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Today I want to discuss the current situation of an an unsettled agricultural commodity market. For the first time in decades most all of the agricultural commodities have lost market strength. Rarely do we see almost universal drops in our farm products, however this is the situation that we are in now. Cattle, hay, small grains, pork, rice as well as many other ag products have dropped drastically. The question is why? With the US market showing signs of strength why are our food and fiber goods sinking like the Titanic? Some of the reasons are globalization of trade and the strong dollar–with a dollar this strong what international trade partner can afford an American T-Bone steak? Other issues plaguing the cattle industry are dramatic oversupply, both of cattle on feed and frozen in warehouses. Those of us in the cattle industry bought into this idea that we were under supply, with domestic cattle numbers at record low. What we failed to look at was the size of the beef that we were finishing. Carcass weights have shot up over the past 30 years resulting in more beef from fewer cattle. What did the industry do? Retained record numbers of heifers to grow production and now we have surpassed the tipping point and created over supply in the marketplace.
There are two sure ways to prove yourself a fool, one is predicting the weather and the other is predicting the market!
How to position for success in an unsettled agricultural commodity market
Enough of the bad news, there are always opportunities no matter where you are in the beef cycle, the trick is being able to objectively look at your situation and plan accordingly. There are a couple of stars in the future of agriculture, some include producers, who in the good times, invested in marketing avenues that remove their products from the generic commodity pool. I admit it is hard to justify creating a label or joining marketing cooperatives that did not pay a huge margin, in the good times leading up to 2015. However those producers who did, will “set pretty” in the unsettled market ahead. The brightest star in the new market will be the Land to Market program from the Savory Institute. For the first time, a regenerative marketplace will exist that offers consumers a purchasing opportunity that insures land restoration through a robust, scientifically valid monitoring protocol. This opportunity will qualify producers who can prove benefits to ecosystem processes. It is no doubt, if you read the news, like this article in The Wall Street Journal, that consumers are ready to make purchasing decisions that will positively impact the ecosystem, small towns and create social justice.
If you are interested in learning more about the Savory Land to Market program and other opportunities, you should attend Grazing for Change, on Nov 4th in Chico, CA. If you are looking at your current situation and wondering how to move forward, maybe it is time to look at your enterprises. It might be time to take a Holistic Financial Planning course and learn how to create an Ag business that is resilient in the good times and in bad. Check out our upcoming course offerings at Jeffersonhub.com.