Perspectives Online

College Profile - Taking the long view, CALS economist Arnie Oltmans  looks at the future of agriculture.

Arnie Oltmans, who teaches agricultural business management, says bioenergy holds the potential to fuel an agricultural revolution.
Photo by Daniel Kim

Dr. Arnie Oltmans' view of agriculture may not be unique, but it is encompassing and certainly informed.

As undergraduate program coordinator in the Department of Agricultural and Resource Economics, Oltmans spends much of his time working with students. But he also has a North Carolina Cooperative Extension appointment, and his Extension work focuses on agricultural business management.

In recent years, he has joined colleagues in Agricultural and Resource Economics to help North Carolinians who grew tobacco or owned tobacco quota make sense of the tobacco buyout. Oltmans focused on the tax and financial ramifications facing North Carolinians who were to receive payments through the buyout.

And, Oltmans says, he finds himself spending more time with people in the state's horticulture industry. He points out that the industry has grown rapidly in recent years and is maturing economically. Competition is increasing, profit margins are shrinking and owners of horticultural businesses are looking for ways to be more efficient, to manage their businesses better.

Arnie Oltmans
Photo by Daniel Kim
Horticulture businesses that were start-ups a few years ago are now into the second and third generation, so there's concern about business continuity, which is an area on which Oltmans focuses.

But Oltmans takes the time on occasion to step back and look at the big picture, to consider where agriculture might be heading. Prognostication, he says, is something he does every couple of years. Most recently, Oltmans collected his thoughts about the future of agriculture for a meeting of the Crop Protection Association of North Carolina.

"They were looking for a general 'What's new in agriculture' presentation," is the way Oltmans puts it.

But before the future, the past. Our views are, after all, colored by experience. Oltmans grew up on a farm in Nebraska, the youngest of a dozen children. Four of his brothers still farm there. And he married a farm girl whose family continues to farm. So Oltmans may have a more encompassing view of agriculture than most. He is well aware that agriculture is a business that requires sound business decisions for success but he is also well acquainted with the view from the ground that the farmer sees.

Given that perspective, what does the future hold for agriculture?

Oltmans thinks the next 10 to 20 years "will be marked by innovation and change," which is nothing new for agriculture. But he thinks the changes may be more rapid and may produce more economic volatility in the agricultural industry than in the past.

Oltmans thinks farmers will have to change the way they view an essential element of agriculture, the land on which they farm. The value of farmland has been driven by agricultural productivity in the past. Land tended to be valued based on the economic return from products that could be produced on it. But Oltmans says that's no longer the case.

"There are more nonfarm people with a stake in agricultural policy, and that's new."
The value of land increasingly is being driven by non-farm demand, Oltmans says. Land is valued based on its potential for things like development, recreation, lifestyle or environmental preservation beyond the economic return from agricultural production.

As a result, he adds, with the value of land increasing more rapidly than the profits from farm production, producers will find it increasingly difficult to own the land they farm. Renting or other arrangements may be more economically feasible than owning land, and farmers may find they have better uses for their limited capital and cash flow. Future owners of farmland will need to approach the ownership decision more as investors in the land than as producers on the land. They will need to differentiate and manage production decisions separate from investing decisions regarding farmland.

In addition to land, another element that has always been an agricultural mainstay will assume increasing importance.

"I think water is going to be one of the key defining issues (for agriculture)," says Oltmans. Both water quantity and quality will be issues. Increasingly, there are competing demands for water, particularly for urban and environmental uses.

Oltmans can see instances in some parts of the U.S. where the water in an aquifer below a piece of land may be more valuable than anything that can be grown on the land. He points out, for example, that water availability is already affecting the horticulture industry, with landscapers using more drought-tolerant plants in an effort to conserve water.

Energy also will have undue influence on agriculture. Oltmans thinks bioenergy holds the potential to fuel an agricultural revolution, but the direction this revolution may take is far from clear.

"I think we're going to look back in a few years and talk about 'the great ethanol run,'" he says of the present rush to build plants to produce ethanol. Oltmans says ethanol is likely to play a major role in agriculture, but there will be an economic shake out before that role is completely determined.

"It's a speculative activity right now," he says of building ethanol plants, and the market will determine who the winners and losers are. "That's what we do in capitalism; we let the market sort it out. Who says we won't be importing ethanol? We're not the only ones who can produce it."

And if markets determine ethanol winners and losers, there will be new players at the table when government makes agricultural policy. In the past, Oltmans says, agricultural policy has been driven by the agricultural community and perceptions of what is good for agriculture and farmers.

But that's changing. Environmental concerns are now part of the picture, as is international trade.

Of basing policy decisions on what is thought to be best for farmers, Oltmans says, "That's just one leg of the stool; it used to be the whole stool. There are more nonfarm people with a stake in agricultural policy, and that's new."

And speaking of international trade, Oltmans has two words: China and India. Both should be major customers for American agricultural products. The emerging Chinese and Indian economies are likely to have outsize influence on the U.S. economy for years to come. But the governments of both countries can be mercurial, so it is difficult to forecast what they may do.

Indeed, Oltmans includes China and India among a number of wild cards that could affect American agriculture in unforeseen ways. Things like the world economy, energy markets, the U.S. political and economic standing in the world, breakthrough technological discoveries - all these could affect agriculture for better or worse.

Then there's what may be the most unpredictable element of all that a farmer must deal with: the weather. Oltmans points to the weather to illustrate the folly of predicting the future. This year was predicted to be brimming with big hurricanes, yet the hurricane season has come and gone with hardly a puff.

"You do the best you can and plan ahead, but who knows what the future holds," says Oltmans.

"We live in very interesting times!"