32 MAY / JUNE 2020 AG BANKING Brady Brewer, Ph.D. Assistant Professor, Agricultural Economics Purdue University brewer94@purdue.edu The Farmer of Tomorrow In the January/February issue of the Hoosier Banker, I opened my article with, “A lot happened in 2019.” I feel like 2020 has been more of the same, but at an even quicker pace that has not let up for the agricultural economy. Ongoing trade wars, decreased fed funds rate and volatile commodity markets, along with demand uncertainty from the COVID-19 pandemic, have been at the forefront in 2020. These events have affected all sectors of the U.S. economy, but agriculture has seen some of the biggest impacts. One common theme among these events is change. Trade wars have brought new trading patterns to the commodities our farmers grow. The low interest rate environment is just one component of land values that has increased competition for valuable land, even though we have seen lower farm incomes in recent years. Volatile commodity markets have made seasoned marketers of our farmers as they try new strategies to lock in margins. The COVID-19 pandemic has triggered drastically changing supply chains as food has been rerouted to grocery stores instead of restaurants, quickly adapting to the change in where consumers bought the end product. All of these have altered how some part of the food value chain does business. This change brought on by these events may have been sudden in some cases, but it isn’t anything new to the farmers. Indeed, farmers and the agricultural sector as a whole have changed drastically over the past decade or so and, based upon the companies and technology I see in the industry, this changing environment will more than likely be the new normal. Banks play a critical role in this process. With change comes risk. Farmers and agribusinesses alike will struggle to adapt to these changes, but there will also be success stories. This presents the opportunity to be partners with these farmers of tomorrow that are keeping pace. Technological Advances One of the main areas of change in the food value chain is the technology being utilized. As consumers demand transparency and traceability for the products they consume, new technologies to fulfill this demand have been adopted. Blockchain enables food retailers to trace a product back to the farm, in some cases providing such detailed information as which farm employee picked and processed the product. In other cases, a protein company uses blockchain that allows a consumer to scan a code on the side of a turkey. This code is unique to the farm that turkey was grown on, and a video plays that gives the consumer the background of that farm. In addition to these examples, there are companies that are working on platforms that allow farmers to track production practices, agronomic data, weather data and input data. These data are merged to create a sustainability score for the farmer that will be used to provide premiums for products. Data and data analytics have also seen tremendous growth. Many companies are struggling to keep up with all that has happened. In our recent survey conducted in 2019 titled Data on Data at the Center for Food and Agricultural Business, 92% of respondents indicated their agricultural company collects data. When asked to grade their company on the use of this data, however, most respondents graded their company a “B” or worse, then indicated they were behind their competitors in data analytics. This speaks to the rapid increase in how data analytics drives value for companies in agriculture. It’s an arms race, and companies must keep up or will be left behind. To further this, the arms race has only
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