The saying goes, “the trend is your friend.” Well, I’m not sure many in ag agree with that statement right now!
The trend since 2013 has been a steady erosion of commodity value and margin opportunities for farmers and seed companies. Land rents, machinery costs and inputs have remained stubbornly high while the commodity revenue each acre can generate has been reduced by nearly half.
The industry was already tightening its collective belt when COVID-19 hit. The trend of reduced demand for animal protein and ethanol was accelerated when the global pandemic shut down the world economy. The record size of the 2020 U.S. corn and soybean crop all but ensures lower commodity prices will stick around long after a COVID-19 vaccine is available.
This trend has certainly not been a friend to farmers or seed companies.
If you look at the industry from a different angle, however, you will see plenty of evidence of those working to use the trend to their advantage. Startups and new industry entrants are investing hundreds of millions of dollars in carbon capture, vertical farming, gene editing and new online ag marketplaces. They see the trend creating new ways of doing business and are working to restructure the value chain to their benefit.
The old ways don’t work in today’s environment. Farmers and seed companies need new solutions, new ideas and new opportunities to generate a profit from every acre. Commodity prices have reached the point where only the highest producing acres are capable of generating a positive return when using the farming mentality from 2013.
Elite marathoner Ryan Hall wrote a book titled Run the Mile You’re In. The idea is that you need to see where you are now and how best to use that situation to your benefit, rather than dwelling on where you aren’t.
We’re doing exactly this at Gro Alliance. We will soon announce a new margin opportunity for seed companies that will help them take advantage of where the trend has taken agriculture. We all need to find ways to reimagine our businesses during these unprecedented times. When we do that, we just might be able to say the trend actually is our friend!
