It’s Groundhog Day!
It sure feels like agricultural producers are living in their own version of the movie “Groundhog Day.”
In the comedy, Bill Murray plays a cynical weatherman who goes to Pennsylvania to report on whether Punxsutawney Phil can see his shadow. He gets stuck in a time loop, forcing him to relive Feb. 2 over and over again. Every morning, Murray wakes up at the Inn to the clock radio playing Sonny & Cher’s I Got You Babe.
If you’ve seen the movie, you will appreciate the similarities to what’s happening in agriculture. Just when our agribusiness customers think markets will be better or trade policies will be swiftly implemented, they are faced with their own Groundhog Day, and every year history just keeps repeating itself. And that’s been happening for around five years now.
When COVID-19 struck this year, it looked like that might be the jolt to get us out of our cycle – one way or another. Either COVID-19 was going to create chaos in the markets that none of us have ever witnessed, or it was going to be a positive for demand and negative for supply. Turns out, five months after COVID-19 started wreaking havoc, for the farm markets at least, it’s just a second of static on the big screen.
What will be the impetus to make a difference in markets?
What about supply shocks? What about the weather? It sure seems that technological advances in both genetics, livestock and crop breeding, chemicals, and automation have almost immunized the food supply from weather disruptions. So, then what about supply chain disruptions? We all agree there were COVID-related food chain disruptions on a minor scale, but they never morphed into anything more than a second of static during the movie.
What about demand changes? Ethanol was a game-changer for corn demand. Now that we’re past that peak, what will be the new “ethanol”? Let’s forget about population growth exceeding the supply. Despite all the predictions otherwise, that theory has been debunked and has never happened. As the world population grows, countries put more land into production with better technology. Supply has obviously kept up, end of story.
So where does new demand come from? Do shifting consumer preferences matter? As consumer preferences change, do the new products use more, the same, or less ingredients? Turns out, no matter what it’s turned into, new products don’t use more – they use different. That does little for the producer in a conventional market that just produce more and get paid accordingly.
One positive for agriculture and exporters is a weaker dollar. The US has had a stated strong dollar policy. But now that US debt is climbing rapidly, the dollar has shown signs of weakness and is 6% lower than it was a year ago - which ultimately may help US ag products be more competitive. However, relative to many of the up-and-coming exporting countries, their currencies have gotten even more cheaper than ours, so that is of little help.
I give the Wisconsin legislature, state, and the University of Wisconsin system credit for moving full-steam ahead with the Dairy Innovation Hub. Now more than ever, we need good leadership to help reinvigorate research into new products and how farming can become profitable. The Hub, a partnership of the Madison, Platteville, and River Falls campuses of UW, looks to be a critical kick-starter campaign for the dairy industry. Perhaps the livestock and grain industries can look for such an innovation center of their own. Make sure to climb on board supporting the Hub.
It’s time that history quits repeating itself. Just like in the movie, it took Bill Murray to make a change so the date would finally advance—and it’s time that the various ag industries move forward with innovation so we won’t be waking up to I Got You Babe playing on the alarm clock—and it will finally be Feb. 3.
Jeff Gruetzmacher is a senior vice president with Royal Bank in Lancaster. Jeff also serves as Past Chair on the WBA Agricultural Bankers Section Board.