Sean Dengler.

There is one part of my finance education which has stuck with me from my time at the University of Northern Iowa: Diversity matters when it comes to one’s investment portfolio. In farm terms, you never put too many eggs in one basket. Investing in only one stock or only a few stocks is an incredibly risky strategy. Investing in index funds helps spread the risk around. When certain stocks do not do well, there will hopefully be others doing well to keep the portfolio in good standing. Going all in on only a few stocks can be a high reward, but it can also be incredibly risky.

This concept can be extrapolated out to an overall investment strategy. If one has the means, investing in more than only index funds like real estate, bonds, or other financial assets will also help spread the risk. Many concepts were taught in business school, but nothing resonated more than this topic. The agriculture economy should take a refresher course from business school.

If people are told to spread the risk for their investments, why do agriculture sectors like nitrogen fertilizer, corn seed, soybean seed, pork processing, agrichemical, agricultural machinery, poultry processing have at least 60% of their United States market controlled by the top four corporations in that industry? (This information is courtesy of Farm Action.) This is incredibly risky. By leaving the control of these markets to fewer companies, the agricultural economy is becoming more fragile by the day. When one of these companies in these highly-consolidated industries has an issue, it could leave every farm and farm-adjacent organization in a lurch.

By diversifying these different consolidated sectors through increased competition by enforcing antitrust laws and structuring the economy around competition and not domination, Americans will derisk their economy. If a person had 60% of their retirement savings in one stock, this would be incredibly risky. This is why John Deere having 60% of combine sales in the United States is risky and concerning. If something goes down with their supply chain, it will be a tough row to hoe for farmers. COVID showed these issues in other sectors like toilet paper, baby formula, or the fertilizer industry.

It is not surprising issues showed up in this industry when CF Industries has 80% of ammonia, 56% of urea, and 52% of UAN fertilizer sales made to American farmers. Mosaic has around 90% of phosphate-fertilizer sales to United States farmers. Nutrien has 40% of potassium-fertilizer sales in North America, and Mosaic has another 35% of those North American fertilizer sales. If a person had all their money invested in one of these stocks at the percentages these businesses have for market share, that would be incredibly risky.

Unfortunately, over the years, allowing this consolidation has made the agricultural economy and other sectors of the economy riskier. This consolidation has led to a rigid and fragile system leaving Americans in a tough spot. The United States needs to rely on a diverse set of companies to drive the economy. Otherwise, we are putting our poker chips all in one basket. This can lead to disastrous consequences. The economy should look to spread its risk out before it is too late. My finance professors would not be impressed.

Sean Dengler is a writer, comedian, now-retired beginning farmer, and host of the Pandaring Talk podcast who grew up on a farm between Traer and Dysart. You can reach him at sean.h.dengler@gmail.com.