Welcome to the weekly edition of The Ag Globe Trotter by Dr. Dave Kohl.
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Wow, the year 2021 is moving by at a rapid pace! As people emerge from the pandemic, it seems that every aspect of life has been accelerated. The following questions were a composite of recent interviews with a group of agriculture reporters. These inquiries sum up what appears to be on people's minds concerning the agriculture industry.
“What is top of mind for farmers and ranchers across the country this year?”
Weather, drought, heat and too much rain in certain growing regions. Some producers are concerned about producing a crop, despite high prices and the inability to deliver on market contracts. The livestock sector is concerned about high feed costs and margin squeeze. Weather concerns are followed by inflating costs. This certainly isn’t the first time farmers and ranchers have experienced these conditions and as history would tell us, it won’t be the last.
Whether it is feed, fertilizer, cost of parts, repairs or the availability of productive labor, a constant assessment of the cash flow and income statement is priority number one to stay on the positive side of the financial ledger. There is also uncertainty regarding agriculture trade and markets in general. With one-fifth of net farm income being derived from export markets, geopolitical uncertainty requires one to constantly monitor financial outcomes and develop plans A, B, C and D. This is when working capital and quickness to cash become essential.
“How should farmers and ranchers view the green agenda: as a positive or a negative?”
My response is “neither” but the word to replace both is “inevitable.” Global leaders and the general population, many of whom are urbanites, are moving forward with the green agenda. The agriculture industry can be perceived not as the problem, but as a solution. Agriculture businesses must study these initiatives while they are in their infancy and ascertain potential impacts on the business using a cost benefit analysis. The green movement will gain momentum toward the middle of the decade and will require more intense record-keeping and transparency from individual producers.
“Land values: Is it a bubble ready to burst, or are values holding steady?”
Farm and ranch land values should be stable. The bubbles are in the stock market and, to some extent, in the housing market. Anecdotal evidence in recent months has discovered elderly farmers are selling properties as a result of potential tax law changes. While there may be regional and local appreciation or deflation of land values, the next 12 to 24 months finds that stability is the key word for the asset that represents 80 percent of the U.S. farm balance sheet.
The remainder of this year and 2022 should be interesting. Stay tuned for the next edition of The Ag Globe Trotter.
Dr. Kohl is Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University. Dr. Kohl has traveled over 8
million miles throughout his professional career and has conducted more than 6,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FSA and regulators, as well as producer and agribusiness groups. He has published four
books and over 1,300 articles on financial and business-related topics in journals, extension and other popular publications.
© Northwest Farm Credit Services 2021