December 1, 2017

DrKohl_color The Ag Globe Trotter

Dr. Dave M. Kohl

Welcome to the weekly edition of The Ag Globe Trotter by Dr. Dave Kohl.

Megatrends 2018 to 2025

Dr. David M. Kohl

The terms “perceptual acuity” and “20/20 foresight” stuck in my mind during an impromptu brainstorming session at a recent agricultural conference. At this casual meeting, the intellectual energy flowed like water, and bounced around to a wide range of topics. I jotted down notes on a napkin, capturing some of which were macro factors while others were at the grassroots level. Let’s take a look at some thoughts that emerged from this informal power session.

Marketplace Disruption
The major retail market disruptor, Amazon, recently expanded into food. This marks only a beginning of the splintering of the marketplace that will challenge food processors, agribusinesses and large cooperatives.

Actually, the brewing industry is a good example of this disruption. Even with the market dominance of InBev’s Budweiser and Molson Coors’ MillerCoors, these industry giants are being challenged by microbreweries. Of course, this trend is driven by the consumer who seeks lifestyle experiences with a blend of technology and personalization.

The local, natural and organic markets will continue to grow both domestically and internationally. Suppliers will need to develop ways to avoid commercialization and establish a sustainable market with a specific segment of the population. These consumer-driven changes in food retail can be easily observed while traveling, with non-GMO pretzels on one flight and gluten-free potato sticks on another. The Dancing Deer Baking Co. chocolate chip cookies are made with eggs from cage-free chickens and real butter. These examples are just tastes of what is yet to come in the consumer marketplace for food.

Further, in this marketplace, there is room for both GMO and non-GMO, organic and natural, and products linked to specific ethnicities or segments of society. These varying preferences will accelerate marketplace change and drive profits for the foreseeable future, and at least the next decade.

Non-government organizations (NGOs) will help shape how agriculture operates in the coming years. Ranging from animal welfare to environmental concerns, the interests of the public and various NGOs must be built into the equation for agriculture. For examples, the closing of Ringling Bros. Circus after 146 years and the protests to the movie A Dog’s Purpose show the breadth and depth of influence from these organizations as well as consumer support. Like much of the world’s population, these groups are somewhat disconnected from the production of food, fiber and fuel that drives agricultural economics, which will require education and collaboration.

Policy and legislative changes such as the new U.S. Farm Bill and tax reform will undoubtedly impact agriculture and rural America, and at an economically sensitive time. Other top legislative issues for agriculture are international trade, healthcare and crop insurance. As always, funding will be important, including for programs to assist young farmers and ranchers, as well as those that support processing and infrastructure for local food movements; both critical agricultural sectors. On the human resource side, qualified individuals with the Farm Service Agency (FSA) along with Cooperative Extension personnel will be essential for agriculture’s continued progress. Incredibly, even with stressed economics, agriculture is also seeing the re-emergence of new business models that include multitasking agri-entrepreneurs in both domestic and international markets.

Technology and Innovation 
In the hands of more astute managers, technology will help maximize resources and increase efficiency, both necessary for U.S. agriculture to continue as a global player. With one in five dollars of net farm income generated through international trade, a disruption with trade partners or trading routes can wreak havoc on the industry as well as specific producers very quickly.

Proactive strategies such as marketing and risk management plans need to be backed up with working capital and core equity. These precautions are necessary to bridge gaps in profits, or at the other end of the spectrum, to proactively position the business for opportunity.

As one example, recently a young producer cut 3,000 acres of marginally profitable, rented ground. On the remaining land, he used information in databases and tracking devices to analyze his profits by field. This practice yielded over $250,000 in net income. 

Millennial and Gen Z Generations
While baby boomers are moving on to their next chapter in life, those born between 1995 and 2012 are moving in. Approximately 83 million millennials and 73 million members of Gen Z have begun to enter the workplace and consumer markets in force. As generations before them, these groups will drive consumer, political and societal trends. Workplace culture will be a key factor for attracting and retaining the emerging generations from farm gate to corporate offices.

Gen Z will be quite independent, working in organizations and businesses that have social causes. They will thrive on problem solving and meaningful work. This group will start to challenge colleges and universities on the cost of education, and will increasingly desire customized degrees with a blend of online and face-to-face education. This group will also be “phigital,” treating a meeting on Skype the same as one in person.

On the other hand, millennials who have urbanized will reconnect with rural America through short, interactive experiences. The growth of small recreational vehicles and tiny houses is only the beginning of coming trend shifts with these new generations as they seek extremes and develop a balance of nature and technology.

The New Workforce 
Involved in education for nearly 40 years, I see a seismic shift on the horizon. During the last 30 years of agricultural banking and lending schools, participants generally came from agricultural backgrounds with degrees from well-known agricultural schools. Most were also male. Today, a majority of the graduates are from non-agricultural programs; there are more females and less farming backgrounds. To keep pace with these trends, training and education programs must be reorganized. More quick-learning modules on different sectors of agriculture as well as a focus on the emotional intelligence side of the business, such as dealing with different personalities, are both needed. Agricultural lending and to some extent the agribusiness industry will thrive on the following “Cs”:

A workplace culture that is caring and will also cultivate professional growth. Agricultural lenders must demonstrate the ability to calculate and analyze data, and also critically think how the data combines with the “intangibles.” Next, the lender must communicate the findings both internally and externally to the institution as well as the customer.

Today’s agricultural environment calls for learning opportunities such as internships with practical hands-on assignments, mentor and mentee relations that provide 360-degree feedback, growth assignments and combined customer and lender education.

Thus, with this perceptual acuity, or insight into the future, what does one need to thrive?

One. Balance the organization between the head and the heart. The head represents the bottom-line numbers, while the heart is the work culture environment that brings out the passion. 

Two. Think globally, but bring it down locally. This requires one to be interdependent, often using an advisory team or other peer groups to mix things up and stay on top of trends.

Three. Focus on the variables that one can manage. Manage around the rest of the noise and clutter from the “uncontrollables."

Four. Commit to education and learning. Then, do something with it! Remember the old adage “if you’re not learning, your neighbor is.” And remember that neighbor could be in India, China or anywhere.

And finally, five. Agriculture is a people business. Your net worth financially and mentally is directly related to your network of colleagues, mentors and friends.