Globalization Strategies from a Producer’s Perspective
In the last column we discussed our place in the global environment and the impact on the financial bottom line. Now let’s shift gears and discuss strategies for success.
Yes, that’s right. If you are sitting on your tractor during harvest and say to yourself, ”I don’t want to be part of the rat race,” then you can just hang out.
However, you should be within five years of retirement and have a debt to asset ratio less than 20%. Hopefully you have farm assets that can become farmettes or be sold or leased to a producer who wants to expand.
Second, you probably should lobby for more government supports and subsidies to keep your annuity cash flow intact.
A major concern is that once you reach retirement you’ll probably need an 18- to 25-year cash flow from your asset base. Think about 2025 – what will the headlines say about global agricultural production and where revenues will be derived?
Think Outside the Box
Others may take on global competition by seeking value earned opportunities such as specialty soybeans, identity preserved grains, non-GMO natural or organic or biopharmaceuticals.
Others may add value through livestock, processed foods or fiber. Be careful – have a sound capital, marketing, management and operations strategy.
Finally others are getting into the energy strategy: ethanol, biodiesel, methane and wind power.
Some are starting rural related businesses such as infrastructure development, roads, sewer pipelines and landscaping to enhance the bottom line.
Finally, producers are joining together to invest in other countries. My advice is that you better know their legal system and invest in countries with sound financial and political systems from the local to federal level.
Success is your choice. Ready or not, globalization is here!
My e-mail address is:email@example.com
Editors' note: Dave Kohl, The Corn and 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.
To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.
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