January 5, 2021

DrKohl_color The Ag Globe Trotter

Dr. Dave M. Kohl

Welcome to the weekly edition of The Ag Globe Trotter by Dr. Dave Kohl.

A common phrase being spoken is, “I sure can't wait to get back to normal.” It’s fitting to end 2020 with an article discussing getting back to normal (BTN) and how it may evolve in this decade. Will there truly be a sense of “normal,” pre-pandemic life? Replication is very difficult as conditions and circumstances are in constant evolution with aftershocks analogous to the favorite old movie “Back to the Future.” To encapsulate this year and envision how businesses and lives may look when the black swan pandemic is in the rearview mirror may take a crystal ball. Let’s proceed forward and give it our best shot.

Black swan events accelerate change and disruption, but also create opportunities. Back to normal could mean greater opportunities for niche and value-added markets that are aligned with segments of the marketplace that desire specific attributes. Consumers of these markets desire transparency, convenience, and an experience with a purchased product or service. While this trend was occurring pre-pandemic, the alignment of young farmers and ranchers with integrated production, marketing, financial management and operational skills aligned with a rapidly changing marketplace could be very economically viable. The key to success will be strategies and actions that are three steps ahead of the big box stores. Large companies will often take a concept from small businesses and scale it up to accelerate their growth patterns and profitability.

The “BTN” era will see much more automation and the use of artificial intelligence (AI) applied to the agriculture industry. The use of predictive analytics within the context of human interface will produce disruptive and opportunistic products and services to the domestic and global marketplace. This 360-degree holistic approach will provide monitoring data and information that businesses can utilize to gain competitive advantages through input from end users. The question becomes whether the use of technology favors rapid consolidation of production and processing in the industry. A concept called concentration cannibalization, in which big firms outcompete smaller firms, will be carefully observed by government, society and consumers who seek balance and agility for productive and safe food, fiber and fuel sources. This will be a high priority if any further disruptions occur in supply and marketing chains, either domestically or globally.

A major challenge of returning to normal will be whether deglobalization accelerates or abates. This is critical to many in the agriculture industry as one in five dollars of revenue is generated through export markets. Will back to normal see more U.S. and China tensions? Will the United States and our possible trade agreements, such as the Trans-Pacific Trade Agreement (TPP), be used as a blocking strategy to China’s Silk and Belt Road where the initiative is to gain economic and political influence? The United States may form alliances with others, such as Europe, Japan and emerging nations, as a method of moving toward fair and equitable trade practices to deter China's aggressive global, economic and military expansion.

Government's role in agriculture may be much different in the post-COVID-19 era. Less direct government checks to boost incomes may be an outcome as global deficits and debt balloons. Will the “BTN” era find scarce dollars being challenged by other segments of society in terms of agricultural payments? Will ballooning deficits and government spending devalue the U.S. dollar against other major currencies, resulting in the rise of interest rates? This could result in extreme price and expense volatility as a result of market competition, which could ripple back to farm and ranch income statements and cash flows initially and eventually to balance sheets.

The “BTN” era may observe more swagger from regulators pertaining to environmental issues, food safety, labor, water and air quality. Soil and water health will be an accelerating trend of the 2020s. Incentive payments for desired practices that improve natural resource bases will provide common ground between agriculture and non-agriculture segments of society.

Weather and climate change will be at the top of the agenda for many countries throughout the globe. The advancement of seed, crop and livestock genetics and technology will alter where production occurs globally. Who could imagine five decades ago that soybeans would be one of the leading crops in Canada? Terms like flash floods will find a parallel with flash droughts. If you desire, weather analytics will come to your farm and ranch to provide your business a competitive edge in the production and harvesting of crops and livestock. Soil and water practices will reduce water consumption and improve soil quality, while also enhancing products that will be desirable to the consumer and society. The “BTN” era will also be an opportunity to reposition the image of the agriculture industry that is often thought to be negative as a result of the aforementioned practices.

Empty grocery shelves and no toilet paper immediately demonstrated to the nonfarm public the importance of the agriculture industry. The interface of messaging using the latest technologies and media outlets will be a best practice with the younger generation of agriculturalists.

The pandemic accelerated change in educational delivery systems. Video conferencing, online shopping, remote working and distance learning may become mainstream. The extent that these changes will remain, return or meet in the middle will be the topic of strategic discussions in board rooms, households and on social media.

An increased need for vocational and technical education that is not perceived to be a second-class education will come to the forefront. Degrees may be replaced by a series of deep-dive subject matter certificates. The inverted pyramid approach may increase in popularity. This is an educational model where one will develop specialized skills and then enhance with traditional introductory courses such as English and psychology, where the subject matter can be applied to employment responsibilities in an experiential learning environment. Education will be a lifelong learning process as information, technology and learning cultures accelerate. Some will learn in a self-paced process, while others will need a more structured, traditional format. “Bite-size” and “snippets” with applications and engagements will be the buzzwords of the future in education.

“BTN” will be in an environment of aftershocks, whether it’s bio shocks, cyber or grid disruptions that will influence behavioral channels of consumers and society. Mainstream and social media will accelerate perspectives and influence economic and financial decisions, investments and wealth management. This will result in the need for financial and business literacy, whether it is managing a business or household.

Deurbanization and a rural Renaissance will evolve in the decade of the 2020s as a pathway for opportunities. Low-cost areas to live and work with collaboration through a combination of technology and human interface will be a greater part of society. While this may sound overwhelming, back to normal really is not “back to normal” as nothing remains the same.

Let's fast-forward to the end of the decade in 2030 when Kelly and Leslie, members of Generation Z who are in their mid-30s, have just read this article. They chuckle that everyone wanted to go back to normal. They smile and indicate that the article from December 2020, while forward-thinking, missed a few points.

● The pandemic did indeed have aftershocks but did not end globally until the spring of 2022.

● Later in the decade, a new president came from the millennial generation. She was the first female president with a male vice president.

● The article, while discussing grid and cyber threats, failed to predict the event that struck and immobilized most of Europe, creating panic throughout the rich nations of the world. Again, this created essential goods shortages and increased the importance of agriculture.

● The combination of biotechnology in commercial agriculture as well as natural, organic and specialized markets is more apparent; however, nontraditional foods like non-meat, non-dairy and cultured products produced in labs are gaining market share, along with vegetable and plant-based alternatives. 

● What they said stayed the same is that the agriculture industry is very entrepreneurial, integrated with the natural resource base, and requires individuals with a high business IQ to provide a profitable, rewarding and self-fulfilling life to those that endeavor the challenge. 

Wow! This article and epilogue sound like an old episode out of Rod Serling's vintage ‘50s and ‘60s television show “The Twilight Zone.”. Kelly and Leslie just watched one of those shows on their interactive technology. They were wondering if the author had ever taken one of Mr. Serling’s short courses that influenced creativity. They surmised it might have been possible given that Mr. Serling and his family spent much time on the lake near Ithaca, New York, home of Cornell University and where the author received his advanced degrees.