Dozens of Farmers Voice Their Biggest Concerns About the State of Farming, We Examined the Data.
What issues are weighing on farmer's minds this year? What will the impact of ag industry consolidation be on the prices farmers pay?
The Voice of the Farmer tells the story of modern day farming through a combination of candid quotes from farmers and analysis of real farm data covering of millions of acres.
What's on Farmers' Minds and What the Data Says
Farm Profits Under Pressure
Despite record high yields in 2016, many farmers saw both revenue and profits fall last year as a result of low commodity prices and high input costs. Farmers must take on an incredible amount of risk at the beginning of every season, but very little of that risk is shared by other industry stakeholders. Input providers and other agribusinesses can be highly profitable even while farmers struggle.
One reason for this is lack of information and lack of competition in the market, which is only getting worse as agribusinesses continue to consolidate. In the last several months, eight major chemical and seed companies have filed for mergers- which is likely to make the small pool of major agribusinesses even smaller in 2017.
Ag Industry Consolidation
Consolidation will likely further hurt farm incomes. By analyzing millions of acres of yields and thousands of input price records, we examined the key relationships affecting the prices farmers pay for vital inputs and their productivity gains. What we found was that with market share increases among input manufacturers, come higher prices for farmers in both the seed and chemical industries. We also found that yield gains from innovation tapered off as input manufacturers gained market share.
The major ag players not only dominate the markets, but also the marketing messages, commanding higher prices by limiting channels to market and restricting competition by refusing sale to new channels. We have first-hand experience with this, as FBN Direct, our direct-to-farmer input service, has been refused supply from many of the major manufacturers.
Farms are also consolidating. Not necessarily because they want to, but because they have to due to demographics or financial realities. Generational transitions, sometimes on the 4th, 5th or 6th generation are underway. Will the way of life that a family farm has known for generations continue? Will the kids come back after college or move to the city? When commodity prices were high, there was more interest in coming home, but when the farm is in the red, the allure goes away. Also, structures such as family partnerships or lack of an interested party to take over the farm creates a vacuum where the inevitable result would be sale of the properties, leading to fewer farms across the country.
We also studied the relationship between farm size and price paid for inputs relative to revenue trends. The larger the farm, typically the less the farm pays for key inputs. But larger farms also realize lower yields per acre as it becomes harder to optimize each individual field. So as farms consolidate to capture economies of scale, it puts negative pressure on productivity per acre even as seed and fertilizer technology improves.
Health care coverage and cost is also a major concern for farm families. A family of five might pay thousands of dollars for health care premiums. But if your farm income is already negative, can you realistically afford this?
The Farm is the Foundation - Reasons for Optimism
Ultimately, there are many concerns - but we also heard time and time again from farmers that they farm because it’s a way of life. They are the bedrock of their communities and an essential part of the America's story. So these struggles, vast as they may be, are not deal killers for many farmers and farmers remain optimistic about the future.
There are positive signals on the horizon. Technology has been an equalizer in many other industries and digital innovations can level the playing field with the entrenched players in the market. The more information there is at the farm-level, the more competition there will be for a farmer’s business, whether it’s competition for input business, financing, crop marketing, or any other service. This competition will drive profitability on the farm in the long term and keep farmily farms viable. Technology is not the silver bullet for farming, but it can create opportunities for more economically and agronomically sustainable farms in the future.
This report also includes much direct, anonymous input from farmers. If you would like to be involved in the creation of these reports in the future as a contributor, please let us know at email@example.com.
Farmers Business Network is an independent network of thousands of farmers, growing profits by sharing information and increasing buying power.