Agriculture Forestry Fishing and Hunting
Business for Sale Industry Economics
2003 - 2021
2021 - 2027
Agriculture, Forestry, Fishing, and Hunting are one of the oldest industries in the United States, with a lengthy history in the economy. It is, nonetheless, one of the most volatile industries in recent history. Many uncontrollable and unexpected elements may have an impact on agricultural productivity. Droughts, pests, and diseases may wreak havoc on agricultural and animal output in a single year, causing demand and profitability to fluctuate dramatically.
Over the five years leading up to 2021, the sector’s revenue has decreased by 0.2 percent annually to $453.0 billion. This decrease is mostly due to overproduction previous to the time, which resulted in low output prices across the board. Furthermore, revenue growth was hampered by structural hurdles and changing demand caused by the COVID-19 (coronavirus) pandemic’s lasting impacts, but increasing sector prices are predicted to boost revenue by 0.9 percent in 2021.
Despite revenue declines during the last five years, the industry remains robust and appealing to new businesses. Corporations have resorted to this industry to reduce input costs and vertically integrate their operations. Despite the increasing presence of multinational corporations, more than 85.0 percent of farms are still held by families, making the industry mostly dominated by non-employers.
Many farmers have resorted to consolidation and resource sharing to deal with rising competition from businesses. In many situations, cooperation takes the shape of non-profit cooperatives, while in others, farms have combined to save money and pool earnings. As a consequence of the uncertain market circumstances and low prices, sector consolidation has increased over time.
Most notably, big vertically integrated beef processors have started divesting their cattle businesses. Despite this, the engagement of corporations and the formation of cooperatives have resulted in a decline in industry participation. Profit has increased throughout time as a consequence of fewer operators in the industry.
Revenue in the industry is expected to increase during the next five years, until 2026. While it is impossible to predict bad weather and other natural variables that may affect demand, revenue is projected to rebound from the steep drops seen recently.
As the economy returns to normality after the epidemic, the industry is likely to gain from increased health concerns and stable price rises over the next five years. As a consequence, revenue in the industry is expected to grow at a 0.5 percent annual pace to $464.8 billion in the five years to 2026.
Agriculture, Forestry, Fishing, and Hunting (Agriculture, Forestry, Fishing, and Hunting) is one of the most significant industries in the US economy. Agricultural goods are used in a variety of businesses, including food production, wood production, biofuel production, and ethanol production. Agriculture is also a net exporter for the United States, making the industry vital to the country’s economy.
Despite its stable position in the economy, income and output quantities have traditionally been variable. Droughts and disease outbreaks are two examples of unpredictable problems that may cause large drops in agricultural and livestock output. These shortages result in pricing variations, which may spread across the industry and produce revenue instability.
As a consequence of this volatility, industry revenue has fallen an average 0.2 percent to $453.0 billion in the five years leading up to 2021, with a 0.9 percent gain in 2021 alone as the industry recoups losses experienced as a consequence of the COVID-19 (coronavirus) pandemic.
These losses include large disruptions in agricultural product markets, the squeezing of the downstream supply chain, and the divergence of retail and farmgate agricultural product prices, which resulted in most farmers missing out on the pandemic’s boom demonstrated by processors and retailers.
THE FLEXIBILITY OF PRODUCTION
Over the last five years, the industry has been impacted by a variety of external and endogenous shocks. Perhaps most significant, agricultural output had soared to record highs prior to the present time as a booming Chinese economy required more and more agricultural goods, pushing prices higher and resulting in overproduction. Industry items started to build upon the local market as demand from China slowed, leading prices to decline owing to increased supply availability.
After seeing substantially bigger drops in 2015, the sector suffered declines in 2016. Supply and demand have realigned since then, causing the market to be volatile. Following that, the trade war with China began, as did the renegotiation of the North American Free Trade Agreement, which was replaced by the United States-Mexico-Canada Agreement, which caused further disruption in industry export markets, causing domestic supplies to rise even higher and prices to fall as products flooded the domestic market.
Then, in 2020, the coronavirus pandemic wreaked even more havoc on the industry, causing a bottleneck in the downstream supply chain and a surge in consumer demand. Overall, since they were left holding the bag, industrial farmers were left out of the quick price appreciation of food commodities.
As a consequence of the pandemic’s reduction in processing and wholesale capacity, agricultural goods stacked up at the farm gate, leading prices at the farm gate to diverge from those at the retail gateway. Overall, this is projected to continue to be a problem for the business in the five years leading up to 2026, and supply and demand will have to maintain a delicate balance.
