Analyzing Financial Statements - TrendsAgribusiness

Trends and the AgribusinessIn 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 TrendsHistorical 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 acresFuture Trends• The world population is expected to increase

by 47% or 8.9 billion people by 2050. 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 agriculturalmarkets today. Today's consumers areconcerned about the nutritionalcharacteristics, safety, and efficiencyof 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 TechnologyGenetically 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

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20

40

60

80

100

120

July Sept. Nov. Jan. March May

Supply

Demand

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 MarketingSell Grain on the Cash Market (directly out of

the field to the local elevator.

Sell grain on a futures contract

• Marketing StrategiesIn 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.