Agricultural Axioms on National Ag Day

Today is National Ag Day. While this annual holiday was created to celebrate and appreciate the significance that agriculture has in our daily lives and on our economies, in today's post, we’re going to briefly dissect two “agricultural axioms.” So let’s dig in!

Make no mistake, American Agriculture has advanced tremendously over the last few decades and the farming of today is more complex than we consumers fully appreciate. To be a successful farmer now requires, at minimum, a working knowledge of business; marketing commodities; mechanical, electronic, and computer technologies; hydrology; soil chemistry; genetics; public policy; and of course, the traditional agriculture areas in plant and animal science.

Yet some things on the farm remain the same as they always have. Bits of wisdom‒axioms‒are handed down from generation to generation. Are they oversimplification? Absolutely. Are they based in fact? Yes.

An example heard often when corn prices spiked in 2012 was, "The fastest cure for high prices…is high prices."  At the time, commodity markets were over-reacting to a severe drought that was plaguing much of the nation’s farm belt. Crop farmers cited that old adage while defending against political clamor aiming to repeal the Renewable Fuel Standard, which represents about one-third of the U.S. market for corn. They farmers promised to 'grow us out' of any short-term supply bottleneck as they always had.

They did exactly that. Maybe too successfully. The price of a bushel of corn today has cycled and slid back to where it was ten years ago…where it was in 1996, 1983, 1980 and 1974 (see image).

Another agriculture axiom has been playing out more recently: "Low corn prices bring low dairy, poultry, pork and beef prices." In essence, if livestock producers see an advantage in low feed costs (e.g. corn prices) and tighter supplies for their product, they will make decisions which enable them to eke out more profit.

However, the cruel pendulum of supply and demand often swings too far as the livestock sector over-produces just as crop farmers over-plant when corn are trending higher. Supply will exceed demand. Prices fall. Timing can mean everything. The smart (i.e. lucky) folks are those who are able to time the ups and downs. A humble old farmer I know quips, “I’d rather be lucky than good.” He is both.

Today’s 'just-in-time' inventory supply methods do not work in agriculture as they do in automobile manufacturing or down at your local big box discount store.  Planting decisions lag behind demand because of the lead times involved. Plants and animals take months to grow and mature. Logistical wizardry cannot eliminate Mother Nature's lag time.

Yes, agriculture has undergone tremendous advancements and incredible efficiency gains over the last few decades. Consider the U.S. average corn yield was 127 bushels per acre in 1997. Just 20 years later, American farmers achieved an average of 177 bushels per acre‒an incredible 50-bushel or 40% increase!

Whatever agriculture looks like in the future, one axiom is certain: farming will not be the same as it is today.

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