COSTS OF INPUTS
The costs of inputs have a significant impact on the performance of subsectors within the sector. When feed costs rise, for example, cattle farmers boost their prices and gain more cash. In the meanwhile, when fertilizer prices rise, crop farmers pass the extra cost on to upstream purchasers, resulting in higher income. However, since feed is generated by crop producers and fertilizer is largely generated by animal farms, variations in input prices have a less impact on the total industry.
As a result, when crop prices increase, feed costs increase as well, and when meat and cattle prices increase, fertilizer costs climb as well. The seasonality of sector goods, on the other hand, results in a delayed influence on downstream price adjustments.
Operating expenditures have risen in recent years as a result of the coronavirus outbreak. Due to the spread of the virus, companies all throughout the country have been forced to reduce output or shut down. Restaurants in the cities and states most hit by the epidemic, for example, were ordered to shutter in early 2020, resulting in a drop in restaurant demand.
Meanwhile, as people began to cook more at home, demand from grocery shops and other retail food suppliers has increased dramatically. Overall, there has been little change in agricultural product demand, but the markets have moved. Many farmers have had difficulties as a result of this since they traditionally solely sold to restaurants or other major purchasers.
To be able to sell to grocery stores or directly to customers, these businesses must now invest in new equipment and procedures. However, as a consequence of the pandemic, profit, calculated as profits before interest and taxes, has increased from lows seen in 2020, accounting for 22.5 percent of sales in 2021. Profit in 2021 will be lower than it was previous to the present era, showing that the industry is still struggling.
While natural disasters might have an impact on local agricultural and livestock output, output changes in other nations may have an impact on the value of exports. In 2016, the United States was able to grow its exports due to shortages in other nations. However, for the five years leading up to 2021, the value of sector exports has stayed constant, at $81.0 billion.
Due to China’s high tariffs on US agricultural commodities, exports are likely to increase in 2021 from lows seen in 2020. These duties were imposed in response to US steel tariffs; since China is the major consumer of US agricultural exports, Chinese tariffs have had a substantial impact on the industry. While a trade agreement between the US and China is planned for 2021, commerce is projected to stay low as a result of the coronavirus pandemic, which is reducing international commerce in practically all industries.
While exports have varied over the last five years, imports have increased. Imports are less volatile than exports since the US imports items from a wide range of nations, especially commodities that cannot be farmed locally. Over the five years to 2021, the value of sector imports increased by 0.3 percent on an annualized basis to $64.2 billion.
FARMS OPERATED BY PERSONS IN THE FAMILY
Despite sales and profit losses, the industry remains appealing owing to its consistent performance. Over the last five years, companies looking to vertically integrate and manage suppliers have pushed to join the market. Despite this tendency, family farms still account for more than 85.0 percent of industrial farms.
While the majority of farms are small, independent businesses, some have resorted to consolidation to compete with corporations and reduce production costs. Cooperatives and resource pooling are often used to accomplish this. In certain situations, though, farmers have consolidated and pooled their earnings. As a consequence, throughout the five years leading up to 2021, the number of sector firms has decreased by 0.5 percent on an annual basis, to 2.3 million.
In the meanwhile, despite growing consolidation, labor demand has risen over time. Historically, typical salaries in the agricultural industry have been modest, but the growing demand for organic and specialty goods has generated a need for trained workers. While these items command higher costs, they also need more resources, especially manual labor.
However, owing to greater restrictions on immigration and foreign travel, industrial employment is predicted to decline in 2021. Many farms use temporary and seasonal workers who are foreign nationals with H2A visas. Despite this, the coronavirus outbreak has resulted in immigration restrictions and an increase in the danger of international travel.
As a consequence, many farms are predicted to confront a labor shortage in 2021, resulting in a 0.3 percent yearly decrease in sector employment to $3.4 million employees in the five years leading up to 2021.
The Agriculture, Forestry, Fishing, and Hunting industry is expected to develop during the next five years, from 2021 to 2026, after a turbulent five years. Consistently improving agricultural prices, as well as increased demand for healthy and organic foods, are expected to boost the sector’s development. However, the industry is also threatened by weather instability and the possibility of a prolonged trade conflict with China. If the industry does not face any unanticipated output fluctuations, revenue is expected to climb by 0.5 percent annually to $464.8 billion in the five years to 2026.
THE DEMAND FOR OUR PRODUCTS IS RISING.
Agricultural product demand is expected to increase, notwithstanding any instability in the industry. Crops, cattle, and timber are all utilized as inputs in hundreds of downstream industrial companies, therefore the sector has a long history in the economy.
As a consequence, demand for industry goods is often stable, regardless of changes in consumer preferences. Major dietary trends, on the other hand, may result in a rise in demand for specialty items. As consumers become more aware of the advantages of natural foods, consumer demand for organic and natural products, for example, is projected to continue to rise. As a consequence of the increase of specialized crops with higher pricing, the sector’s income would certainly gain.
