Everyone reaches certain benchmarks in life and this column is no different. Starting in 2001, I have been writing weekly articles with the mission of providing insight for agricultural decision-makers based upon my travels, academic research, and applied decision-making in our businesses. Much has taken place over this span. Let's take some time to recap some of the surprises and changes.
First, grain commodities have experienced a bull run never seen over the past century. This super cycle, starting in 2003, has now lasted over seven years, twice the term of historical endurance. Much of the profits have been invested in land, which has had over a 20-year run of appreciation, particularly in the Midwest and Upper Midwest. Personally, I never thought this would occur; however, five game changes have aligned to create this strong bull market. They include strong exports based upon demand in Asia and particularly China, growth in ethanol, the low value of the dollar, low interest rates and weather challenges in major production areas of the world. Moving forward, any negative changes in the aforementioned items could result in softening of the market in profits and land values.
Contrast this situation to the livestock industry, which is been experiencing quite a few bear markets over this time period as a result of high input costs, consolidation, regulation and uncertainty of domestic and global markets. Those on the livestock side who have diverse operations of both crops and livestock have weathered the storm much better than the specialized businesses.
Volatility has been the keyword over the span of the last decade. Terrorist attacks, hurricanes, the world financial crisis and oil prices laid the groundwork for the concept of modest amounts of financial leverage, strong cash reserves and liquidity and a good, sound relationship lender who understands your industry and business.
Young farmers and ranchers are emerging at agricultural seminars as the prospects for employment have diminished in the non-farm sector. More women and minorities are appearing in my seminars and webcasts as lifelong learners are seeking information and management techniques that can give them a competitive edge.
Issues of total risk management and transition management are still seminar topic standbys; however, animal welfare and meeting domestic and international consumers’ needs are front and center in the management paradigms.
It has been surprising how equity markets, as well as urban and development real estate, bubbled up by artificial stimulus and crashed. The markets have been slow to return. Those in the agriculture sector need to take note of these conditions.
Local, natural and organic production have emerged as strong niche players, but the traditional and large, complex farm and ranch businesses are still the major suppliers of food, fiber and fuel.
Webcasting, videoconferencing and blogging are replacing traditional information delivery methods. Understanding how generational needs impact communication and product delivery channels was only in its infancy in column number one back in 2001. With fewer people having agricultural ties in major decision-making positions in industry and government, each of us in agriculture will need to become ambassadors for our industry.
As we close down 2010, the next decade for agriculture has more opportunity than any time in the past 30 years. However, with that opportunity comes the downside of a higher probability of failure. Best wishes for 2011 from our staff. We hope to see many of you on the road, on a webcast or by videoconference as we begin a new year in the second decade of the 21st century.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.