Accelerating change will be the name of the game for much of 2021. The COVID-19 pandemic is a black swan event, also known as a “gray rhino” by some, that has created both challenges and opportunities. Let's examine some of the strategic areas that will impact your business planning process from a geopolitical standpoint.

Minimum wage

One of the critical challenges facing agriculture and small businesses may be legislation increasing the minimum wage to $15 per hour. The implications of such a change could result in increased capital spending on automation to replace or reduce labor costs. An increase in the minimum wage could also result in more consolidation of businesses, also known as concentration cannibalization. Large-scale businesses are more able to scale up to reduce costs when compared to small businesses. This trend would be disturbing as America was built on small businesses and entrepreneurship.

Energy

Attention must be focused on the energy complex. The United States is the largest energy producer in the world with Canada and Mexico ranked fourth and eighth, respectively. What will be the new administration’s stance on fracking, ethanol, solar, and wind power? How will competitors, such as OPEC and Russia, react to changes occurring in North America concerning energy? How will demand be impacted by electric vehicles and the possible reduction of travel for employment? Major changes will create extreme volatility in energy related expenses for both businesses and consumers.

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Taxes, taxes, and more taxes

Stimulus checks will come with a price. Expect an increase in local, state, and federal taxes. Agriculture could be impacted by changes related to the wealth tax. Revisiting your estate plan and monitoring changes with your accountant concerning taxes will be high priorities moving forward.

Regulations

Expect to see more swagger from regulators of businesses and the financial services sector. An increased focus in areas such as the environment, labor, compliance, health, and food safety may bring new regulations for agriculture producers. If the agriculture industry faces a financial crisis, regulators may be less forgiving than in the past.

De-urbanization and the Rural Renaissance

Who will be your new neighbor? Expect de-urbanization to continue in 2021 as people examine lower cost areas to live for safety and security concerns. Of course, access to broadband internet will be imperative.

The radar screen is full of potential challenges for the agriculture industry. While one cannot control these variables, a strategy to manage around these events will need to be incorporated into your business plan.

Related:Farm Business on the Brink

Source: Dr. David Kohl, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.