In a research report analyzing trends and issues in U.S. farming, Rabobank's Food and Agriculture Research group says the U.S. farming industry is well positioned to succeed in an increasingly competitive global market.
U.S. farmers must, however, continue to grow, innovate and use domestic advantages to overcome challenges such as high land costs, increasing environmental regulations, changes in governmental support and global competition.
Rabobank's report identified key trends to help ensure the competitiveness of U.S. farming:
Consolidation will continue as U.S. farmers seek larger operations and incomes to spread fixed costs, achieve greater efficiencies via technology, gain access to lower-cost capital, and strengthen bargaining power.
Integration and contracting with wholesalers, processors and retailers will allow even smaller farming operations to capture a market premium while reducing risk and locking in sales.
While contracting is already established in the protein sector, grains and oilseeds sectors will see more integration in the future, as well as premiums for specialty crops such as low-linolenic soybeans.
Key advantages that U.S. farmers have will help them compete globally, including a relatively low cost of capital, access to cutting-edge technology, strong managerial skills, a strong domestic market, as well as favorable access to Canadian and Mexican markets for U.S.-produced commodities.
Rabobank says that U.S. farmers do face competitive challenges, however, such as higher land costs relative to other markets, and changes in government support, both in the 2007 farm bill and trade-driven reductions in price supports and crop subsidies.
Going forward, U.S. government support will increasingly shift from direct payments to indirect incentives that will support demand and consequently prices.
While the U.S. will continue to focus on its large affluent domestic market, export markets beyond North America represent potential growth opportunities for U.S. commodities.
To obtain a copy of Rabobank's report, contact Lynne Burns at 212-808-2581 or e-mail: lynne.burns@rabobank.com.