MANAGINGEXPECTATIONS?

Macro Clinic Video Blog: www.compeer.com/educationRoad Warrior of Agriculture: www.cornandsoybeandigest.comAg Globe Trotter: www.northwestfcs.comDave’s GPS & Dashboard Indicators: www.farmermac.com

Dr. David M. KohlProfessor Emeritus, Agricultural and Applied Economics

Member of Academic Hall of Fame, College of Agriculture & Life SciencesVirginia Tech, Blacksburg, VA

(540) 961-2094 (Alicia Morris) | (540) 719-0752 (Angela Meadows) | sullylab@vt.edu

December 12, 2019

Perspectives on the New Decade

more change in the next decade than the last 70 years technology, consumers & management

economic & financial volatility friend: proactive manager foe: reactive manager

business IQ is the common denominator for success decade of transitions capital, human assets & business culture shifts

more opportunity for success or failure depending on your mindset,capitalizing and controlling your destiny

balance “high tech” with “high touch” high tech- biotech, engineering, big data high touch- in the moment, interpersonal skills, interdependent

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Eras & Cycles: Fork in the Road

Decade Era of Economics

1950’s - 1960’s Post War, Go-Go Production Era

1970’s Go-Go Economics Era

1980’s No Go Economics Era

1990’s Slow Go Economics Era

2000’s Go-Go Super Cycle Era

Teen Years Slow & No Go Economics Era

Adult Years Fork in the Road Management & Economics Era3

Economic Super Cycle & Post Super Cycle 60-30-10 Rule 10-60-30 Rule F-bomb “fraud” trust and verify reactive manager equals refinance collateral

lender proactive manager – high business IQ- knows

cost of production, has good cash flow and liquidity

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Economic Radar Screen-Globalization vs. Decoupling international trade

USMCA China’s Belt & Road Initiative

synchronized global economic moderation China- slowest growth rate in 28

years Japan- negative growth rate Germany – negative growth rate Central Bank’s stimulus in China high debt levels in urban real

estate in China

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political uncertainty Brazil Venezuela Mexico Argentina Germany, Britain & Euro

Sector U.S.

North America’s Economic Power Block 28% of the global economy’s GDP energy & oil U.S. #1 Canada #4 Mexico #8

450+ million people 47% of Mexico’s population is under 25 ag trading partners: Canada #1 Mexico #3

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Rising of Asia

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Farm Real Estate- Last Line of Defense 83% of U.S. farm balance sheet assets great bridge over economic troubled waters equity often leads to management

complacency farm real estate is local, be careful of state and

national statistics

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Volatility on Balance Sheet

lender appetite for refinances/restructure customer appetite for refinances/restructure supply/demand- real estate, equipment and/or

livestock regulators suppliers of operating credit baby boomer farmer/rancher

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As of Mid-June, Longest Economic Expansion in the U.S.

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Killers of Economic Expansion

expansions don’t die/killed off Central Bank tightening strategies oil prices stock market decline bubbles trade issues debt: personal, student, corporate and federal

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Mega Trends 2020-2030: “High Beams”

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Mega Trends 2020-2030:Breakfast in 2030

Imagine this: You 3D print your morning croissant and your sugar-free ginger cake is soft and sweet. The roast beef on your sandwich is plant based and your entire diet is perfectly tailored to your lifestyle. Can you picture this?

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Source: The Economist Magazine, December, 2018 & Wageningen University & Research- www.wur.eu/careerinfood

Mega Trends 2020-2030:Industry Must Adopt Fads/Trends

dairy example: children say milk tastes like chalk USA Today reports during 2012-2016: skim milk sales were down 36% organic milk sales were flat flavored milk sales were up 9% whole milk sales were up 2.4%

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“Need to be three products and services ahead of the curve.”

Mega Trends:Technology & Production

Country Corn(Percent Change)

Soybeans(Percent Change)

U.S. 21% 55%

China 48% 1.1%

Brazil 85% 108%

Argentina 174% 73%

Canada 36% 125%

Europe -9%

Paraguay 168%

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Metric Tons Increase Since 2008-2009 til 2018

Source: Kirksville, MO presentation - University of Missouri

three layers of change• technology• new resources• weather & climate change

Mega Trends:Export Market Share

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United States Brazil

Corn Beans Corn Beans

Mid 70’s 75% 96% 1% 1%

2000 64% 50% 8% 28%

2019 33% 35% 20% 50%

Source: The Economist Magazine- 2019

Mega Trends 2020-2030: Non-Government Organizations

Smithfield lawsuits Monsanto lawsuits others biosecurity open pens antibiotic free animal welfare

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“NGOs more disruptive than government regulations.”

Agricultural Business Growth:Green Shoots value added young & beginning farmers/ranchers family business transition gig economy dialed in/high tech low investment resourceful

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Future Business Models: Young Farmers & Ranchers family business cousins partnering with

cousins non-family members separate enterprises/use

common assets

agri-entrepreneur multi-tasker gigs diversified sources of

income

boomeranger professional “outside the box” mindset new skill sets

women, minorities, veterans demographics of FFA & 4-H

vertical & urban farming

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Side by Side-“Wisdom to Ponder” (1) most credit problems start outside the numbers non-financials are just as important as financials

be in the moment- side by side relationships indistractable – “either you control your own time, or others will”

family living philosophy- Corvette Rule it is difficult to take a cat drinking cream and switch to skim milk

the deeper the hole you dig, the more opportunity to bury yourself alive preservation of wealth & self worth

equity on the balance sheet doesn’t pay bills profits turned to cash flow, backed with financial liquidity, are a means of

staying ahead of disruptions

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Side by Side-“Wisdom to Ponder” (2) family living expense is like pouring concrete once it sets up, it is difficult to change

if it grows too fast it is a weed: businesses outgrows the capital & business acumen

invest as much in human capital as in technology the balance of high tech & high touch is critical for success

know your numbers but be careful of managing a business only by the spreadsheet balance head (numbers) with the heart (your passion)

the best crop you will ever raise will be young people and their self worth & financial net worth = network of people

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