Agricultural Land

Climate and Tech Expected to Affect Ag Most This Year

Fri, 08 Mar 2024 19:43:28 GMT

Farm Journal’s Smart Farming Week is an annual week-long emphasis on innovation in agriculture. The goal is to encourage you to explore and prioritize the technology, tools and practices that will help you farm smarter. Innovation today ensures an efficient, productive and sustainable tomorrow.

Every year before the ball drops in Times Square, it seems everyone wants to pull out a crystal ball and prophesize what the new year will bring. And the ag industry loves a good prophet.

Before 2023 became history, Forbes Magazine took its shot at predicting agriculture’s highlights for 2024. So before Father Time turns the predictions stale, I thought it might be insightful, or at least entertaining, to provide some color commentary on the article, which focused on the following five areas where change in agriculture could be the greatest.

1. Farmland Holds the Key to Carbon Management
No different from last year or the prior year, agriculture has a bull’s-eye on its back when it comes to carbon intensity. According to the USDA Economic Research Service, U.S. agricultural operations are responsible for 10.6% of the nation’s overall greenhouse gas emissions. Climate scientists and Al Gore have told us this for years now. Expect the barrage of white papers and warnings to continue in 2024.

The good news, according to the pundits, is it will become increasingly clear this year that farmland is the key to carbon management. By default, nature has been seen as the most scalable way to remove CO2 from the atmosphere. What is becoming more obvious to those outside the sphere of agriculture is that farmland is the best place to store it.

Look to see more announcements at the consumer packaged goods level regarding programs and collaboration across industries and sectors to foster regenerative practices at the production level. Companies such as Walmart, PepsiCo and General Mills are seeking programs able to scale such practices across millions of acres.

2. Alternative Proteins Will Recover From Their Sophomore Slump
Last year, the stock market and the population’s tastes soured on meatless burgers and chickpea chicken nuggets. Beyond Meat’s market cap plummeted from an all-time high of $14.2 billion to just more than $500 million at the turn of this year.

But don’t count out the alternative protein industry yet. Those quoted in the Forbes article anticipate 2024 to be a renaissance year for animal-based product substitutes.

The reason for such renewed hope is a tactical marketing change adopted by the second wave of alternative protein startups. Instead of taking full-blown consumer-ready products direct to the grocery store shelf and the fast food drive-through lane, they are focusing on selling alternative protein products as ingredients.

For example, the Every Company is touting that “the world’s first liquid egg made without the hen” could replace real eggs in thousands of processed food items. Rue the day these eggs find their way into my favorite lemon meringue pie.

3. Forget Counting Calories. Count Carbon
A new diet seems to be on the table every new year. This year, paring down the amount of carbon in your life may be as important as limiting your calories. Just like requirements for disclosing calories through food labels, the social, political and regulatory environment is forcing food companies to be fully transparent about their carbon footprints.

Instead of carbon credits, experts say carbon insets are needed to move the climate needle. With recently passed climate disclosure legislation, such as California’s SB 253, expect more food companies looking to measure, report and reduce their carbon emissions.

This switch will put pressure on producers as food companies off-load the burden of carbon reduction on them. Look for additional emphasis on cutting methane emissions from livestock through innovative feeds and carbon-capture techniques and improving soil health through biotech innovation, data and artificial intelligence.

4. Technology Will Make Ag More Hip and Exciting
Agriculture has long been characterized in literature, and even nursery rhymes, as boring and depressing—think Grapes of Wrath and Old MacDonald Had a Farm. Well, technology is continuing to turn this industry on its head.

Specialty crop operations’ use of automation will grow quickly as ag labor shortages persist. Meanwhile, the food prep industry is transforming as food- and medicine-focused companies take root. Think HelloFresh and Blue Apron meet your medical dietician. Companies such as ModifyHealth are tailoring chef-inspired medical meals to support consumers’ specific health needs, and companies such as Farmer’s Fridge allow you to select a green goddess salad or Thai noodle bowl instead of a Snickers bar from a vending machine.

5. Capital Investment in Ag Will Be Even More Deliberate and Disciplined
Once viewed as the hot new space for disruption, the ag tech sector is now weeding out the venture capital investors who entered it with hopes of quick wins. That culling really started in earnest two years ago and is predicted to continue this year.

But all is not gloom and doom in the ag startup arena. Investors see the market stabilizing and valuations returning to more realistic levels. Quality companies that are scaling, have good economic fundamentals and growing customer demand will likely find the capital they are seeking in 2024, but expect no more free lunches.

So there you have it. This recaps the Forbes take on agriculture in the new year: climate, carbon, technology, money and a world with eggs but no chickens.

If you think that’s weird, then just wait. The year has only begun. In agriculture, nearly anything can happen. Just wait a day.

John Phipps: Why Water is the New Oil for Landowners

Wed, 09 Aug 2023 13:38:50 GMT

There are signs that water is the new oil.

