This past week I was in the beautiful Canada province of Alberta, north of Calgary and northeast of Edmonton. Despite a heavy snow squall, this area of Canada, like the northwest part of the U.S., is extremely dry. I then went on to Kansas facing winds of over 70 mph to address the Kansas Banker Agricultural Conference.
It’s been interesting in my Canada travels to see the amount of soybean production and diversity of crops and livestock grown there. Many of the producers have questions and issues similar to what we are dealing with in the U.S.
NIMBY, For Sure
Will North America get rid of the "NIMBY" attitude? Well, I believe the "Not In My Back Yard" (NIMBY) philosophy is here to stay, whether it pertains to large, intensive livestock operations or to the smaller lifestyle farms near growing communities. The reasons are many, but two come to mind:
First, nearly two-thirds of North Americans are two generations away from the farm, creating a lack of connection.
Second, public perspective concerning environmental and animal welfare, and food safety concerns continue to increase as the age groups made up of the Boomlets, Xers, and Nexters step up to the plate and develop their agendas.
Question of the Week
E-column reader Jeff emailed two good questions that people following my writing on SoybeanDigest.com need to ponder. Here is one of them:
Will South America’s aggressive expansion result in a land value collapse like the NASDAQ bubble?
Yes and no. How is that for an answer from an economist?!
What makes up value of land is complicated and not just related to agricultural value. A recent study found that the economy and Wall Street influence 27 percent of land value. Another 20 percent (approximately) is influenced by government payments depending upon area of the country.
Much land is held and owned by "Granny Landlords" who are over 65 years of age and are debt free, thus reducing the financial demands of interest paid, and the time factor of liquidation.
Finally, interest rates have been relatively low when contrasted to the 1980’s where a spike created a general collapse.
Yes, South America could be a major component that could start the house of cards to fall and thus a dramatic decline, but not unless we have a major recession and a mass liquidation by the older generations.
Tip of the Week
Total debt is calculated by adding up all debt including supplies, account payables, mortgage, machinery, livestock, capital leases, and yes, credit cards.
Most farms are increasing debt loads as it pertains to machinery debt, capital leases, and credit cards. In a downturn this could be a bad sign.
I wonder if owners of large sports franchises have ever thought about risk management and diversification before investing $10 to $25 million in a high-priced athlete?
Tune in next week to see where I have been!
Thanks for the questions this week. Send more. I really like the challenge.
Editors note: Dave Kohl, Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He currently is on sabbatical and working with the Royal Bank of Canada.