Our first AgTech Blog for November is a bit tardy — my apologies — but worthwhile as there are several recently converging, divergent and sometimes even contradictory trends that will influence your near-term business decisions.
To wit:
Adverse and new agriculture economics. Farmers, despite their pastoral exteriors, are gamblers, and they are always placing their bets with an eye on the cyclical nature of agriculture.
Good times may be not so good soon.
Bulk commodity prices are dropping. Although specialty crops (like nuts) are holding the price line, dropping yields (the drought, remember?) are reducing revenue. California ag land (with water) values skyrocketed over the past four years and seem to have slowed or dropped.
Changing climates are part of the impact on land instability. Chill hours needed for permanent crops are drastically down in the San Joaquin Valley, which presages a possible northern migration and new crops emerging.
Every fall, after harvest, most farmers trek to their neighborhood ag banker for a spring loan. If you are an ag banker this fall, you are looking very closely at the above micro-trends … and maybe asking for more collateral or lending less or … you get the idea.
A bit further afield, major equipment manufacturers, like John Deere, are no longer seeing green and have reduced employee counts, profit projections and output. These are the folks who both buy new ag tech products and who compete with you. So this may be a blessing in disguise.
The herd of unicorns is thinning. This is the tech half of “ag tech.” Unicorns are the just-past startups valued north of $1 billion, and investment bankers appear to be finding fewer worthies. This investor skepticism trickles down to ag tech entrepreneurs.
Consult this new New York Times explanation.
On the upside, there is a new ag tech market. A trusted source, the California Department of Food and Agriculture secretary blog, reminds us that our Golden State is not only a global food-producing leader, but a planetary food-processing leader, too, of course. To quote:
“Food and beverage processing is California’s third-largest manufacturing sector (computers/electronics and chemicals are first and second, respectively), and our state’s total of 4,514 food and beverage manufacturing establishments is the largest in the nation. Manufacturers in California are responsible for 10.85 percent of the total economic output in the state.”
In ag tech world, you find your farmer/customers by prosperous geography. Here are 2014 (most recent available) market results by county:
http://bit.ly/1QscGZ3
You’re welcome, and see you here in a week or so.
