The agriculture industry is a critical sector that provides food, feed, and fiber to people worldwide. However, it is affected by external economic factors that can have significant consequences on the industry’s performance. Therefore, it is crucial to understand these outside forces and their impact on the agriculture industry.
- One of the external economic factors that affect the agriculture industry is the equities market. The commodities market is significantly influenced by the equities market, as seen in the spiking inflation and broad market concerns over Federal Reserve restrictive actions that quickly spilled into other markets, including commodities. This resulted in a drop in corn prices from over $8 per bushel to around $6 per bushel in a few months, despite typical fundamental drivers that influence ag prices not mattering. Thus, it is essential to keep track of the equities market to predict any impact on commodity prices.
- Another significant challenge in the agriculture industry is labor availability. Various factors, including the pandemic, immigration reform, and changing worker expectations, contribute to this issue. Younger workers in the latest generation to enter the workforce, known as Gen Z, have a DIY mentality and demand a say in decision-making and career pathways. To attract and retain talent in agriculture, the industry needs to adapt to these changes.
- Crop input prices and availability are another external economic factor that affects the agriculture industry. Global market and industry factors impact U.S. crop producers through volatile or increased production costs. For example, supply chain upsets in China can affect how much crop protection product is delivered to the U.S. agriculture industry. With rising input costs, efficiencies will need to be gained through technology advances or genetic shifts.
- Lastly, the renewable diesel market is a new source of demand for the agriculture industry. Soybeans are being used for renewable diesel production. However, the rise of electric vehicles (EVs) could decrease the demand for gas and ethanol, resulting in a potential displacement of 2-2.5 million acres of corn if 25 million new EVs are on the ground by 2030. Therefore, the agriculture industry needs to adapt to changing markets to remain competitive.
In conclusion, external economic factors significantly impact the agriculture industry. It is crucial to take notice of these outside forces to predict any potential consequences and adapt accordingly. The agriculture industry needs to embrace technology advances, genetic shifts, and changing worker expectations to remain competitive in a rapidly changing world. By doing so, the industry can continue to provide food, feed, and fiber to people worldwide.