It seems that 2014 is finishing with a furor that one could not have imagined 12 months ago. Oil prices now hovering in the $50 per barrel range with a $60 swing during the year illustrate the volatility to consider in developing projections and planning for 2015. Rapid change in oil price has been a lead indicator of every U.S. recession since 1969. Also, with 80% of all farm and ranch expenses linked in some way to the price of oil, this metric bears watching.
High profit margins and prosperity flipped from the grain sector to the livestock sector this year. The east and west coasts and sand state economics, i.e. Florida, Arizona, and Nevada, are on the rebound, bringing strength to horticulture, value added, local, natural, and organic markets serving the general economy, while the flyover states of the Midwest and agricultural and rural areas are regions of moderation.
The U.S. economy is in a 60+-month expansion, which is longer than the average expansion cycle since the Great Depression of 58 months; however, it is still below the record expansions of 86 and 120 months that occurred in the Greenspan and Volcker Federal Reserve administrations in recent years.
The year 2014 still is not the year farmland values declined. While commodity prices in the grain sector have declined, livestock has rebounded to even out expectations concerning incomes in many regions, balancing out farmland value expectations. Of course, key drivers of farmland values are low interest rates and less attractive alternative investments such as stocks, bonds and mutual funds. Thus, farmland is still on a 27-year bull market in appreciation, similar to the levels seen prior to the farm crisis of the 1980s with the exception of land in Florida, Arizona and Nevada.
This has been a benchmark year for technology, ranging from big data to automation and robotics being integrated into day-to-day decision making in agriculture. This new technology is creating a paradigm shift concerning the quality of talent needed throughout the agricultural industry ranging from production to the agribusiness sector. People will spend more time reading data printouts and analyzing information when making crop and livestock marketing and financial decisions on farm and ranch businesses. Suppliers, lenders and agribusinesses must employ and train top quality individuals who not only understand technology but have the human touch to provide an exceptional customer experience.
2014 has been the year of the young millennials. Millennials are now managing and making decisions in all levels of the business of agriculture. Some are preparing to take the first economic punch to hit the agricultural industry since the farm crisis in the 1980s. This group seeks a balance in business and lifestyle. These individuals often live in town or a small city and commute to the farm or agribusiness. The ability to attract and retain talent will require new rules in the workplace, some of which involve telecommuting and time for family.
The concepts of lifelong learning and continuous improvement have become important for producers as well as agribusinesses and lenders. This is particularly true for entrepreneurial multitaskers operating businesses both inside and outside of agriculture as they strategically diversify their businesses.
The year 2014 has truly been a time of transition for the agricultural industry and rural areas. While challenging, there will be more opportunities to succeed in agriculture in the next decade than the last 30 years, but there will also be more opportunities to fail. A game plan including resiliency and agility will be the themes for 2015 and beyond for those moving to a higher level of management in the industry of agriculture.
We want to wish you all a Merry Christmas and Happy New Year! Remember to ‘take five’ to reflect and celebrate the blessing of being involved in American agriculture, an industry that produces basic necessities for the world. I hope to see you in my travels in the coming year!