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January 5, 2024
The days are shorter and the holiday season sets the mood for reflection. The year 2023 has been a period of transition from the pandemic era to one that is “back to normal," if this phrase can still be used in an ever-changing world.
Despite record increases in interest rates farmland values have continued to rise at an accelerated rate. Much of this increase can be attributed to demographics as baby boomer farmers and ranchers leverage their equity and profits, often from lush government payments during the pandemic, to make cash purchases with minimum amounts of financial leverage.
Some are making these acquisitions to position the next generation's competitiveness while others are purchasing land to mitigate risk compared to other investments such as cryptocurrencies, stocks, and bonds. The combination of high interest rates and elevated costs, and extended periods of lower prices could be the confluence of events that take some of the glitter off this preferred investment.
Weather is the first variable checked by many producers in the morning. It is interesting to note that extreme weather is becoming more normal. Risk mitigation programs, such as crop and livestock insurance, are tools to reduce the extreme outcomes that were troublesome in the 1980s. Seed technology and regenerative farming practices with an emphasis on soil health and water management are strategies impacting production, cost, and price outcomes.
2023 has been a year of more consolidation throughout the agriculture industry. However, smaller niche and value-added producers are emerging by aligning their resources and talents to the marketplace that relishes differentiation.
Some of these businesses are startups, others are side ventures of larger operations, and some are mid-or later life entrepreneurs utilizing their creative spirits and talents gained in other endeavors to strike a stake in the agriculture industry.
Razor thin margins with extreme volatility is a recipe for more intensity in business and financial practices in the dollars and cents of agriculture. In my seminars and speeches, it is encouraging to see producers, lenders, and other agribusiness stakeholders with an open mind and adapting many of the practices presented.
On the global front, de-globalization is now in full gear impacting export markets which contribute one out of every five dollars in net farm income in the United States. Major shifts in production to the southern hemisphere, which has direct links to the Asian market, will continue to intensify. However, the resources, skill sets, and agribusiness structure still give American producers a competitive edge, but it will be challenged.
In closing out 2023, remember, productivity and quality of life can be directly impacted by the people you know, network with, and interact with. Agriculture is still a people business. Finally, there is no successful country or culture without success in agriculture.
Our team wishes you a happy and successful New Year!
The opinions of David Kohl are not necessarily those of Farm Progress.
Contributing Writer, Corn+Soybean Digest
Dr. Dave Kohl is an academic Hall of Famer in the College of Agriculture at Virginia Tech, Blacksburg, Va. Dr. Kohl has keen insight into the agriculture industry gained through extensive travel, research, and involvement in ag businesses. He has traveled over 10 million miles; conducted more than 7,000 presentations; and published more than 2,500 articles in his career. Dr. Kohl’s wisdom and engagement with all levels of the industry provide a unique perspective into future trends.
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