straight talk, straight actions - dr. david kohl

STRAIGHT TALK, STRAIGHT ACTIONS

Macro Clinic Video Blog: http://agstar.com/edge/

Road Warrior of Agriculture: www.cornandsoybeandigest.com

Ag Globe Trotter: www.northwestfcs.com

Dave’s GPS & Dashboard Indicators: www.farmermac.com

Dr. David M. KohlProfessor Emeritus, Agricultural and Applied Economics

Virginia Tech, Blacksburg, VA

(540) 961-2094 (Alicia Morris) | (540) 719-0752 (Angela Meadows) | [email protected]

February 9, 2017

State of the State of Agricultural

Economics Reset: The Mid Innings

emerging nations, BRICS & KIMT, slow

growth, one half in recession

ethanol & oil’s impact on commodity prices

Central Banks - U.S. & abroad

duration of the strong dollar

weather: supply & demand

2

Game of Economic Reset

Innings 1-3

profit margins decline, cash flow issues

Innings 4-6

relief pitcher, use working capital, refinance

Innings 7-9

core equity, sale of property, multiple refinancing

3

Global Economics: Europe

Brexit

immigration issues

next year’s elections

break up of euro

other

4

Global Economics: China

TPP: China’s role

water, soil, & air issues

asset bubbles:

stock

real estate

other

military buildup

South China Sea

5

Global Economics: Japan

leader in support of TPP

aging population

Central Bank’s stimulus

military

shrinking economy

6

Global Economics: Russia,

Brazil & Others

Oceania

political disconnect

economic challenges

currency valuation

weather

other

7

New Administration

international trade

banking regulations

health care

immigration

taxation

trillion dollar infrastructure spending

8

Federal Reserve’s

Interest Rate Barometer

Indicator Status

Unemployment 5.0%

GDP Growth 3.0%

Inflation 2.5%

Consumer Sentiment >90%

9

• Three increases in 2017!

• stock market/real estate wealth effect

• copper prices

State of the U.S. Economy

90 months of expansion

106/120 months

coastal vs. fly over states

Republicans/recession

velocity of money

stock market

10

Mega Trends 2017-2025

11

Mega Trends 2017-2025:

Global Economy

moderating economies in emerging nations

agriculture is “point dog” in political, military,

and social actions

geopolitical trade risk - biggest risk to

agriculture

creates tremendous opportunities and

opportunities for failure

“Business planning scenarios,

execution and monitoring”12


Consumer Trends

splintered marketplace

local, natural, & organic

GMO vs. non-GMO

food expenses

traits to plate

ethnic group linkage

"20/20 foresight: perceptual acuity”

13


Innovation & Technology

convergence of technology

bio

engineering

big data

higher level of talent

employees, suppliers & advisors

systems/replicate

too connected

“Hear the silence.”

14


Non-Government Organizations

biosecurity

open pens

antibiotic free

organic/natural

animal welfare

15


The Millennials

group exceeds baby boomers in size

will be on forefront on consumer, social, and political

trends, changes & issues

75% of workforce by 2025

40-20-40 Rule

feedback and recognition are important

balance of work and lifestyle

innovation/technology with “old time” work habits

“Financial self worth equates to

network of people.” 16


The Disconnect

by 2050- 70% of world population will be urban

85% of Americans are 2 generations away

from farm

political power disappearing

less government support levels

extreme groups

social media

“Connectivity strategy- sixth sense”

17

Median Net Farm Income: All Farms vs. High 20% vs. Low 20%

18

Median Net Farm Income: By Enterprise

19

Net Farm Income, 2015

20

Bottom 20% of Producers

wishful thinking for revenues

not aware of costs

don’t know cost of living

won the cash rent lottery

never updates the balance sheet

emotional vs. objective

no fall back plan

no active responsibility / not at fault

wants easy out in adversity21

Top 20% of Producers

know cost of production

realistic revenue targets

keep in touch with lender

keep up with finances before December

take responsibility for outcomes

fall back plan

training family members to takeover

better before bigger

22

10 Good Reasons to Start

Farming/Ranching Today

1. machinery & equipment values are down 20%-40%

2. low interest rates

3. 20% of family farms have no next generation

4. one size does not fit all

5. capitalize on local niche markets

6. control vs. ownership of assets

7. collaboration of assets and talent sharing

8. 60% of land turnover by 2030

9. 50-70-70 rule

10. raising a family/children

23

straight talk, straight actions - dr. david kohl

Economy & Finance