Long Term U.S. Agriculture Outlook Optimistic as Drought Lessens
BMO Economics projects an "excellent" long term outlook for U.S. agriculture
Despite a historic drought in 2012, farmers were able to produce solid farm earnings, and the outlook for the agriculture industry in 2013 and beyond is “excellent”, according to a recent BMO Economics release. The release cites projected technological advances, demand for products, and the weakening of drought conditions as some of the key reasons for optimism.
The BMO release states that technological advances in production techniques have provided a significant boost to agricultural efficiency. Also, the demand for agriculture products is growing at a rapid pace, particularly in emerging markets, which has put agricultural prices and profitability on an upward trajectory.
Aside from agricultural products and technology, the BMO release also attributes projected optimism on the recent weakening of the drought which has been rampant across most of the U.S. plains.
BMO Harris Bank's Sam Miller, who leads the bank's Agriculture lending practice, says in the release, "Mother Nature is working overtime. The latest U.S. Drought Monitor shows that, compared to last August, the drought is all but eliminated east of the Mississippi, and greatly reduced west of the Mississippi.” The latest Drought Monitor report backs up Miller’s claims, stating, “Drought coverage is reported to have decreased from the upper Midwest into the western Corn Belt and central portions of the Rockies and Great Plains.”
While the long-term future of U.S. agriculture appears to be optimistic, there are still reasons for farmers to be cautious, according to BMO Economics. High feed costs, resulting from the drought, are posing a challenge for livestock producers. Also, competition from foreign producers is increasing, and many producers remain vulnerable to increases in energy prices.