Agriculture Reference
In-Depth Information
at different points in the future can be generated. This information is very important to
agribusiness marketers. A fi rm selling capital equipment to farmers and ranchers knows
that purchases are heavily infl uenced by interest rates. Long-term prospects for stable to
declining interest rates mean this factor in the farmer's capital equipment purchasing
equation is positive. A regional retail food chain may fi nd that economists are predicting a
harsh recession in the area served by their stores. Such information will have important
implications for the fi rm's sales as some customers reduce luxury purchases, and focus more
on staple products.
Market forecasts
Market forecasts
, or forecasts for specifi c industries or types of products, are based on
general economic forecasts and a great deal of information about the specifi c industry
involved. Agricultural economists continually monitor changing economic indicators that
track or lead agricultural trends. Some use complex mathematical methods (econometric
models) to predict demand for various products and commodities. In the food business,
demographic data is carefully studied to forecast demand for specifi c products. Demographic
factors such as family size, age, income level, and education tell market researchers
much about what kind and how much of specifi c types of food products will be purchased
in a region.
Factors determining farm market demand have been researched extensively. For exam-
ple, agricultural economists have worked to understand various cycles or patterns in live-
stock production. Historically, pork production cycled every four years, while the cattle
cycled about every nine years. During these cycles, prices fell as the number of animals on
feed increased, and profi ts declined. As a result, some less effi cient producers exited from
the market, livestock numbers dropped, and prices gradually increased. The cattle cycle was
longer because of the length of the gestation period for cattle, taking more time to increase
production. Dramatic changes in the size and structure of pork and cattle operations over the
past 20 years and the technologies used by pork and cattle producers have certainly affected
these cycles. Still, information and forecasts on sow herd size, cattle on feed, dairy cow
numbers, etc. is extremely important to nutrition companies, milling equipment companies,
livestock marketing fi rms and meat processing companies because it directly impacts their
prospects and customers and thereby their market.
The demand for most farm inputs such as animal health products and fertilizer is a
derived
demand
. This means that the demand for a specifi c type of product or service depends
greatly on the demand for another product or service for which it is used. The demand for
fertilizer, for example, is a function of the demand for the crops it helps produce. When the
manager of a fertilizer plant in the Midwest is projecting the demand for nitrogen, the corn
market is carefully considered. The manager knows that the price farmers anticipate for corn
in the next season will greatly affect the number of acres of corn they will plant and the
amount of fertilizer they will want to buy. Consequently, agribusiness managers are careful
students of the market for whatever products their supplies help to produce.
Not surprisingly, there is a great interest in current information on nearly every product
produced by farmers. Summaries and analyses of market conditions for virtually every
agricultural product are distributed widely each day—from both public and private sources.
Important grain and livestock market information is instantly fl ashed to analysts and
agribusinesses as transactions occur throughout the day via a variety of media—television,
radio, satellite news services, and the Internet, to name a few. Government and private
