Keep the Pedal Down: Farmers Will Roll Through a Bumpy 2024 with Resiliency, Innovation
Part 1 of 2
Recent outlook reports from the Agriculture Department suggest U.S. farmers will face some rough roads in 2024. The path ahead doesn’t look impassable, but we are only just entering the waning weeks of the first quarter of the calendar year. However, crop prices are down considerably from last year, expenses are up and demographics are making the view through the windshield a bit blurry.
All those factors indicate it may be time for farmers to shift down and kick the pickup into four-wheel-drive. There certainly will be some economic ruts in the road this year, but there probably is not a singular reason for farmers to take their feet off their accelerators, even if they were in financial position to do so. Most will slam the pedal to the metal, in search of the most efficient and least expensive route to higher yields and decreased per-unit costs.
Growing more with less takes on added urgency when all indications are heading in the wrong direction.
In fiscal year 2024, U.S. agricultural exports are projected to be around $170 billion, a decline of more than $8 billion from 2023 and about $25 billion lower than 2022. With the U.S. exporting about 20% of what farmers produce, international trade is traditionally the backbone of U.S. agriculture.
Additional impact also will be felt this year from an expected increase in total production expenses of more than 5%, according to the USDA. As one would expect, these forecasts will serve to dampen U.S. farm incomes. Net farm income, a broad measure of economic strength, will fall to $116.1 billion, a 25.5% decrease from 2023.
To survive the projected fallout, farmers will be on the lookout for ways to gain an edge, but only those that can prove a return on investment will be adopted. Some will opt for new technologies, some for efficient practices and inputs and some for sharpened marketing strategies. Companies offering proven ROIs through agricultural technology, more efficient or effective farming practices or additive crop protection or nutrient advantages will benefit. Other farmers will consider new revenue strategies. Smaller farms, in particular, might, opt for revenue-generating tactics like agritourism or growing crops that offer the farm-to-fork advantage of higher profit margins.
Strategic Adaptation
In recent years, farmers have tried various strategies to adapt to changes. They have seen benefits from harnessing technology and improving how they manage their land for soil health or by planting cover crops.
Even with those changes, the latest demographic reports from the USDA suggest another wave of change might be washing across the land. Or perhaps those reports are merely the official recording of a trend that started several years ago, though all annual indicators at that time were much rosier.
The most recent U.S. Agricultural Census shows that the dominant trend in farming today is one of ongoing transition. From a peak of 6.8 million farms in 1935 to today’s count of 1.9 million, the landscape has shifted. There are now fewer farms than at any time since 1850. Just like for the last few Ag Census reports, alarms will be sounded that the foundational structure of farming has reached a breaking point.
But change is constant, and farmers have found ways to roll with those changes. Today’s farms, while retaining their overall family-ownership structure, are fewer, but also bigger. Equipment is larger, there is a revolution of new data-driven technology, and there have been efforts to respond to shifts in consumer trends.
As U.S. farming changes, creative innovation and collaboration will be key to meeting the needs of consumers. At Stratovation Group, we remain confident that in the face of projected uncertainty, America’s farmers will seize opportunities for positive change and work toward a resilient, equitable, and sustainable agricultural future. We will continue to do what we can to help our clients help farmers keep the pedal down.
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By Mace Thornton, COO of Stratovation Group.