FBN - Better days ahead for American Farmers

By: "Farm Tender" News
Cropping & Grain News
Dec 31, 2018
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By Amol Deshpande - Co-Founder of FBN

I am frequently asked by investors, analysts and others for a market outlook. Typically, those outlooks are meant to be framed in 12 month intervals, given in the last few days of a calendar year (or first few of the new year depending upon if you are lazy or organized).

As it turns out, I don't typically think about outlooks in 12 month time frames. The artificial bound of a 12 month horizon is silly for those interested in creating meaningful impact or wealth. I don't believe in "trading", I believe in buying and holding-- both equities, as well as ideas. I think about it the same way with people. If I am bought into someone, their character and their upside, then I am going long on their potential and I am likely not going to change my mind even if they have some ups and downs.

I am sure it must have been hard for many of us in December to watch our 401K or stock portfolios take a hit as the market saw a 15% decline.

The smartest thing my father ever taught me was that declines in the market are simply buying opportunities for the long term thinker. Its so counterintuitive because you just feel like you want to sell. But the reality is selling short or being scared is almost never the right decision. Life circumstances and needs sometimes supercede the pure and financially rational mindset, but as best you can its helpful to fight the impulse to think short term.

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Here is a secret I will let you in on. I have been investing for over 25 years now and I can tell you I have almost never sold anything. On occasion I sell, but not without a fight. Truthfully, I will sometimes ride something all the way to the bottom. But much more often I end up seeing the benefit of patience and compounding, just over time. This includes my car which is the only one I have ever owned and is now nearly 19 years old with 200K miles.

The opposite is also true. When the market goes up 20%, I wouldn't count your chickens. Rather, double down again for the long term and compound the wealth. Sitting at home and counting money is for the small minded.

So with that frame of mind, and insight into what I am thinking, that gets me to the agricultural economy.

The long term view of agriculture is very positive today. Its tough to say that with a straight face as some of our farmer members at Farmers Business Network ("FBN") are facing negative margins and a multiyear money losing trend. But the wealth and prosperity of emerging nations will provide a long runway for those who raise crops and livestock efficiently. And American farmers certainly do that better than anyone in the world. Trade wars and interest rates are temporary phenomenon and the clever and economically minded will innovate around them and reap the benefits.

Perhaps the biggest outlier trend is consumer sentiment changes that are compounding at a rapid rate and those could be longer term and more structural- probably most worth paying attention to, especially for the American farmer. I don't know what is going to happen their but the will of the consumer is to a large extent out of the hands of a farmer. Better to worry about things you can control and watch these trends from afar to be ready for change.

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Claims about innovation abound, but some of it is also long dated, expensive and impractical. I see all kinds of innovations and very few are truly game changers. Most are incremental and almost none are willing to be implemented with a bold mentality. Almost all are very expensive due to the innovators fixation on near term margin gains. Food innovations rarely hit the nail on the head and are almost always focused on feeding the "rich" versus feeding the "poor". Need I remind us that 45M Americans are still on SNAP nutritional assistance programs and an estimated 13-15M of those are kids! And we are talking about high end foods?

The biggest issue today for the American farmer is lack of appropriate risk and reward dynamics. Simply put, farmers take far too much risk for far too little reward. All trends and innovation in agriculture are dictated by a few lone companies who control disproportionate market share. New and novel ideas are discarded or treated with disdain unless they are blessed by the 40% market share leaders. All this and mergers still abound. If this trend continues you can expect it will offset any positive trends of consumption and demand from emerging economies.

Why am I still long term bullish? Because I think the scales are tipping in favor of the small business entrepreneur. New technologies, democritization of data and information will lead to a more level playing field. That will happen in agriculture-- it is happening, in part because of FBN, but really because the time has come for a change in business practice.

American farmers will prosper because they are innovative and willing to take risks. They also have staying power of many generations. With the new tools and technologies of this age of innovation, I think incomes can go back up. It will need to be a long term trend- it necessarily cannot happen overnight. But the stage is set. Consumers will also prosper because innovations in agriculture will continue to bring high quality food at low costs to your door. Your demands as a consumer will likely be met and the ripple effect through the economy will be positive. I hope in 2019 there is more value placed on innovations that focus on efficiency gains and progress for those with limited budgets- they are consumers too and there are more of them than there are rich people in Manhattan or San Francisco.

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So my outlook 2019? I am an optimist and I am bullish for the long term. Unfortunately, I couldn't begin to tell you for certain what will happen in the next 12 months. But what I can say is I see better days ahead for agriculture, and more broadly, I would be buying and holding American stocks in any scenario from a market perspective. I am going to stick with the program. Buy when things are good. Buy when things are bad. It pays to believe in the long term of the American economy and as a financial investor, its equity. I am also going long term on people. If I see someone with character and talent, I want to know them not just for the next year, but for their entire career. It is exciting to think about the possibilities all around.

www.fbn.com