Dr. David M. Kohl Professor, Agricultural and Applied Economics Virginia Tech Blacksburg, VA 24061...
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Transcript of Dr. David M. Kohl Professor, Agricultural and Applied Economics Virginia Tech Blacksburg, VA 24061...
Dr. David M. KohlProfessor, Agricultural and Applied Economics
Virginia TechBlacksburg, VA 24061
(540) 231-7727 (Jill Albert)(540) 961-2094 (Alicia Morris)
e-mail: [email protected]
Weekly Website Columns: Ag
Globe Trotter: www.farm-credit.com Road Warrior of Agriculture: www.cornandsoybeandigest.com
Landscape of Agriculture& Rural America
consolidation of food companies Top five:
– USA: 38%– Canada: 70%– Europe: 80%
two in ten year rule million producer rule North America
1/2 world production 1/4 total ag exports 1/3 grain ag exports
profit vs. lifestyle women’s role
Drivers of Change in the Food System
ConsumersPassporting &
Traceability
Economy
Biotechnology
Information Technology
Global Competition
Government Policies
Environment, Water & Natural
Resources
Blue Sky Incident
Global Domestic
The Bottom Line
the global food market is comprised of two major market segments...
...and must be served differently
developed countries large and important but slow growing
developing countries smaller and faster growing enormous potential for food imports
American Consumer“Meal demise; Snack arise”
average American eats 4.3 times per day
30% eat 6 times per day 20% of teenagers eat 16 times per
day mobile dining room surf & graze
Food Preparation Time
food preparation time at home has been reduced dramatically, driven by higher incomes and technology
Food Preparation Time at Home
0
0.5
1
1.5
2
2.5
3
1930 1950 1970 1990 2015
Source: Wye College, University of London
5 minutes
Redesigning the Food System To Meet Age Wave Needs
number of taste buds decrease from 245 at age 30, to 64 by age 80, a 64% decrease more spices more sweeteners food lines geared to taste
83% of those over age 65 have at least one degenerate disease hypertension
– foods with sodium– fats, cholesterol
digestion– high fiber foods
arthritis– citrus, gluten
overweight– double the adult population eating low calorie food and
drinks breakfast will become most popular meal
age 25-29 consume 6 pounds age 60 plus consume 10.4 pounds
Top Snacks & Times of Day
Morning: 45%
Afternoon: 57%
Evening: 74%
snack bars/ granola, dairy products,
crackers, cookies, chips/pretzels, leftover
pizza
chips/pretzels, popcorn, seeds, nuts,
cookies, crackers, snack bars/granola
popcorn, seeds, nuts, chips/pretzels, cookies,
fresh fruit/veggies, crackers
Seven Business Models of AgricultureEarly 21st Century
Super Commodity 10,000 to 50,000 acres up 10,000 to 100,000 head up more than $3 million in Gross Revenue multiple family units/investors prime agricultural areas/Great Plains access to markets rent / lease / control assets
NeedsSuper Commodity
requires specialist with knowledge of the business and industry
network and strategic alliances need cash sweeps and liquidity
management counsel on:
regulations marketing internationally environmental issues labor management value-added opportunities
strategic positioning with family & outside partners
outside partners/shareholders deal with large suppliers
Traditional Commodity
$150,000 to $600,000 in revenue last generation family farm Great Plains / commodity regions dying rural communities lack economies of scale / total
management
NeedsTraditional Commodity
wealth preservation exit plans production to business acumen transition management
Vertical Integrated Agriculture
large livestock crop units more younger producers gains benefits of financial stability technology from parent
companies
Contract Agriculture
high technology younger producers mixed and diversified producers alliances and large agribusiness
farms
NeedsContract Agriculture
require specialist with knowledge of the business and industry
counsel on: commodity marketing & value-added labor management growth/expansion management transition management investments networking lease strategic alliances
Lifestyle
proximity of population centers off farm employment less than $50,000 in sales MAXIMIZE lifestyle agriculture compatible with
employment natural amenity
Value Added/Retained
