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Friday, March 16, 2012

The Future of Farming

I was privileged to get to listen to Danny Klinefelter for about an hour on March 8.  He shared a number of opinions and insights into the business of farming.  He sees farming dividing in a number of directions in the future.  Maybe we are already headed that way.  He sees:
  • Large commodity producers
  • Qualified Suppliers
  • Niche Market Producers
He says many producers do not support themselves solely be farming.

Klinefelter also weighed in budget issues.  His opinion is that is is very difficult to cut the federal budget without raising taxes because so much of the budget goes to defense, social security, medicare and medicaid, other mandatory spending, and interest on the national debt.  Check out this chart

Things he is expecting will affect agriculture in the near future are:
  • Alternative Energy
  • Biotechnology and Biofuels
  • Information and Communication
  • Engineering and Technology including guidance, GIS, and GPS
He also weighed in on farmland prices.  Right now it seems that optimistic crop prices have driven land prices.  He pointed out that net farm income has dropped in 3 of the past 10 years, in 2002, 2006, and 2009 net income dropped from the previous year.  He says we can expect drops in the future.  He says that even current prices cannot sustain the growth rate of land prices that we have experienced in the last 3 years.   He expects to see farm land prices level off.  He says if land prices drop, recent high bidders are the least likely to get into trouble.  Stress will be on highly leveraged producers as interest rates move toward 8-10% levels.

He says that regulation will continue to affect farms and farming.  He quotes Mike Boehlje who says that legislation that affects farmers negatively will come out of non-ag related committees in Congress.

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