Q You seem to have a passion for
agriculture and in examining the world scene. What drives your interest?
Q John, tell us why you started producing
Analysing Agriculture in 1989?
A It really stemmed from my time as a Farm Management Consultant in the 1960’s and 1970’s when I found it frustratingly difficult to find market intelligence based on facts. I found so much misinformation, unresearched opinion and vested interest slants that it was hard to find out what was really occurring in our world markets. The beef and wool price crashes of the early to mid 1970’s were prime examples. Today it is a bit different in that we have better access to data through technology but still a poor supply of good information or solid opinion based on thorough analysis of the facts. With my experience and curiosity for the real truth based on facts I though I would test the market for such thinking.
Q You obviously found a market to have kept producing the newsletter for so many years?
A Yes and I think my continuing interest and experience has helped. Many subscribers have told me they enjoy following my thinking and reasoning. Over the longer term of carefully reading what I write they obviously believe they have benefited significantly from making better decisions. Mind you it is mainly the top end of agriculture that subscribes as they seem to value reasoned arguments and take the longer-term perspective. The major benefits seem to be from having a better understanding of the longer term trends and being able to position their businesses to capitalise on periods of market strength and hopefully minimize the effects of market weaknesses.
Q. You mention data, information and
opinion; can you tell us how you see the difference?
A When I was teaching, I used to hold up a book full of statistics (pages and pages of tables of historical agricultural information) and say to the students, “this is one of the most exciting books in your library because it provides the basics on which you can learn most about your industry trends and markets.” Of course they would laugh, as there’s nothing more boring than a book full of tables of numbers. Much of this data is now available online but is still boring until you know how, and have the time, to analyse it and convert it into useful information. So the basic statistics are the data and the analysis of that data provides the information. Once the information is produced, and this is what I do mainly for Analysing Agriculture, then opinions can be formed on future likely trends given current actual trends and the fundamentals in the market. When such analyses are combined with a dose of common sense and your experience, I guess, a reasonable assessment of potential future trends can be made.
Q Usefully interpreting the
information you glean from analysis still requires skills. How can most of us
involved in agriculture improve our capacity to interpret information?
A Good operators in various fields of agriculture all appreciate the market truism that supply and demand are eventually balanced by price. When a commodity is oversupplied prices drop and that increases consumption and slows production. When shortages occur the price rises and that stimulates production and slows demand. In agriculture these reactions occur in the short term (say 2 to 3 years given the time frame for much production) and in the long run if demand for a commodity is overall rising or falling.
Individual agriculturalists in business need to understand these trends and the current stage of any price cycle for their commodity. With such knowledge they can make better decisions about positioning their own businesses and their enterprise emphasis. For instance a major grain user will alter the level of stocks held depending on the expected trend in prices and producers can often change their commodity mix to reduce the effects of low price cycles or to capitalise on potential periods of higher prices.
Q Yes all of that is understandable but do you really think operators in agriculture all act and plan they way you suggest? It seems to me that you would need to be a pretty sophisticated operator to make the sort of decisions you suggest.
A I’m sure the more successful operators do, given the demand for well-researched analyses . . . but it does require a pro-active management approach to planning the business side of your enterprise. I am aware that many farmers tend to prefer (or are environmentally locked in) to follow the same production pattern annually. In those cases though many could better position themselves in the market by forward selling or buying their outputs or inputs (say grain in the case of a feedlot or piggery).
Q Can you give us any examples of how your analyses have helped in decision-making?
A I have had considerable feedback over the years, especially from long time subscribers who regularly read what I have written and many have made some of their big investments decisions based on trends at the time. The purchase of additional land is often a key decision that can boost or set back an enterprise for many years if done at the right or wrong time. Many families tend to buy when the family is ready to take on more work or when they have had a couple of good years but not necessarily when is the right time to buy.
A decision to expand is best made when pressure is off land prices and the major commodity from that land is in the doldrums. Last year (early in 2002) in Australia was the ideal time to be buying cotton land and water entitlements because of the lack of water and low prices for cotton. Such a policy takes some nerve to act on as most farmers only make one or two major investments in their lifetime and so often cannot be clinical about the timing.
Often better knowledge of world trends can also help avoid a bad decision as well as help make a good one. For instance the current situation for beef in Australia looks promising in the short term but a major investment in beef for the medium term will be costly with prospects of a significant price fall over the next 2 to 5 years developing. I explain the reasons for such thinking in my newsletter and in some of my major analyses.
In terms of annual production patterns emphasis on a mixed farm can be given to those commodities for which prospects look most promising. I know all the analyses in the world cannot always be correct, and I certainly have no magic knowledge of the future, but if you act on the best available knowledge you will be in the right place at the right time more often than not. This, over time, will translate into higher profits and greater asset accumulation.
Q With world markets being distorted by subsidies, quotas and tariffs despite the World Trade Organisation’s (WTO) push for freer trade; do you really believe market signals are true enough to be confident that any analysis can help determine future trends?
A In terms of small market movements trade is probably distorted and some of these smaller trends can only be explained by political or trade policy decisions. On the macro scale though no power in the world can stand in the way of eventual market forces. This has been proven time and time again where cartels have tried to determine a market price and hold it. Some schemes have held for years but eventually they have failed in the face of the real market forces.
Even though the gradual move to make world trade in agriculture freer is being delayed by intense vested interests at the WTO, most of those interests know that, in the long run, their economies will be better off with freer trade despite the internal pain of adjustment those countries and many of their farmers will suffer in the short term. I really believe the world has an environmental challenge of enormous proportions in being able to adequately feed all its population in a long-term environmentally stable manner and so bickering about political and economic decisions will be seen to have been highly petty in the long run. The only way this will be achieved is if trade is freer and the price of agricultural commodities is higher, enabling better practices to be followed even if the production processes used are slightly more expensive but more environmentally benign. I will continue to cover this issue in my newsletter from time to time.
Q John, thanks for that brief overview. I am sure there are many questions others might like to ask. What can someone reading this script do if they would like to ask you a question about your work and opinions?
A I would be quite happy to answer general questions that are sent to me by email. If a reader has a question then please send me an email with your question and I will do my best to give you a reasonable answer.