Emerging Agricultural Trends and Their Implications for Your Business

Transcription

1 Emerging Agricultural Trends and Their Implications for Your Business Heartland Co-Op Young Leaders Conference January 14, 2016 Altoona, IA Brent Gloy, LLC

2 Agenda A little background Key long-term trends Strategies for success Download the presentation and other materials from a private website developed just for you:

3 , LLC

4 Some Key Questions Heading into Will profitability fall for a third year? 2. Will costs adjust to alleviate margin pressure? 3. Will farmland prices continue to SLOWLY soften? 4. Will strong financial conditions hold? 5. How many acres of corn and soybeans? 6. El Nino, La Nina, or what? 7. What will happen with interest rates? 8. What about the dollar? 9. What about China and global uncertainty?

5 Perspective on the Situation

6 What s Ahead Trends That Will Shape the Future of Farming and Building Your Strategy

7 1. Data, Technology, Information Will Be More Important in the Future

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9 1. Key Points on Data, Technology, and Information Evolving very, very rapidly Some will be winners and some will still be in the hype stage 10 years from now Very challenging to place bets Partnerships will be key Trust will be key Can you connect make better use of underutilized technology already in place Can you use your knowledge of technology on other farms/businesses

10 2. Demographic Shifts Create Large Opportunities Of all external changes, demographics defined as changes in population, its size, age structure, composition, employment, educational status, and income are the clearest. They are unambiguous. They have the most predictable consequences. They have a major impact on what will be bought, by whom, and in what quantities. Peter Drucker, Innovation and Entrepreneurship, 1985 (p 88 and p 89)

11 2. Demographic Shifts Create Large Opportunities

12 Who s Missing on the Farm (and Coop)?

13 Land Ownership and Control What Does the Future Look Like?

14 3. Production Shifts Geographically vs Soybean acreage has consistently marched west and south

15 3. Production Shifts Geographically vs U.S. increased corn plantings by 14.1 million acres over this period 60% from the corn belt

16 4. Consumers Get Louder & Continue To Fragment

17 5. Global Production Capacity Increased

18 Key Questions

19 Where to with World Economic Growth? SOURCE: IMF 2015 World Economic Outlook

20 China s Influence Two Examples

21 Choice from Higher Income Favors Agriculture Will this be enough to keep us from building substantial stocks?

22 Where to with Domestic Animal Agriculture? What will domestic production cost structure look like going forward? Demand will grow outside the U.S. inside?

23 What Happens if We Leave the Low Interest Rate Environment?

24 Long-Term Rates Remain Low How would people react to rising interest rates? Could have big impact on farmland values

25 How, When & Does Global Uncertainty Resolve Itself?

26 Let s Think About the Future of Your Operation

27 Common Growth Traps/Problems 1. Financial 2. Family/Relationship 3. Management

28 6 Common Financial Problems Associated with Growth 1. Underestimate working capital needs 2. Not being prepared for risk associated with expansion 3. Poor communication with lenders 4. Assuming expansion will improve profitability 5. Unrealistic planning or no planning 6. Denial of the problem

29 4 Common Family/Relationship Problems Associated with Growth 1. Not everyone is on the same page 2. Poor communication issues exposed 3. Underestimating/not appreciating/ having different attitudes about work/life tradeoffs 4. Underestimating stress associated with expansion

30 5 Common Management Problems Associated with Growth 1. Overstretched management 2. Assuming management will develop (grow with expansion) 3. Exceeding the capacity of a really smart person that is poor at delegation 4. Too much of business success held in one person s hands 5. Expanding into a hot business that does not build on core strengths and talents

31 Building Your Strategy for the Shifting Environment

32 Producer Strategies for Success in Today s Environment 1. Stay laser focused on costs 2. Manage working capital 3. Pay attention to debt repayment capacity 4. Pursue good deals with discipline 5. Scout and crunch numbers 6. Manage lending relationships 7. Don t forget about price risk 8. Think beyond crop insurance when managing risk 9. Consider alternatives, (leases, equipment, crop rotations, structure, etc.)

33 Final Thought for Navigating Today and Tomorrow s Ag Environment Focus on management and strategic plan Deploy resources today for tomorrow s reality versus defending yesterday s decisions Peter Drucker Focus on Building Strategies to Take Advantage of the Key Trends and Maintaining Flexibility to Guard Against the Big Risks