September 30, 2021

DrKohl_color The Ag Globe Trotter

Dr. Dave M. Kohl

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

The younger generation of farmers, ranchers and agricultural entrepreneurs is infusing a new energy into the agriculture industry and rural areas. This is challenging the agriculture communities across the spectrum including agribusinesses, lenders, policymakers, academic institutions and others to align to better serve this segment. The young agriculturalists are very agile, innovative, and definitely more business-savvy than their predecessors. Let's envision a broad range of topics that will be the centerpiece of their success over the next decade and beyond.  

The Portals 

The portals of entry for young producers will be much broader than past generations. Family businesses will still be the dominant entry method, but they will see some changes. More families will manage farm businesses with cousins and extended family members. In some situations, these extended family members will reside in urban areas with asset ownership which will require more formal business arrangements. Some will collaborate with non-family members to leverage their expertise and, in some cases, capital to move the business to the next level. 

Another portal will be the agricultural entrepreneur. These individuals will find profits by aligning with changes in the consumer marketplace. Agricultural entrepreneurs are often multitaskers who develop diversified sources of revenue through agriculture and non-agricultural gigs. They will leverage their talents, experiences and resources to place them outside the traditional definitions of farm and ranch revenue. They will use this income and cash flow to support the agricultural business and to leverage the acquisition of assets, such as farm and ranch land. 

A third portal for new producers will be the boomeranger professional, or blue-collar individuals, returning to agriculture from other occupations. They will integrate their skill sets and experiences with outside the box thinking to develop successful business models and a satisfying family and personal life.

The demographics of agriculture will follow the diverse trends in organizations such as 4-H, FFA, MANRRS and other youth leadership organizations. This will result in more women, minorities, people from urban backgrounds and military veterans seeking to strike out on their own entrepreneurial activities surrounding food, fiber and fuel.

This next decade will stretch the boundaries of institutions serving agriculture to include urban and vertical farming activities. These businesses will have a strategic advantage of less transportation costs and transparency through local products to serve the needs of an urban population. 

Rural Renaissance 

The entrepreneurial, rural renaissance is occurring at an accelerating rate due to the pandemic. As a result, private and public initiatives to improve broadband internet access are being implemented in many areas. In the past, the best and brightest young people felt that rural areas did not have the attributes needed to operate a successful business, offer professional enhancement or provide a quality family lifestyle. The ability to attract and retain talent will be a key in the decade to come. Highly skilled individuals will be critical to interface with technological advances for maximum productivity of farms and ranches in rural areas. 

Five-point strategy

What can be done to position the next generation of agriculturalists to succeed domestically and globally in the competitive marketplace? Education rises to the top as the agriculture industry becomes more business oriented.

This education needs to start early in grade and high school through 4-H, FFA, MANRRS and other leadership programs. The investment by the agriculture community, both monetarily and in terms of time, will need to be priority number one to develop the next generation of the agricultural community.

Next, the vocational and technical schools, colleges, and universities must be engaged in experiential learning. This type of education links research and theory to practical educational experiences either through high-tech or a blended educational approach that includes both high-tech and high touch. This approach to education will often result in a series of educational certificates, challenging the traditional degree system. Lifelong learning will be one of the key educational modes to enhance knowledge. 

I am involved with approximately 20 multiple-day educational programs for young agricultural producers annually. The most successful programs provide education linked to accountability activities. These programs are beneficial to both the sponsors and the participating individuals and businesses. This is analogous to Division I athletic scholarships and graduate assistantships that are awarded to individuals with the expectations of accountability and action to continue in good grace. For example, a lender may sponsor a scholarship for an educational experience with the expected accountability being the timely completion of the balance sheet, income statement, projected cash flow and written goals. Of course, the lender would benefit by being better able to examine the credit risk, but the business and individual's chance of success could also be dramatically improved. Engagement and accountability will be key words of the next decade as business IQ will be a difference maker. However, this could be expanded to other areas such as social and environmental stewardship, public and consumer interface, and other facets of the long-term success of the agriculture industry.

Next, financing opportunities will be necessary for the next generation of agriculture. The traditional low interest rates and extended terms with government, private and cooperative funding will be prominent. Micro loans, small startup funding and extended working capital terms for growing businesses and those in value-added markets will be required and will stretch the boundaries of some traditional agriculture financing programs. Financing value-added entrepreneurial businesses will require capital, terms, and repayment options that will challenge the paradigms of many underwriters and regulators. Thus, underwriting standards will need to be reconsidered where land and equity dominate the risk assessment. Examining management potential and business IQ, which is often an art rather than a science, will have a higher priority when determining risk for young and beginning farmers, ranchers and entrepreneurs. 

Finally, local, state and national public institutions need to work more closely with business, industry, and lending institutions to provide cutting-edge programs and agricultural initiatives that attract and retain the best of the best.  

The decade of the 2020s can be coined as the “fork in the road” concerning agriculture's successful outcomes. Regardless of the method of entry, sound and applied learning with accountability and a balance of private and public initiatives will be a top priority for a strategic leader’s game plan for the 2020s.