April, 2014 - Long Overdue Update to Our Scanning

It’s economic forecast month for me. Several ongoing clients have me addressing a range of industries with a look specifically at macroeconomic cycles and impact. I always start with a disclaimer that I’m not a predictor but a forecaster and the difference.

Forecasters look into the future and express their views with a reading on relative certainty and change those forecasts with time and new information.

Right now the US economy, the topic I’ve been addressing this month looks generally favorable with a 75% to greater chance of working through 2014 with slow growth in GDP. Probably (over 50%) in the 2% range. In other words, without “escape velocity” that would allow robust growth, a rise in interest rates, a spike in consumer confidence, and a greater demand for credit.

In short, for my clients in banking and construction, it’s OK news but we’re probably not too excited about it.

2015 looks better fundamentally. I’d move my forecast up to a 2.5 to 3% GDP growth rate in the year with a 75% probability and I think I’ll be elevating probability by year-end.

Agriculture is one of my key client segments. I’ve been privileged to work with North America’s smartest agriculture leaders, commodity associations, agribusiness companies, and farmers. I love them. And the business in this sector has been extremely good for a run of about 6 years. Unfortunately that may be ending.

Due to a combination of factors crop prices will almost certainly be falling and the bloom is off the rose for a number of players in the field. The counter-cyclical beneficiaries may be the animal protein sector where lower commodity prices translate to lower feed prices. Cattle might benefit particularly if its prices haven’t gone so high in the supermarket that consumers will further reduce their consumption.

Nobody deserved a good run more than the farmer. In my opinion they’re the most misunderstood business executives in North America today. While some critics of “production agriculture” whinge about “millionaire corn farmers” and “corporate farms” they completely ignore the statistics that over 90% of US farms are family-owned. And what family that runs a business doesn’t have that business incorporated? Only the naive.

I’ll have more to say on the agriculture outlook in later posts. Thanks to those of you who reminded me to stay at the blog. The workload has been a bit heavy but I’m about to take some time away from the road to get an overhaul of a bum ankle soon and I’ll have more time to share what I’ve learned from my smart clients in the months ahead.