The top three trends impacting ag retailers are: economic uncertainty, volatility and labor challenges says Ken Zuckerberg, CoBank agribusiness analyst. He also shares those in agriculture who can adopt a “growth mindset” rather than a “fixed mindset” will be better suited for success.
Zuckerberg gives further insight on The Scoop Podcast:
Hear more at the ARA Conference and Expo, Nov. 29 to Dec. 1
What is the current state of the world at the moment?
The global and U.S. economies have been slowing but inflation is still high. The situation is presenting ‘darkening economic clouds’ that may result in a global recession. The farm economy is positioned to deliver a record year of income as projected by USDA, the highest in fact since 2012 on an inflation adjusted basis, and with much lower government support in 2022 vs. prior years. Grain prices remain above-average and futures markets tell us they are going higher against the backdrop of very tight global stocks to use for corn, soybean, wheat and rice. So bottom line, the farmer has cash and can afford to pay for higher fertilizer prices (and labor and energy inflation) even if they would prefer not to.
How is agribusiness doing and if you had to distill three top trends in ag retail/agribusiness right now, what would they be?
I would say the top three trends impacting ag retailers are: economic uncertainty, volatility and labor challenges. Economic uncertainty stems from the economic slowdown, high inflation, a looming recession in Europe and of course, federal reserve actions (interest rate hikes) which are concerning to American companies. Volatility is across the board: stock markets, bond markets, fertilizer prices, gas, diesel and natural gas prices, much of this is driven or exacerbated by the Russia / Ukraine conflict. Grain prices also continue to be volatile which alters the outlook in farm income. Let’s not forgot about barge problems on the Mississippi River due to drought and climate change, looming railroad strike, political infighting and disruption and back and forth lockdowns in China due to their zero COVID policy.
And there are labor challenge. Rural America has struggled with this issue for years. Urbanization / shifts to regional city centers is a long-term structural trend, as are three other factors: lower U.S. births, reduced immigration, and baby boomer retirements, something that accelerated during COVID. The good news is that robotics, automation and other technologies can help address some of the labor challenges in farming.
As we sit in 2022, what has been the great change driven by the COVID-19 pandemic that will stick around with ag retail?
A recognition that black swan events –like COVID and adverse weather – are greater risks to supply chains than most people realized. The risks, including the concentration and dependence on Asian manufacturing were always there, however, they have now become acutely apparent.
What’s your top takeaway for ag retailers right now?
In a nutshell, chaos and risk always present opportunities if you are willing to adopt a “growth mindset” rather than a “fixed mindset.” Business is full of examples of companies that failed to pivot their business models when the facts change. These include: Kodak, Sears and Blockbuster video.
What’s being overlooked by the industry today—what’s the missed opportunity?
I think the missed opportunity is to get paid separately for agronomic advice. If farmers ever end up buying directly from input suppliers, that critical, value-added advice provided by the Ag retailer, connecting the dots on products and crop production, could be the saving grace between long-term success and failure.
