Those of us in agriculture are no stranger to risks involved with agriculture that are taken every day, whether it is financial, production, legal, price/market or human resources risks. While we can’t control everything, there are measures that can be taken to protect one’s operation and reduce risk. Each year the Farmers & Ranchers College hosts Dr. David Kohl, Professor Emeritus from Virginia Tech who does an excellent job describing global risks which affect us locally and how those risks will affect the agricultural industry. In my seventh year of Extension, there are several key messages he largely emphasizes which I’ve summarized below.
First of all, “bigger is not better”, rather “better is better”. In other words improve the efficiency of your operation first before expanding. Also, to be successful (in anything really), be proactive and use the “HUT” principle: hear, understand and take action. While attending educational programs and undergoing professional development, unless you use the information and take action, you won’t fully succeed.
Kohl described common characteristics that the last four super cycles of the century possess: each had a rapid global real growth, conflict/geopolitical uncertainty, inflation, significant infrastructure investment, etc. Currently, we are in the longest of those super cycles (2003 – 2012), but one thing that is bound to happen is a crash. Be sure to have an exit strategy when this current super cycle crashes!
As the population increasingly grows more urban based disconnected to today’s production agriculture, there are many misconceptions of agriculture. There will also be a huge transfer of land in the coming years. Kohl warned of the spoiled brats emerging who want a “piece of their parents’ legacy”, thus invoking conflict among families, etc. When I attended Elaine Froese’s presentation she referred to baby-boomers as “waiters”, meaning they are waiting for their parents to collect inheritance because they haven’t prepared for their own retirement and feel entitled. In fact, there is a 500:1 odd that a business will make it to the 5th generation. Transition planning is increasingly important in order to beat the odds!
Kohl described what a “cut above super producer” possess. Among other things, they should follow the 60-30-10 profit plan, where 60% of profit focuses on efficiency first, and then growth. Thirty percent of one’s profit should build working capital and the last 10% is for you to do what you want with it – enjoy life! Remember to not live above your means.
Finally, he ended with reasons to be optimistic about agriculture. By 2050, we will need 100% more food, fuel and fiber, thus the career opportunities for youth are enormous! One in six jobs is related to agriculture in some way; students taking college courses should remember to not only take the technical classes, but classes in business, science and communication. We need to “think globally and act locally”.
I encourage you to reflect on this past year and create/enhance your business plan for 2013. I wish you all a happy and joyous holiday season!
Views from VanDeWalle 