Agribusiness adapts to ‘new reality’ as some sectors continue to struggle

What’s the state of the agribusiness sector heading into the new year?

I think farmers and agricultural (businesses) are adjusting to what I call a new reality. Commodity prices are not terrific, but … what’s surprising a lot of people are land values are not coming down as rapidly as some had (predicted) they might. That means for land owners that the land rents are not coming down as rapidly as projected. Land, in most cases for farmers, is their most important assets. I think that’s good news. What we are seeing now is not what happened in 1986. … We are not seeing huge numbers of farmers in strong financial disarray.

Have you seen any other surprises?

The growth of the livestock sector is pretty profound, certainly pork, with the new Clemens (Food Group) plant in Coldwater. We are seeing some more interests in turkeys (and) the large dairy operations are still strong and aggressive.

Is that surprising given the challenges in the state’s dairy industry?

The dairy industry is a fascinating sector. I think it’s important to realize that dairy is one of those sectors in production agriculture where there are efficiencies in size. Bigger operations will have a lower-cost approach to production than some smaller operations. One of the practices employed by some for resiliency is actually growing their (operation’s) size. I think we’ve seen a lot of that. Those who aren’t growing are looking at niche opportunities, but they are few and far between.

How will the dairy industry address the glut of milk on the market?

We have, of course, seen a processing deficit in Michigan for milk and for dairy products, but (Foremost Farms) recently announced a new plant in Greenville. I anticipate we’ll see another announcement in the next four to five weeks … of another dairy processing plant in Michigan. Even as we are announcing processing facilities, there is a two-year lag (to build the plant and get it operational). It’s not going to solve the problem short term.

With the talk of throwing out NAFTA, how do you see trade issues playing out next year?

Who knows what trade is going to look like. It’s interesting. In all of the ag media I am reading, everybody’s excited because President Trump told Senate Ag Committee Chair Pat Roberts (R-Kansas) that we were going to be OK on NAFTA. Well, one positive statement, as opposed to dozens and dozens, if not hundreds, of negative tweets and comments and statements … points to agriculture glomming on to anything that is positive about trade. That statement to Senator Roberts is about the first (positive) one we’ve seen.

Does that signal some stability might be ahead for trade?

Even if they do keep NAFTA in place, we have already seen the impact of the rhetoric and the conversations and the tweets. The value of the peso is lower, which causes their purchasing power to be less. If you’re in Mexico and you’re constantly barraged by these tweets and other comments, you are worried about your supply overall. … They don’t want to be held hostage.

Looking ahead to 2018, what’s keeping you up at night?

What’s keeping me up at night are three things: Trade, weather and the third issue is labor. If we don’t have an adequate supply of labor, a lot of those specialty crops, especially fruit crops that we really value in West Michigan, will go away.

 

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