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ASSN OF EQUIPMENT MFGRS: FIVE AG INDUSTRY TRENDS TO WATCH
Source: Association of Equipment Manufacturers (AEM) news release

2017 has been quite a year so far for the ag industry. A number of trends have emerged, and their potential for impacting equipment manufacturers should not be overlooked. While most of those manufacturers who serve the ag market are aware of these trends, it's important to consider just how they will shape the industry moving forward.

Here are five ag industry trends to watch right now:

Public Policy

Not long ago, much of the focus on ag policy in the U.S. centered around the upcoming Farm Bill. However, quite a bit has changed in recent months. The U.S. Environmental Protection Agency (EPA) made a move to withdraw the Waters of the United States (WOTUS) rule, and the agency opted to keep the Renewable Fuel Standard (RFS) blending requirements the same for 2018 as they were for 2017. In addition, the U.S. has been actively engaged in NAFTA renegotiations for the better part of the last few weeks and months, and the issue if immigration reform remains an topic of great significance for the industry. It almost goes without saying that these policy issues, among others, weigh heavily on the minds of many within the industry right now. Only time will tell how everything will play out.

Sustainability

The desire to meet the world's ever-growing needs for food and textiles, as well as protect the environment for future generations, has led to the ongoing development of sustainable agriculture practices. Farmers today are seeking a wealth of methods and means to help promote soil health, minimize water use and lower pollution levels. In addition, other key stakeholders - food processors, distributors, retailers and consumers - continually investigate the ways in which they can help in ensuring a sustainable agricultural system. The trend of sustainable agriculture has had disruptive impacts on the industry in recent years, and there is no reason it shouldn't continue to do so for the foreseeable future.

Labor Shortage

There is growing concern among farmers in the U.S. and around the world that their existing labor shortages will not be alleviated at any point in the near future. Questions regarding how immigration law will be reformed have exacerbated their worries. Nowhere is this fact more true than in California. There, farmers have struggled to hire enough people to work during harvest season this year, causing some crops to rot before they can even be picked. The situation is dire, as evidenced by the fact that the labor shortage in the state triggered losses of more than $13 million in two counties alone this year. No real resolution to the problem is imminent, but there is hope a turnaround will happen eventually.

Automation

Many experts foresee a future where tractors and other farm machinery are transformed into semi-autonomous machines. The ag industry's need for self-operating equipment to perform time-consuming tasks and improve efficiency is driving the automation trend, as is the rising cost of farm labor and the lower adoption costs of the technology. According to Goldman Sachs, farm technologies could become a $240 billion market opportunity for ag suppliers, with smaller driverless tractors a $45 billion market on its own. This is a trend in the earliest stages of its infancy, and it's one poised for considerable growth over the course of the next decade.

Supply and Demand

The world's growing population has led to an incredible demand for food, one which is expected to increase somewhere between 59% and 98% by 2050. Currently, crop yields are not growing at a fast enough fate to meet the forecasted demand. A number of factors, including but not limited to climate change and urbanization, are making it difficult for the ag industry to provide enough food for the world. While aforementioned trends like sustainable farming and automation are helping to improve efficiency, it's a question of if -- not when -- supply will eventually equal demand.


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