The prospects for the global agricultural industry in 2016 cannot be viewed in isolation.
The interdependencies between it and the other segments of economic activity are complicated and subject to wide disagreement in interpretation, but nonetheless exist. So what does that mean in 2016 terms?
The global economy
Writing in the first weeks of the year, it seems clear that, once again, next year will be tough for the global economy. While this may sound like a repeat of the news from any year since 2008, sadly, it seems likely to be the case.
For the moment, the economies of the United States and the United Kingdom are growing moderately and healthy, but their economic recovery remains fragile. Consumer spending in both countries is extremely low and unpredictable.
The once unstoppable Chinese economy is slowing down, although growth still remains at levels that almost any other country would consider an unattainable ideal! It seems likely that demand for certain types of agricultural products in China will continue to rise, which is good for its domestic producers and the countries from which they import things like tractors and farm machinery, as well as produce.
Unfortunately, from then on, the outlook looks increasingly bleak.
Australia and the Euro Zone appear to be facing relatively anemic growth prospects for next year. Furthermore, Greece remains a great country even though it is not currently a concern for European financiers as “front page news”.
Many economies in South America and Africa appear to be headed for dire difficulties, and even the once energy-rich Russian economy appears to be in danger of falling further and further down, almost out of control.
The first weeks of 2016 have also seen several moderate panics across the various equity markets and while they have not yet rushed into a panic sell-off, things have gotten close to that at times. Again, there is some evidence that capital is beginning to turn to things like gold and other safe havens.
In terms of the political effects on the global economy, the situation in the Middle East is far from encouraging, although it probably has to be said that the world has largely gotten used to that over the past 70 years. Unless oil supplies are threatened by the situation there, dire tragedies may not have an immediate direct impact on the world economy.
A more immediate concern for markets and economists is the growing and growing tension between Russia and NATO along their huge border in Europe. The economic instability in Russia and the lack of predictability in relation to its political decision-making is on the minds of many investors.
The situation in terms of mass migration to Western Europe is also proving to be an economic concern.
The exact numbers are unknown. The European Union itself estimates that approximately 1.8 million people emigrated to Europe in 2015.
Even conservative estimates of the numbers that have entered Europe since 2012 and will do so through the end of 2017 yield rather staggering numbers. Given the uneven distribution of immigrants in relatively few of the richest and most industrialized EU countries, the immediate short-term impact of the costs involved and the potential for social disruption, with the economic effects that they could entail, is worrying.
Summary
It seems sensible to anticipate that at least some of this will feed back to the agricultural sector and have a detrimental effect on producers trying to raise investment capital. However, that negative impact may be more than offset by the current global demand for affordable food due to population growth.
Agriculture is perhaps one of the relatively few sectors doing reasonably well in 2016, even if times elsewhere are tough.