Analyzing Financial Statements - Trends Agribusiness

Trends and the Agribusiness In this lesson we will investigate: The different Trends effecting agriculture and how our decisions can be guided by trends How Trends can be utilized to make educated decisions in the Agribusiness.

Historical and Future Agricultural Trends Historical Trends Less farms/ranches – more acres per farm/ranch Population Involved in Production Agriculture is less than 2% in the U.S. Higher Production on less acres Future Trends The world population is expected to increase by 47% or 8.9 billion people by This equals more demand for Agriculture Products. More dependence on alternative fuels (ethanol) and less dependence on oil. Less acres to produce more product.

Social Trends Consumerism: Consumer is king in the agricultural markets today. Today's consumers are concerned about the nutritional characteristics, safety, and efficiency of preparation of those food products. Internationalism: We live in a global market and a global society. Environmentalism: Agriculturalists are looked upon to be stewards of the environment – More efficient use of chemicals Technology: Improved Mechanical Technology Genetically Modified Organisms

Supply and Demand Trends Supply and Demand Dictate the products we produce and when they are marketed. One example of this is crops. Harvest time is typically when the price of a specific crop bottoms out. On the other hand the height of the market is a few months before harvest of the crop. This is due to the demand staying steady through the year and the supply slowly being consumed. This trend should be an indicator to producers to market their products at the “prime time” if storage is available.

Supply and Demand Chart for Wheat The above example shows that the demand for wheat stays constant over time. It also shows that the supply of wheat is reduced over time. If you as a producer could store wheat, the best time to sell is when the supply is at it lowest. This is when you will receive the highest price for your product.

Marketing Trends in Crop Production Commonly used Crop Marketing Sell Grain on the Cash Market (directly out of the field to the local elevator. Sell grain on a futures contract Marketing Strategies In years when the supply will be forecasted to be large, you should store grain and sell later in the year. In years when the supply for the product is forecasted to be low, you should price early (futures contract)

Market Trends in Livestock Production Livestock Production Trends are cyclical, this means that they start and complete a cycle. As a producer it is to your advantage to understand these cycles and buy and sell when it is most effective. It is also a good idea to investigate selling livestock on a futures contract when available.

Cyclical Trends in Agriculture Example of Livestock Cyclical Trends:

Trends & Recordkeeping in the Operation Agriculturalists should be aware of trends and their effect on the agriculture economy. Agriculturalists should make sound financial decisions taking trends into account. Careful observation of trends may reduce the risk associated with any enterprise.