We often tend to focus on our day to day activities and do not spend much time surveying the landscape. Every now and then, it is good to pop above the tree level and get a view of the entire forest. What follows are a few thoughts on the megatrends in agriculture that are present in agriculture.
Massive growth in food demand will continue into the future. Currently, there are slightly over 7 billion people on the planet. The U.K. Food and Agriculture Association predicted the population will increase to 9 billion before the middle of this century. This is a huge increase in the demand for food. We also have increasing middle classes in countries like India and China. As people move from a lower class into a middle class, they will tend to consume more food. This fact alone means that agriculture is full of opportunity.
A continuing ramp-up in efficiency and new technology will dominate changes in agriculture. If the population will increase by 30%, then the current food output must increase as well. Yet, there is little new arable land available in the world. Additional production will have to come from smarter and more efficient ways to produce food to meet the growing demand.
The graying of agriculture is a serious trend as the average age of a farm operator is now at 57.1 years old according to the USDA. This means that eventually these farms, if they are to continue in operation, need to be transferred to younger owners. Succession planning for your farm clients is important for them to consider now instead of being blindsided by it in the future. The wise farmer who prepares and navigates around the pitfalls of taxes and operational challenges will have a better chance of leaving that farm to his heirs.
An upcoming generation in farming will embrace new technological advances. Farm finances can be tracked much better now. Yields per acre have increased with the use of GPS. The trend toward more innovations will increase in the future. Yet, these young producers have never faced a downturn and need to learn from the seasoned veterans how to weather an economic storm.
The growth of mega-producers’ dominance in agriculture presents new challenges. These entities can produce a concentration risk, and understanding the various attached entities that would be impacted if problems occurred with one of them is important. For example, a grain elevator may expand to accommodate the production of a large corporate giant, but if something occurs that severely curtails the revenue the elevator would receive from the mega-producer, the elevator may face financial challenges.
Labeling and packaging will drive agricultural decisions in the future. Take a look at bananas. Did you know that Chiquita has come up with a special membrane that doubles the shelf life of the product, by regulating the flow of gasses through packaging? Naturepops are wrapped in a bio-degradable film made from plant matter. Look at how many different changes are coming in, and how the food that we buy is labeled and packaged. Each of these innovations impacts our industry.
The energy opportunity in rural areas is huge. We understand this impact here in the Dakotas, with North Dakota as the second largest producer of oil last year, behind Texas. The revenue from oil and gas can be a real game changer to the family farm. There is a push to make our country energy-independent, and oil from the Bakken will play a big part of that. Other types of energy like wind, solar and biofuels will play an important role also. The US Department of Energy expects alternative fuels to provide 5% of our energy needs by 2020, which is up from under 2% today. Europe plans to have a usage of 20% biofuels by 2020, and Feed & Grain estimates fuels from agricultural feed could replace 25-30% of US petroleum imports. Of course, these factors will increase our prices of food at the table, but it will also mean even more agricultural demand.
Agriculture will continue to be relevant.I recently heard of a legislator from a city, who was complaining of folks in rural America and saying they were not relevant today. In my view, as long as folks like to eat, put fuel in their car, and use many of the products they use today, the farmer and rancher will still play a big role in their lives.