A Future Built on Resilience
Farm Strong - A Future Built on Resilience: Ken Eriksen
> Two words that best describe 2020 may be "disruption" and "uncertainty."
> Both have been at the forefront thanks to the COVID-19 pandemic, low commodity prices, trade disputes and multiple weather disasters.
> These are tough challenges to overcome no matter how long you have been farming. That's why you don't want to miss the 2020 DTN Ag Summit, Dec. 7 through 9. This year's event will be held virtually, but it will still feature a stellar speaker line-up who will share their strategic insights on ways growers can farm strong to build more resilience in their farming business. Go to www.dtn.com/agsummit for registration details.
Speaker: Ken Eriksen
-- IHS Markit Senior Vice President, Head of Client advisory and Development, Energy and Transportation and Policy
-- Background as an agricultural statistician with the USDA's National Agricultural Statistics Service.
This may sound like a "duh" statement, but at the end of the day, everyone has to eat. There will always be opportunities for American farmers. However, in a world where population concentrations are spread out and diverse, and arable land is not readily available in some areas, the duh statement becomes more complex.
When we think about getting people the necessary calories and protein, it can be a challenge in the face of a pandemic. Surge buying out of fear initially drew food supplies down. But, we have seen a resiliency of that system to come back.
Hog slaughter, for example, wasn't expected to catch up with the backlog for months, but by mid-August, it had. When there's a challenge to be met, people rise up to meet it.
Vertical integration within agriculture will continue. Big consumer package food companies buy a lot of ingredients. But, will they go backward and get closer to the farm? Costco, a big box operator, got into growing and slaughtering chickens. It is running at capacity ahead of schedule.
What's interesting is what one short, six-month pandemic did to disrupt business models so dramatically. It's painful for those disrupted, but they can come out strong and better going forward.
THOUGHTS ON EXPORTS
With African swine fever and COVID-19, there's a lot of change going on in China and Southeast Asia concerning how livestock is raised and where people buy food. There's a shift toward larger, integrated farms and urban cold storage integration (chilled and frozen meat). People used to go to the wet market daily; that has been turned upside-down.
Now, companies have set up integrated hog farms and compound feed operations. On the backside, there are slaughter plants and retail stores.
The flow of corn and soybeans needs to be steady. China needs feed and needs it yesterday, and right now we're sending it as fast as we can.
For 2021 and 2022, we see record grain and soybean exports out of the United States. There are opportunities for protein exports for pork and also beef to a certain degree.
In Indonesia, tempeh is still a strong part of the diet, and that requires soybeans. The dairy market will continue to struggle until food service recovers. We see good demand for crushing businesses for oil and flour, but we don't foresee growth in ethanol in the short or medium run.
COMPETITION HEATS UP
South America has been awakened. Price incentives exist to compel the country to produce more soybeans, corn and livestock. The U.S.-China trade situation has helped.
So, there's competition for U.S. farmers ahead, but they should still have opportunities in soybeans and corn. However, the competition is catching up, and fast. The U.S. has invested some in its infrastructure to move exports, such as dredging the lower Mississippi River and repairing locks and dams. U.S. farmers have to stay committed to infrastructure being improved.
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