The sharp rise in the number of farmers markets around the country reflects an increased demand for locally sourced produce. This also represents a source of revenue and opportunity for smaller farms, often excluded from the traditional supply chain of larger supermarkets served by industrial-scale farming.
Slow economies also bring benefits for large-scale farming, with cheaper labor and energy costs. For example, dairy farming is having a strong year with the USDA forecasting record milk yields, helped by falling feed prices. Dairy analysts suggest there is enough of a margin on offer to keep dairy farmers in business, with 2014 likely to be even better. However, corn and soybean farmers are having to contend with low prices, with concerns as to the amount of crop needed to be produced in the current year to generate sufficient income to plant next season’s crop. Furthermore, futures prices for the 2014 crop are also depressed, which will likely lead to a repeat of the problem next year.
Farming is an industry that depends on a number of important sectors in the provision of seed, livestock, fertilizers and (organic) pesticides. The rise in produce prices has generated windfalls for many farmers, fueled jobs, and increased interest in agricultural-related university courses .
However, this boom hasn’t filtered to all sectors equally. For example, Monsanto Company (NYSE:MON) serves the $78 billion corn farming industry, but its GMO seed and related products are effectively limited to large monoculture farming. The cool, wet spring has magnified the distress to monoculture farming which, because of its scale, has little room for maneuver: DuPont lowered guidance on its agribusiness due to the large number of unplanted seeds. Monsanto Company (NYSE:MON) reported similar impacts, but compensated losses from its seed division through sales of its higher-priced Roundup weed killer. Earnings for Monsanto Company (NYSE:MON) and DuPont are likely to be hit again if corn and soybean farmers are unable to sell at high enough prices to support next season’s crop.
Component fertilizer companies like The Dow Chemical Company (NYSE:DOW) and Potash Corp./Saskatchewan (USA) (NYSE:POT). are well positioned to benefit from the growing interest in farming. The Dow Chemical Company (NYSE:DOW)’s Agricultural Sciences division achieved “record second quarter sales with double-digit growth”: a 10% year-over-year increase in sales and a 14% growth in new products in crop protection. Despite a drop in R&D expenditures, there has been an increase in ag-related investment with research in its seed division an important driver for the future.