The Reshaping of the U. S. Agricultural Economy

But the new face of agricultural economics reflects a
significant shift from business plans rooted in overproduction
to ones based on response to market demand. This shift affects all aspects of ag businesses, from fuel, fertilizer and feed to marketing, shipping and every other facet of business management.

It’s clear that the demand for food is no longer the only major market driver for agricultural products. Ever since humans figured out how to grow and harvest grains, the principal purpose of crops has been to feed people and livestock. But that’s changing as sky-high energy prices hit record levels, and the rising cost of filling the tank has the world on edge.

The cost of energy is a key driver of this shift, forcing the United States to find alternative energy sources — ethanol from corn, for example — and more efficient ways to operate. In addition to the use of farm products in bioenergy, other global trends reshaping U.S. agricultural economics include a weakened U.S. dollar and rapidly growing middle classes in developing countries, such as
China and India.

The energy factor
According to Brent A. Gloy, associate professor in the department of applied economics and management at
Cornell University, “The technology to turn corn into ethanol is not new, just the economics of it. When the price of energy was low, it didn’t make economic sense.”

Gloy added, “When energy prices changed dramatically, high prices allowed the use of biomass as energy rather than as just food for people and livestock. Growing corn for fuel, coupled with the relatively low price of food, made corn-based ethanol economically feasible.”
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Rest of the article plus:

• Meet your new director
• Director election results
• Crop insurance
• Young Entrepreneur Profile - Lo-Nan Farms, LLC, dairy and cash crops
• Washington Update - Congressional attention given to commodity and food prices
• Ag Enhancement Grant Recipients Announced - Grants to promote Northeast agriculture total $38,000

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This article appeared in the Fall  2008 issue of Financial Partner (F.P.) magazine, Yankee's customer publication. Click here if you would like to start receiving FP magazine in the mail.