We are in the fourth super cycle in agriculture since 1900 and this one has outlasted the others by 2 ½ times in length. Recently, Indiana farmers gathered to hear Virginia Tech’s Dr. David Kohl talk about managing in this super cycle and why this one has stood the test of time.
“Basically we had a convergence of events. We had the growth of these emerging nations, then we had the biofuels/ethanol mandate, of course we had the Federal Reserve who lowered interest rates and then they had a cheap value of the dollar to encourage exports, then of course our old friend, Mother Nature, kicked in there…and what happened was all those events had basically stayed very, very positive for agriculture, particularly on the grain side, for ten years.”
A baseball fan, Kohl says agriculture is in the 7th or 8th inning of this super cycle.
“You’re starting to see the emerging nations soften, you’re starting to see bioethanol mandates being changed a little bit, but the Federal Reserve is tapering back. The consequences are going to be that the easy money has been made. Now, money can still be made, particularly on the grain side of agriculture; but one of the things it’s going to take is astute management.”
As challenges for agriculture become greater, Kohl stresses the importance of having good business sense surrounding your farm and your family.
“I think one of the keys is to form your advisory teams. I say advisory teams and it could be your lender, it could be a farm consultant, etc., etc. Basically what they do is bring objectivity to a very emotional type of decision-making. Then have clearly defined goals. Not only business, but business, family and personal. And use them as kind of your guide or your ship whereas your both navigating through these economic whitewaters.”