This is a question sent in by U.S. Farm Report viewer David Marshall of Lafayette, Indiana: “You’ve covered the subject of foreign land ownership and rightly noted that it’s a very small percentage. I think the issue that we really need to address, especially in the southwestern states, is the purchasing of farmland by corporate entities that have nothing to do with farming but who solely want to obtain the water rights that the purchase of the ground includes. Their main reason for purchasing the land is to have a resource that they can sell to the highest bidder. How long before hedge funds and corporations own all the water rights and the farmer and the public are left to be the highest bidder or do without the needed resource?”

As Mark Twain said, “Whiskey is for drinking, water is for fighting”. While our arguably arcane water rights laws have provided thousands of billable hours for water lawyers in the West, I don’t think we’ve seen anything yet.

“First in time, first in line” may have seemed like a good idea centuries ago when rivers and groundwater appeared inexhaustible, the enormous use by modern agriculture - about 80% of our nation’s resources - is testing the practicality of those laws. I can’t imagine modern lawmakers reforming our laws with the needed speed, so the backup method of acquisition for water consumers is to buy the water needed from agriculture.

Bluntly put, there is a price for every gallon, and many farmers are just now realizing how extremely valuable those gallons are.

As I have argued in every land-use debate -from solar panels to suburban development - with rare exceptions due to location or unique qualities, the rights of landowners should be preeminent to allow the market to redistribute those assets.

Consider the rapidly growing cities of the Southwest, like Phoenix. Spending millions to buy water rights from nearby farmers currently growing alfalfa in the desert to feed dairy cows, when milk is being dumped in Wisconsin, looks to me like an inefficient market hampered by regulation and unable to rationally allocate assets.

Between our outdated milk pricing programs and water laws, the outcome you describe is capitalism’s way of solving a problem. Farming may always be the optimal use for our ever-scarcer water.

I think not, but I think this is a problem being solved by accountants, not lawyers.

Is the Great Financial Reset Now Underway?

Mon, 19 Dec 2022 19:28:54 GMT

Dairy farmers are finishing a strong financial year, despite concerns about labor and feed costs, and those concerns are at the forefront of conversations as they enter 2023.

One major bright spot in 2022 is domestic dairy demand, which is on a record pace. During Farm Journal’s Milk Business Conference (MBC) this week in Las Vegas, it was clear it’s now a question on if inflation and higher dairy prices at the store will eat into consumers shopping decisions in 2023. “I think the cost of everything, and of course, water issues are huge in California,” says Arlene Vander Eyk, a dairy farmer in Pixley, California.

It’s not just dairy products seeing the impact of inflation. Dairy farmers from across the country are wading through the reality of higher feed prices, input prices and inflation across the board.

“Inflation has reached a zenith, it did so back in March. It’s now coming down,” says Dan Basse, president AgResource Company . “The question is, ‘How far will it fall in 2023? And what’s the new natural rate of inflation?’ Back in the last 10 years, it was somewhere around 1.4%. We now think it’s closer to 3% to 3.5%, meaning that interest rates are going to be staying higher.”

The Consumer Price Index (CPI) this week showed a positive sign and the rate of inflation is slowing. In the 12 months through November, the CPI climbed 7.1% which was the smallest advance since December 2021, and followed a 7.7% rise in October.

The annual CPI peaked at 9.1% in June, which was the largest increase since November 1981.

However, inflation remains above the Fed’s 2% target. And as the Fed make a decision on more rate hikes in 2023, Basse is dubbing it the “Great Reset,” and one that he says is costing farmers more money on nearly every corner of the farm.

“If you look at seventh district data for the Kansas City Fed, this is the big farm states and the I-States in the middle of the country, they are now looking at operational loan costs being around 6.8%,” says Basse. “If you needed to borrow money to buy farmland, it’s about 6.5%. This is up about three percentage points from last year substantially. And so, whatever your interest rates costs were last year, it’s going to be double.”

Basse thinks interest rates could increase again early next year. With the Fed Rate hike this week, he thinks two more could be coming in 2023.

“The great financial reset is happening where interest rates are rising,” says Basse. “There’s a new asset class called cash. And as we look forward, I think that reset will have a big impact on recall repricing assets, not so much farmland but equities and lots of other things and farmers need to be aware of that,” Basse says.

Farm Journal’s Washington correspondent, Jim Wiesemeyer, says he’s more concerned about 2024 than 2023 in terms of the great financial reset and impact on agriculture.

“Later in 2023, I think you’ll see some of the pressures start, because as the carryover from relatively firm prices, this past year play out and some of these ad hoc disaster payments are spent and other foreign program payments. So yeah, 2024 could be some crunch times. It has to be cash flow, your cash flow is your predominant and cutting costs,” Wiesemeyer says.