Feldspar
Member
- Location
- Essex, Cambs and Suffolk
On the OP, I think these people who think some day farmers are all going to be rich due to rising populations, China eating more meat, etc., are engaging in pie-in-the-sky thinking. Yes, we might see higher prices, particularly in the odd year due to increased climate volatility, but if there is a general trend upwards you can be sure that input prices will follow close behind.
Big agrochem companies will know how much money farmers are making probably better than the farmers know themselves. With a large number of supply companies there will be more of tendency to compete on price, thus bringing the price of their products to a level where they make enough money to bother making them. In this instance the farmers will see quite a big benefit from using agrochemical products and could be really quite profitable.
At the other end of the scale, with very few companies -- and less than five is very few IMO -- the tendency will be towards collusion (and this can happen in very subtle ways) that causes the price of their products to rise to a level where the farmer makes just about enough money to bother farming, but in this case it will be agrochem companies who are laughing their way into the bank.
I have just been reading The Prize by Daniel Yergin on the history of the oil and oil companies and you can quite clearly see both of these dynamics throughout history.
My feeling is that, whilst the second scenario prevails, a farming system that can divorce itself from products -- which are supplied by a few very large companies who have vastly more power than the individual farmer -- the better the long terms prospects for that farming business.
Looking at previous opportunities, the successful farming business needs to make sure it keeps one eye on efficient crop production, but to keep another looking out for anomalous opportunities. I think selling land for houses was one a while back (now S106 agreements are clawing back a lot of the money made from selling land in this way), and I think renewable energy and FiTs were another (now also gone, or least very much reduced). Both of those options were more the benefit of the land owner and not the farmer, which leaves the farmer facing quite a different long term prospect to that enticing picture of sky high commodity prices and rock bottom input prices.
The thing that still amazes me is the spread between the bottom 25%, average and top 25% farms. Whilst we still have this big spread, I still see a way of farming and making reasonable money for those at the top, assuming that the price of inputs will be pitched at a level that makes the average farmer still want to get out of bed in the morning.
Big agrochem companies will know how much money farmers are making probably better than the farmers know themselves. With a large number of supply companies there will be more of tendency to compete on price, thus bringing the price of their products to a level where they make enough money to bother making them. In this instance the farmers will see quite a big benefit from using agrochemical products and could be really quite profitable.
At the other end of the scale, with very few companies -- and less than five is very few IMO -- the tendency will be towards collusion (and this can happen in very subtle ways) that causes the price of their products to rise to a level where the farmer makes just about enough money to bother farming, but in this case it will be agrochem companies who are laughing their way into the bank.
I have just been reading The Prize by Daniel Yergin on the history of the oil and oil companies and you can quite clearly see both of these dynamics throughout history.
My feeling is that, whilst the second scenario prevails, a farming system that can divorce itself from products -- which are supplied by a few very large companies who have vastly more power than the individual farmer -- the better the long terms prospects for that farming business.
Looking at previous opportunities, the successful farming business needs to make sure it keeps one eye on efficient crop production, but to keep another looking out for anomalous opportunities. I think selling land for houses was one a while back (now S106 agreements are clawing back a lot of the money made from selling land in this way), and I think renewable energy and FiTs were another (now also gone, or least very much reduced). Both of those options were more the benefit of the land owner and not the farmer, which leaves the farmer facing quite a different long term prospect to that enticing picture of sky high commodity prices and rock bottom input prices.
The thing that still amazes me is the spread between the bottom 25%, average and top 25% farms. Whilst we still have this big spread, I still see a way of farming and making reasonable money for those at the top, assuming that the price of inputs will be pitched at a level that makes the average farmer still want to get out of bed in the morning.
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