Sunday, March 12, 2006

Ag Barbell in the Future? Wineries as an Example.

Would a barbell make more sense for how we view our agricultural economy in the future? I’ve been contemplating this for sometime as I traveled around the country for the past several years, observing the changes that are occurring in the agricultural arena. My observation is that we really have two areas of growth for our agricultural producers.

The most obvious area of growth is in the production of commodity products such as corn, soybeans, wheat, cattle, hogs, etc. The keys to success to compete in an increasingly global economy are: economies of scale and becoming the low cost producer. Our current agricultural policies do not encourage either key and hopefully will be changed in future bills to allow us to compete better.

The area of most excitement to me is on the other end of the barbell, in niche markets where producers carve out an area of expertise, allowing them to become dominate within their geographic or product area. New technologies (i.e. GPS), media (i.e. email, Internet, etc.) and changing demographics (i.e. baby boomers reaching retirement age) are all factors that should allow for the rapid growth of new entrepreneurs in agriculture. I’m seeing examples of it with every trip that I take out around the country. If we could channel some of the subsidies going to commodity products into these niche products and convince the medium commodity producers to develop niche products, I’m convinced that we would make both ends of the barbell much more substantial.

An example of an agricultural niche area that is growing very rapidly is in the growth of wineries throughout every state in the USA. A recent trip to OK showed over 30 wineries in that state ( and 60 that I learned of at an IL Products Expo that I attended last weekend ( IL only had a dozen wineries ten years ago, quite an increase in the last decade.

IL was the fourth largest wine producing state in the country until the Prohibition Act of 1920 caused the closing of all wineries. In 1936 the Baxter family in Nauvoo, IL reopened their winery, which remains open today as a fifth generation operation. More on them later in the week.

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