Straggle Muster 153 - 29/4/2005
US Farming - a Powerhouse in Transition with Tony Hammington, Rabobank.
A Rabobank Industry Note, currently available from your local office in NZ.
Although agriculture accounts for only 1% of the US GDP, it's importance in the value chain is much greater, and increasing by 5% pa on average since 2000. Food and fibre segments are estimated to provide over 12% of the total US GDP, which is estimated at USD11.8 trillion.
Production is dominated by animal protein, grains and oilseed production, and it is one of the largest importers and exporters of agribusiness products in the world.
Two significant trends are shared with New Zealand; farm consolidation is ongoing, with 70% of farm output coming from 10% of farms in 2004. Family or individual farms account for 90% of the 2.1 million farms, and 66% of to total farm land area. Secondly these larger farmers are leading the innovation and efficiency gains the sectors require to maintain their right to supply international and domestic markets.
Currently approximately 20% of total farm income is based on direct government support, but given their current US budget deficit, discussion underway for the 2007 Farm Bill will pressure US congress to revise those support levels. Expected changes in the current programme will probably accelerate the process of farm consolidation. This is in the face of a net deficit, as agricultural imports are now exceeding agricultural exports, due to affluent consumers expanding their requirements to higher priced exotic items, and some locally produced commodities with a high labour component are coming under price pressure from low cost producers in South America and Eastern Europe.
The opportunities for US farmers are to capitalise on their larger scale, by applying the most up to date technology to increase production with lower inputs, utilise capital more efficiently, and integrate up and down the production chain to share a larger part of the profit.
Water for irrigation is a more mature industry factor, where it is a resource that is unevenly spread geographically, and has been the subject of monitoring and regulation for a long time. Whilst varying in importance to different crops, irrigated crops account for half the value of all US crops sold.
The sectors in the US are actively lobbying the information wave that is sweeping consumers, as they try to have parity in influencing consumer trends that shift based on diet fads, media coverage ands research findings on nutrition. There are some interesting examples of this in the report, along with more detailed discussion on some of the points introduced above.
Call in to your local Rabobank office for a copy of the report.
Tony Hammington
Regional Manager, Southern South Island.
Email: tony.hammington@rabobank.com.
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