Dr. David M. Kohl

1
Mega Forces of Agriculture Vision 2010
Dr. David M. Kohl Professor Emeritus
Agricultural and Applied Economics Virginia
Tech Blacksburg, VA 24061 [phone] (Jill
Albert) [phone] (Alicia Morris) e-mail
sullylab_at_vt.edu
Weekly Website Columns
Ag Globe Trotter www. farm-credit.com
Road Warrior of Agriculture
www.cornandsoybeandigest.com
2
Landscape of Agriculture

• barbell effect in financial performance
• old wealth new leadership
• six degrees of goal setting balance
• extremes will create opportunity

3
Drivers Influencers of Change in the Food
Fiber System
Domestic/Global Economy
Blue Sky Incident

• Terrorism
• Pandemic Flu

• Globalization
• China world power by 2050

Human Component
Technology

• Biotech
• Nutriceuticals
• Natural/organic
• Fast/slow food

• Producer, agribusiness consumer linkage

Vision
Domestic Global Consumers
Information Value Chain
Environment, Natural Resources

• Passporting
• Trace-back
• 360º feedback
• Media plans

• Water land competition

Global Competitive Status
Government Policies

• WTO
• Subsidies
• Green pmts
• Trade issues

• Block economies
• Five-star assessment

Reality
4
Five Reasons This Farm Bill Will Be Different

• loss of strong political leadership
• wars
• Medicare
• budget deficit
• voter shift

5
Emphasis of Next Farm Bill

• conservation the environment
• rural energy
• homeland security
• less dollar support

6
Oil Energy

• four areas of the world produce 80 of oil
  energy
• just-in-time inventory management
• China is 5 times less efficient
• 80 of all farms expenses

7
Shield on Land Values

• land owned by elderly with little or no debt
• 60 of baby boomers want to live in small town
  rural America
• alternative energy, water other natural
  resources
• lower cost of living alternative for boomers
  veterans
• opportunity cost to more perceived risk in other
  investments
• 1031 tax exchanges
• productive larger agricultural producers
• government supports recreational ground

8
Penetrating the Shield

• more than 100 basis point rise in long term rates
• 200 basis point rise in short term Fed Funds rate
• changes in tax laws
• 1031
• pull back of government supports
• collapse of global economy
• recreational farm ground
• the urbanites killer toy

9
Economic Update

• interest rates
• housing
• inflation
• oil

10
Canadas Revolution

• product identity
• reinvention of processing industry
• value added niche
• model after South Pacific

11
European Outlook

• analogous to Ford, GM Delta airlines
• too many entitlements
• agriculture pressure by WTO
• bio-altered products

12
Central South America

• pink tide movement
• social leftist movement
• ethanol energy
• pressure on commodity production

13
China Syndrome

• major competition in apples cotton
• forming alliances with Russia South America
• similar political ideologies
• double digit economic growth impacts energy
• economy social structure will feel growing
  pains
• intellectual revolution

14
Global Partners

• Proposed Asian Group
• Members Japan, China, India, Australia, South
  Korea, New Zealand the 10-member ASEAN group
  Brunei, Cambodia, Indonesia, Laos, Malaysia,
  Myanmar, Singapore, Thailand, the Philippines
  Vietnam
• Population 3.1 billion
• Total GDP almost 10 trillion (US)
• NAFTA
• Members Canada, United States, Mexico
• Population 430.5 million
• Total GDP 12.9 trillion
• European Union
• Members Austria, Belgium, Cyprus, Czech
  Republic, Denmark, Estonia, Finland, France,
  Germany, Greece, Hungary, Ireland, Italy, Latvia,
  Lithuania, Luxembourg, Malta, Poland, Portugal,
  Slovakia, Slovenia, Spain, Sweden, the
  Netherlands, United Kingdom
• Population 460.1 million
• Total GDP 11.7 trillion

15
Population Shifts
16
Characteristics of Rural Affluent Zones

• Rate Your Business as a
• Green, Yellow, or Red Light
• ___ Are there high quality schools available in
  your rural area?
• ___ Does your location provide convenient access
  to hospitals and medical care?
• ___ Is reliable high-speed Internet access
  available?
• ___ Do you have the necessary roads
  infrastructure to allow access to your market?
• ___ Are there lifestyle amenities, i.e. lake,
  mountains, in the area?
• ___ Is the cost of living affordable?
• ___ Are you located within 30-45 minutes of a
  mall?

17
Future of the Professional Farm Management
Industry
Inform
Apply

• transition management
• family boomerangers ruralpolitans
• linking regional, national global trends and
  people to local area
• linking BMPs to financial performance
• peer benchmarking, financial performance, BMPs
• growth management, business planning technology
  management
• risk management, insurances, finances, marketing
• other

Follow Up
Execute