Profitability Will Define the Future of American Agriculture
A few weeks ago a fellow dropped off some new bulls at our ranch. Normally we would have talked about rain or how calving season had gone, but this year the price of diesel dominated the conversation. He had just paid a thousand dollars to fill up and he talked about how fuel prices were wreaking havoc on his budget.
The price of oil has gone up even more since then, affecting everything from fertilizer, to chemicals, to the “just in time” parts inventory, to just how we get things done on the ranch. It is a fascinating time for agriculture and a little ironic that nationally the press is touting how well agriculture is doing as though ag were somehow immune from these costs or that our markets are as heady and certain as they have ever been. Let’s wait awhile and see.
All of us in agriculture know the vagaries of a commodity market and the difficulty of securing a reliable gross margin over time – let alone this year. The unprecedented rise in the price of oil to record highs these past few months, even when we were consuming less than in prior years, suggests something new in the usual process of supply and demand. There is no doubt this is an important development and energy certainly plays a central role in our future.
Still, the challenge for agriculture is more complex than just one topic. It is the struggle to remain profitable, which will be our greatest test. Energy does permeate nearly everything, causing costs across the board to rise and we cannot expect our customers to willingly accept increased prices for our goods; it will be how we react to these new factors that will determine our ultimate viability. As producers we will need to anticipate these new pressures, understand how the market will respond, and with a little help, compensate.
This isn’t a new story for agriculture. We have learned and adjusted to changing market conditions all along. That is why I firmly believe the future of agriculture in the United States rests squarely on its practitioners. It is we, not government, who must assure continued profitability. This time though it is imperative that our government help and not hinder a free, fair, and open market, and not burden responsible operations with well meaning but impractical regulation. American agriculture is the best in the world, and given a fair chance, we can compete with anyone.
New markets continue to emerge for our products and support for our role as stewards of the land is growing. In many parts of the country the face of agriculture is changing. Consumers are recognizing the value of a secure and familiar food supply. Opportunities are developing in so-called niches: farmers and ranchers are expanding business across a spectrum from traditional markets, to kosher, grass fed, natural, branded, organic and custom markets. While none of these will by itself provide an ultimate answer, together they represent new prospects for producers.
Part of the challenge for government now will be to promote entrepreneurialism by first recognizing the value of these new markets, and secondly assuring that they are free from manipulation by fostering true communication between the consumer and the producer. Consumers need to be certain that the products they purchase are genuine and meet our country’s health, environmental, and safety standards, and customers should benefit from true competition through an open market. This approach is something our delegation in Congress has worked to cultivate and must continue.
How should government proceed? First, regulation must not bureaucratically torpedo good laws with rules that overstep or misrepresent it. For example, Country of Origin Labeling (COOL) has passed yet again. This time it must be funded and implemented efficiently. We should keep track of imported meat, not burden our domestic producers with endless recordkeeping chores. Additionally, when our state meat inspection system meets federal standards, we must allow commerce to work and producers to sell their product across state lines.
The concentration of the packing business is discouraging competition in the marketplace and giving over too much control to companies with too few ties to producers or consumers. The recent effort by J.B.S. to acquire National Beef and Smithfield further shows how just a few players will be able to set markets by reducing excess capacity, timing deliveries and setting prices interfering with a true marketplace. Additionally, I believe we need to work hard to ban ownership of cattle by packers for more than a reasonable amount of time. We need an open and accessible marketplace that allows for new approaches and new opportunities, one which allows producers to meet the demands of consumers, not one that is controlled and operated by a few.
Furthermore, we must open more foreign markets for our agricultural products. These agreements must be truly fair and not favor foreign products or modes of production over ours. We must be mindful that our current national penchant for funding our spendthrift ways by borrowing from some of these same trade partners does not compromise the best interests of our national agricultural system.
Government can also do a lot for new concerns or businesses anxious to upgrade existing equipment by allowing them to handle more flexibly and favorably how these assets are treated for tax purposes. These provisions would encourage investment aiding businesses to become more competitive. These provisions could apply to beet handling equipment and processing facilities, grain facilities, abattoirs, transportation and other equipment. And, of course we must assure that estate taxes nevermore interfere with the orderly transfer of property from one generation to the next.
Another area that our government must attend to is our creaking transportation infrastructure. This must be a commitment for our nation going forward as there are enormous issues of reliability, security, economic viability, energy efficiency, and just plain safety that we must stop ignoring and get on with. For many places in Wyoming access to markets is of paramount importance to providing economic opportunity.
Encouragingly agriculture is beginning to receive appropriate attention for conservation. From the nascent opportunities in carbon sequestration that could provide additional income for people in agriculture, especially if Congress is responsible in the laws it creates governing carbon emissions and storage, to recognition for good work done on the ground through EQIP, WHIP and other similar programs, to understanding the value of open space and wildlife, agriculture is beginning to see new opportunities. Certainly one of the most critical issues touches perhaps Wyoming’s most important resource, water. Here we must ensure it is protected and used responsibly. That responsibility rests firmly here in Wyoming and must remain so.
What this nation must never forget is that private property and the opportunities and responsibilities that are derived from it must never be compromised. Issues such as eminent domain and environmental regulation must be handled sensibly and appropriately so that the economic viability of farms and ranches is safeguarded. The rest I think will be up to us.
Mark Gordon is a Republican candidate for Wyoming’s lone seat in the U.S. House of Represenatives.