exploits location, production service agriculture
90 percent domestic markets, 10 percent international
people marketing skills natural food organic agriculture
Recreational Rural Experience
hunting and fishing bed and breakfast – rural
experience natural resource / location natural amenity people marketing skills
NeedsRecreational Rural Experience
operational advice technology time project managers opportunity interface
Regional Trade CenterCharacteristics plentiful soil / water globally competitive agriculture &
agribusiness structure mix of large farm family units &
industrialized agriculture business modest gov’t payments Examples Olds Alberta Willmar MN Emporia KS Lexington NE Western NY
Rural Community AnalysisQuadrant I
American GothicCharacteristics lack of infrastructure
schools highways hospitals
lack of natural amenities gov’t subsidy zones older producer & rural base loss of capital tweener farmsExamples Prairie Provinces Western Plains Rural South
Rural Community AnalysisQuadrant II
Satellite CitiesCharacteristics growing or strong infrastructure natural amenities population grown 10% or more recreational opportunities mix of old & new economy property rights & farm / city issues value-added opportunities agri-entrepreneursExamples Guelph Ontario Kearney NE Lancaster PA Cedar Rapids IA
Rural Community AnalysisQuadrant III
Urban ConnectionCharacteristics infrastructure overload land development property rights farm / city issues growth of suburbia 10% in a decade value-added opportunities agri-entrepreneursExamples Kansas City Des Moines Toronto Vancouver Seattle Denver
Rural Community AnalysisQuadrant IV
Global Competitiveness:The Ag Side
RATING GAME soil, water, human resources infrastructure/technology political stability financial stability market accessibility
Global Competitiveness:The Rural Side
schools hospitals internet access roads & infrastructure amenities cost of living 30-45 minutes from a mall
Managing People by Generations
“The Leadership Challenge”
Veterans Boomers Xers Nexters
Outlook Practical Optimistic Skeptical Hopeful
Work Ethic Dedicated Driven Balanced Determined
View of Authority
Respectful Love/hate Unimpressed Polite
Leadership by Hierarchy Consensus Competence Pulling together
Relationships Personal Sacrifice
Personal gratification
Reluctant to commit
Inclusive
Turnoffs Vulgarity Political incorrectness
Hype ?????
Motivating Generation X
delegate tasks & authority acknowledge performance establish own goals and self-
fulfillment objectives create job description with
performance measures provide sufficient compensation let veterans mentor share & communicate strategic
plan/vision/legacy allow to make mistakes develop ownership balance work & lifestyle objectives
Critical Events in the Economy
capital investment Greenspan tax cuts global slowdown interest rates deflation ripple health care insurance consumer debt residential real estate trade other
In Search of Entrepreneurial Excellence in Agriculture
hunting rights in Arkansas 40-cow Jersey dairy herd in North
Carolina specialty soybeans in Virginia
exported to Japan selling cheese over the internet in
Canada the pumpkin patch that attracts
10,000 visitors annually the dairy herd north of Atlanta that
attracts 150,000 school children a year
designer pigs in Manitoba, Canada Old McDonald’s farm that touches
all senses beef cows that drink beer and get
massages in California ethanol plant and tropical fish in
Kansas
Five Elements of Value Earned & Retained Agriculture
outside-the-box thinking money vs. time niche commodity working capital exit plan
The Golden Rules
Rule #1 - business profit & success formula P = O + C + L + M2
Rule #2 - $40,000 to $70,000 net income prevents guerrilla warfare
Rule #3 - growth rule / annually 10 to 15 percent gross 5 to 7 percent net
Rule #4 - corvette rule family living is an overhead cost / credit card debt
Rule #5 - 20% expenses / networking capital cash is king
The Golden Rules(cont.)
Rule #6 - 3 to 5 years networking and labor management
Rule #7 - six years the hired employee for life
Rule #8 - 3000/500 hours time is the precious commodity
Rule #9 - 5 to 10% and 100 - age don’t put all your eggs in one basket
Rule #10 - missions and goals a goal is a dream with a deadline