Ken Zuckerberg leads the global research team at CHS through its CHS Market Advisors division, and he shares the five current issues for the U.S. crop farming:
1. Are we at the bottom of the ag cycle?
Zuckerberg says, “The winds of change are blowing as the crop cycle continues to search for a bottom. One recent example of change could be Corteva, to split its two businesses and unlock value for shareholders. Beyond Corteva, I think you will see other public and private companies restructure to create greater value for their stakeholders.
2. Consolidation from the bottom up.
He says looking 10 years out, the industry will likely see significant consolidation among small producers, independent ag retailers, and farmer-owned cooperatives. Zuckerberg cites not only tight margins but also a lack risk management tools, namely availability and affordability of property-casualty insurance.
3. Domestic demand drivers.
“The domestic consumption of grain, primarily for feed and even more so biofuels, will continue to increase in importance,” Zuckerberg says.
4. Shift in trade partners
Zuckerberg says we are witnessing a “shift in grain and fertilizer export trade flows which will be further concentrated and dominated by a handful of firms with physical shipping and transportation assets and global relationships.”
5. Price volatility
“Commodity prices will experience periodic volatility with some sharp spikes due to changing demographics and continued geopolitical factors,” he says.
Due to the cyclical pressure and structural funding pressures for farmers, Zuckerberg says ag retail has no choice but to change.
“Its’ a trend in any business—if you aren’t changing with the customer, you may not have the customer in the future,” he says.
Results of this include:
- Farmers are more sophisticated and vertically integrated operators whose businesses control more acreage.
- This same profile of farmer is more transaction oriented vs relationship focused. “The cooperative can no longer operate as it did for previous generations. Everyone must evolve to better serve farmer needs,” Zuckerberg says.
- There will be higher expectations for ease of doing business and greater transparency
