Ag boom years on the decline?

By Codi Vallery-Mills

Despite drought, and other weather related disasters, the last seven years have been good to the region’s agricultural sector. High prices for many commodities – from corn to cattle – have helped make farming and ranching profitable.

What will the next seven years in agriculture look like? That was a question addressed during the South Dakota Governor’s Agriculture Summit, June 25 in Deadwood, S.D. Held annually, the event is always a time for the state’s ag sector to come together to give feedback, strategies, and future thoughts on industry topics.

Brent Gloy, Professor of Ag Economics at Purdue University gave insight into the coming years, hinting that the boom years could be over. “The last seven years have been fantastic, the next seven will not be as great, but they won’t be at the lowest levels either,” he says.

Prices for commodities and land will level off. The high price for commodities like corn will fall but not bottom out. Right now an additional 215 million bushels are grown every year to meet Renewable Fuel Standards. Gloy says the gas industry will not tolerate more than that and acres dedicated to renewable fuel will hold around the rate they are now.

Also leveling off is the hot land market. Gloy suggests that sale prices won’t plummet, but a plateau effect is expected for the next seven years. Also of note is a survey by the Board of Governors of the Federal Reserve System that shows interest rates will go up in the next 1-3 years.

How the world will feed 9 billion people by 2050 is a statistic and concern the industry has been throwing around for awhile now. Gloy offers a new perspective. He says the important number is not the 9 billion, but instead how much money those 9 billion have in their pockets.

Purchasing power then, is what Gloy says the ag industry should consider. “What drive’s demand? People’s bellies. And people fill their bellies based on what they can afford to put in it.”

Emerging developing countries are expected to have more purchasing power than some of those that are developed. In the U.S. for instance, high unemployment rates in the coastal regions will keep demand in check. Therefore foreign trade relations are important.

Gloy wrapped up by saying farm income’s historic highs are likely to fall, but not to historic lows.  “Farm booms always end,” said Gloy. “How they end is the concern.”

One panelist session held during the Ag Summit discussed infrastructure in the state and nationally.  State Senator Mike Vehle who is Chair of the Senate Transportation Committee provided an update on South Dakota’s roadways. A survey conducted with each county resulted in an overall condition rating of 4.86 out of 10. Only 9 percent of roads were rated excellent while the rest fell into fair, poor and failing categories.

Vehle says the state, and the residents of it, are going to have to come up with solutions in the near future on how roads can be improved.  In 2011, Vehle helped bring about legislation that led to a license plate fee increase with that money going towards road improvements, but Vehle says that more will need to be done.

Meetings will be held this July by the Highway Needs and Finance Committee to discuss options for infrastructure. The public is invited to attend and give input.

Why should farmers care about transportation? According to Mike Steenhoek, Executive Director of the Soybean Transportation Coalition based in Iowa, it’s because their international competitiveness depends on it.

Countries like Brazil are capable of raising soybeans to the standards of the U.S. it’s just they don’t have the infrastructure to get the beans to market as easily.

With the ag statistic that 1 out of every 4 acres of soybean acres is destined to China, Steenhoek says it shouldn’t be a question of how the U.S. will out innovate others, but instead how it can out function them. Without well-maintained roads, bridges and railways the country stands to lose market shares to other countries that are placing an importance on transportation needs.