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) | [email protected]
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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