Aside from changes in consumer tastes, agricultural prices are the primary source of income for the industry. Because demand is typically stable, revenue movements are generally determined by price fluctuations. As a consequence, the agricultural price index, which measures the prices paid for crops and animals in a particular year, provides a clear picture of the sector’s success.
Over the five years leading up to 2026, the agricultural price index is expected to rise by an annualized 0.9 percent. Agricultural prices in South America are projected to be influenced by growing fuel costs, increasing biofuel output, and cattle output constraints.
THREATS REGARDING PRICE
Despite the fact that prices are expected to grow in general, the industry may face local and international risks. A trade war with China is the most serious danger. The federal government put duties on Chinese commodities, including steel and aluminum, in a bid to encourage American production.
China replied by placing taxes on US imports, mostly agricultural, in retaliation. China first placed duties on mostly fruits, nuts, and vegetables, but after threats of more duties, China also placed a tax on sorghum, one of the United States’ most important exports. The implementation of a trade agreement was scheduled for 2020, but the COVID-19 (coronavirus) pandemic has put the pact on hold.
Regardless of whether or not there is a trade war, the industry is unlikely to suffer large export decreases. Over the next five years, the US currency is expected to weaken, making US products less costly in other nations and hence increasing demand for exports. Over the five years leading up to 2026, the value of sector exports is expected to increase by 0.7 percent annually to $84.0 billion. However, if China raises duties on US agricultural products, exports are likely to suffer.
In the meanwhile, the value of sector imports is expected to fluctuate as well. Crops and food that cannot be farmed in the United States are mostly imported. Imports are expected to decline as hydroponic crop growing technology improves and the US business concentrates on supplying local demand. However, the value of imports is likely to climb somewhat before then, rising by an annualized 0.2 percent to $65.0 billion in the five years leading up to 2026.
CONCERNS ABOUT UNCERTAINTY
In addition to the possibility of trade wars, the industry faces environmental hazards such as harsh weather and disease outbreaks. Because of their intermittent character, these elements are difficult to predict. However, in recent years, excessive levels of pollution and deforestation have led to a rise in the frequency of natural catastrophes. While it is impossible to predict the precise number and types of catastrophes, it is probable that this tendency will continue over the next five years.
Severe weather conditions may have a good or negative impact on the industry since they usually result in output shortages. However, since agricultural items have a stable need, when output declines, prices and income increase. As a consequence, additional natural catastrophes are expected to drive revenue growth in the industry during the next five years.
Despite this, although supply shortages help to drive up prices, they have little impact on individual farms. Because the majority of farms are family-owned, a low-production year may have a significant impact on yearly revenue. A low-production year might spell financial doom for a farm that does not have considerable assets. Many farmers have opted to consolidate, either via mergers or cooperatives, to overcome these conditions.
Farms often form cooperative arrangements in order to combine resources and keep running expenses low. Farms, on the other hand, have been increasingly looking towards mergers and acquisitions as a way to boost profits. As a consequence of this tendency, the number of businesses is expected to remain flat over the next five years, reaching 2.3 million by 2026.
Despite the consolidation, demand for labor-intensive goods is expected to climb, which would increase job demand. Organic crops, for example, need a higher level of personnel monitoring than conventional crops. If current trends continue, employment in the industry is expected to rise by 0.3 percent annually to 3.5 million jobs by 2026.
Farms that mainly cultivate crops or produce animals, as well as firms that specialize in forestry and agricultural support services, all fall under this category. Companies that supply land for hunting and fishing are also included in this industry. The sector of agriculture, forestry, fishing, and hunting has reached the end of its life cycle.
Over the ten years leading up to 2026, sector value added (SVA), which gauges a sector’s contribution to the overall economy, is expected to expand at an annualized rate of 1.1 percent. Meanwhile, the US economy is expected to increase at an annualized rate of 1.9 percent during the same time period.
Slower SVA growth than GDP is usually indicative of a mature sector. Furthermore, the fact that a sector has a steady role in the US economy serves as a good indicator of its life cycle stage. Agricultural commodities are a critical input for a broad range of sectors, thus demand for them is always high.
In addition, there has been a modest amount of technical development in the industry. While agriculture isn’t often thought of as a forward-thinking area, genetically modified seeds and crops have had a big impact on the industry in the five years leading up to 2021.
In addition, there has been some consolidation in the industry, as farmers have looked to mergers as a way to minimize costs and reduce risk. As a consequence, during the next ten years, the number of businesses is expected to fall at an annualized rate of 0.3 percent. Consolidation is usually an indication that a market is reaching the end of its life cycle.