Dr. David M. Kohl. Professor Emeritus Agricultural and Applied Economics Virginia Tech

Transcription

1 Dr. David M. Kohl Professor Emeritus Agricultural and Applied Economics Virginia Tech Blacksburg, VA (540) (Alicia Morris) (540) (Angela Meadows) Weekly Website Columns: Ag Globe Trotter: Road Warrior of Agriculture:

2 Economic Environment Planning Forecast- Crazy by Patsy Cline extended d period of economic moderation worldwide volatility at extremes - cost & revenue reprioritization of business decisions reprioritization of personal and family decisions cash & liquidity will be King innovative, resourceful, & selective

3 Fast Facts in American Agriculture 70% of North American farm ground will change hands by 2025 local, natural organics could be 20% of the consumer marketplace special interest t groups and consumers will drive business models 80% of Americans are two generations away from the farm and/or ranch control of asset rather than ownership with new land lords water could replace oil as the limited resource women and minorities will become major decision makers strategically think globally but act and execute locally

4 Five Dimensions of Agriculture Food Fiber Life Experiences Life Sciences Fuel

5 Views from the Road livestock / protein industry grain industry dependent on real estate third party / counter party risk regulators / government oversight lenders rationing credit imbalance of input costs / commodity prices export markets, technology, economy non-farm revenue

6 Percentage of World GDP

7 Century of Super Cycles ommon Characteristics: Commodities Boom Rapid Global Real Growth (average annual % change) N/A 4.8% 4.0% 3.5% Conflict & Geopolitical Uncertainty First World war Korean war Yom Kippur & Vietnam wars Iraq conflict Inflation Widespread Limited Widespread Limited Significant Infrastructure Investment First World war Postwar reconstruction None China Centered on Metals, agriculture Metals, agriculture Oil, agriculture Oil, metals, agriculture % Increase in Prices (previous trough to peak) 34% 47% 59% 131% Years of Rising Prices Prior to Peak

8 Projected World Growth Germany Iceland -0.8% -9.3% Canada -0.5% Britain U.S. -1.1% Euro zone -0.9% -0.6% Mexico 0.4% Brazil 3.0% France -0.4% India 7.3% South Africa 3.0% Russian Fed. 2.3% China 8.0% Australia 1.7% Japan -0.1% 01% South Korea 2.7% Indonesia 54% 5.4% GDP Growth % GDP Growth % 2009 Forecast

9 World Growth Germany Iceland -14.4% -13.6% Canada -5.4% Mexico -21.5% U.S. -5.5% Britain -7.4% Euro zone -9.7% France -4.7% Brazil -3.3% South Africa - 6.4% Russian Fed. -9.5% China Japan India 7.9% -14.2% 5.8% South Korea +0.5% Australia +1.5% Indonesia 4.4% GDP Growth % GDP Growth % 2009 Quarter Figures July, 2009

10 World Growth Germany Iceland -4.8% -6.5% Canada -3.2% U.S % Mexico -6.2% Britain -5.1% Euro zone -4.1% France -2..4% Brazil -1.2% South Africa - 2.1% Russian Fed. -8.9% China Japan India 8.9% -4.5% 45% 7.9% South Korea.6% Australia 0.6% Indonesia 4.2% GDP Growth % GDP Growth % 2009 Latest Figures December 3, 2009

11 Oil - Black Gold $3.50 to $4.00 per gallon consumers shut down 80% of farm expenses linked to oil value of dollar geopolitical risk weather rule

12 U.S. Farm Real Estate Values Annual Percentage Change in US Farm Real Estate Values 30.0% % 20.0% 15.0% 10.0% $/ac 5.0% 0.0% -5.0% % -15.0% -20.0% 0% Year Source: Dr. Steve Isaacs, University of Kentucky Land Values Declined 3.4%

13 Business Cycles by the Numbers Months 11 economic recessions 58 business expansions 86 Great Moderation Theory expansions 7 Great Moderation Theory recessions 106 record expansion-- Paul Volcker 120 all time record expansion -- Alan Greenspan Kondratieff Wave Theory Rolling recessions of Post War

14 Short Run Economic Issues world stimulus programs- G20 nations equity markets rebound earnings report / cost cutting low interest rates

15 2010 Issues savings and consumption growth inflection point commercial real estate small and midsized banks housing / real estate foreclosure crisis increased taxation cap trade

16 Long Run Economic Issues unemployment consumer confidence business confidence government debt inflation healthcare social security

17 Spheres of Influence Media / Advertising Accountant Lender Lawyer Supplier Partner Spouse Peers Crop Consultant Politicians Livestock Consultant General Extension

18 Suppliers as a Strategic Advantage relationship managers provide more than products and services understand d industries, i business models, and businesses unique positions within industries grasp interconnectedness of agricultural value chains understand people and ask questions Where have producers been? Where are producers today? Where are producers headed? d? provide context to information, adding meaning and relevance to numbers and noise focus on what makes long-term sense

19 2010 to 2015 Consultant planning, strategy & execution organizational & time management mixture of technology & face to face problem / solutions / workout business opportunities & management

20 Dave s Top Ten Quotes three prong risk management program paradigms shift principals don t Be careful of people in silk suits people rule widening gap of loan pricing based upon management edu-marketing - the 15% rule Don t allow your employees to put you on probation. You build your best business in tough times. You build your career during tough times. Don t forget your good customers.