Farming in a Resource-Challenged World

August 9, 2010 02:48 AM
 

Although U.S. livestock producers have had a rough time in the past few years, ag remains a strong sector, says Terry Barr, economist and senior director of industry research at CoBank, part of the Farm Credit system. “We are optimistic about where agriculture is going, but very aware of the heightened risk farmers face on both the input and output sides of their profit equation. At a time when you need risk management tools, the old ones are in question,” he says, pointing to restrictions on some forward cash contracts, potentially high margin calls on futures positions and the need to prepay for some inputs such as fertilizer.

We’ll continue to see investor interest in the sector, Barr adds. “They have the perception that once we get through the recession, demand for ag commodities will increase again as the global rising middle classes increase expenditure on food and their diets shift. In this resource-challenged world, the U.S. has the advantage of a good infrastructure and stable political environment.” Of course trade relationships will be critical to farm prices, he adds. “If we get into a period of protectionism, it could dampen the outlook.”

 

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