Economic Development and Food Service & Agriculture

Ag industry growth slows

Dietary changes, technology cause Michigan’s supply to outpace demand in livestock, crops and horticulture.

November 10, 2017
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West Michigan continues to lead the state’s agricultural sector, but the growth rate is regressing.

The agricultural supply chain, which ranges from farming to retail — including restaurants — contributes more than $100 billion per year to the Michigan economy, said Jamie Clover Adams, director of Michigan Department of Agriculture and Rural Development.

According to The Right Place Inc. — a West Michigan economic development organization — in 2016, West Michigan was the top producer of blueberries, tart cherries, pickling cucumbers, dry beans, greenhouses and flowers. The region was second in the state for producing apples and asparagus, and sixth in milk.

There were more than 1 million pounds of blueberries, 31 million bushels of apples and 20 million pounds of asparagus produced in 2016, according to The Right Place, and approximately 97 million pounds of pickling cucumbers and 405 million greenhouse/flowers are produced annually. In 2015, more than 250,000 tons of edible dry beans were harvested and 75 percent of tart cherries in the U.S. come from Michigan, the agency said.

Although the diversity in commodities has boosted the Michigan economy over several years, the agricultural sector has become stagnant in the past few years, Adams said.

“Back in 2008, 2009, in and around that area, it was about $68 billion and now we are up over 100 (billion dollars), but it has plateaued,” Adams said. “It hasn't grown at the same rate as it was growing (before).”

There are many opportunities available for the processing and retail side of the supply chain, but on the farming side, “times are tough,” Adams said.

“Frankly, in my lifetime, I have not seen when all parts of the production side of agriculture (are) down,” Adams said. “Normally, if crops are down, livestock is up or vice versa. Everything has been down for the last two to three years.”

Many factors can contribute to low profitability for farmers, including weather, supply, demand and export cycles.

The unpredictable weather is a common reason among agricultural experts for West Michigan’s decline. Patrick O’Keefe, CEO of Grow Michigan, said the drought in 2012 hurt farmers, especially fruit farmers.

“We had almost no apple crops, no cherry crops and very little blueberry crops, which are all three big commodities in Michigan,” O’Keefe said. “Prices have fallen since the high prices of 2012 when wheat was $9 per bushel — now $4.50. Corn has fallen from $8.50 to $3.75 and soybeans from $18 to $9.”

Jeffrey Vanderwerff, who is a co-owner of 200 acres of apple orchards and 2,000 acres of wheat, grain and soybean farmland in Sparta, said fruit profitability also can be difficult because the weather affects crop size.

“It seems like we either have a huge apple crop or we have a small apple crop, and that can make the cash flow a little bit more challenging,” he said.

Vanderwerff said he uses his farm as a “fresh market grower,” which allows him to sell apples to local supermarkets, such as Meijer, Walmart or Costco.

Some of the fruits that are in demand are fresh market apples, blueberries and asparagus. But according to Kevin Robson, a horticulture and industry specialist at Michigan Farm Bureau, products such as canned vegetables, canned fruits and pie fillings are tapering off.

This year proved a setback for farmers, as an unexpected late frost and the heavy, consistent rain and wind in July put farmers at a great disadvantage, according to Robson.

Aside from the weather, supply has outweighed demand in livestock, crops and horticulture. One of the reasons for so much supply is the implementation of better farming methods, O’Keefe said.

“You have better input,” O’Keefe said. “So, things like seeds and fertilizer are better now, making the acreage that is being farmed more productive. You have more supply in the marketplace with a shrinking demand.”

Dairy is one of the state’s top commodities, according to Ernie Birchmeier, a livestock specialist at Michigan Farm Bureau, but he said the state has more milk that it can handle and not enough processing facilities. Therefore, dairy farmers have to ship their milk out of the state for processing, which is costly.

“We have outgrown demand,” Birchmeier said. “Milk consumption has been going down for the last 20 years. Instead of drinking milk, people are drinking more bottled waters and sodas.”

Now, more Michigan dairy farmers are looking to export their products.

A rise in the number of vegans and vegetarians isn’t helping poultry and livestock farmers either, O’Keefe said. Birchmeier estimated there are approximately 12 million laying hens in Michigan.

Adding insult to injury is a decline in export demand for Michigan commodities.

Several underdeveloped nations are learning better farming techniques, O’Keefe said, which has lessened demand on an international level and increased competition for Michigan farmers.

Vanderwerff said export plays a pivotal role in determining the stability of the agricultural market in Michigan.

“We compete, on the grain side, directly with the likes of Brazil and Argentina,” Vanderwerff said. “When you are talking about Brazil and Argentina, you are talking about two countries that have the ability to produce two crops a year, where we are only able to produce one crop a year.”

Vanderwerff also mentioned both South American countries have other advantages, including “less regulatory burden to deal with; they have a slightly better climate to deal with; they have a better labor rate than we do, so we have to take the South Americans very seriously.”

The increase in supply and decrease in demand leaves Michigan farmers fighting an uphill battle.

“We are truly a supply-and-demand-driven industry, and when supply outstretches demand, you are going to have a negative impact on prices, and we certainly have seen that across the commodities in Michigan,” Birchmeier said.

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