When a webinar’s registration exceeds 450 individuals, it’s challenging to respond to the overwhelming number of questions. In this article, I will focus on a sample of questions on various topics that I have received during recent webinars. Let's move forward with some discussion and perspectives.
A number of the attendees had questions around the timing of investments. First, it is exceedingly difficult to time the market. Whether it’s farm and ranch land, stocks, mutual funds, gold or silver, one must step back and evaluate your goals. Next, what is your time horizon: short, intermediate or long-term? Evaluate your appetite for risk, particularly if you are borrowing capital for land investments. When making a market or investment decision, it is critical to assess your business and personal financial liquidity. Having a backup of financial liquidity to weather the down economic cycles is very prudent so that timing does not work against you. Investing nonfarm income or business profits in farm and ranch land historically has been advantageous. The value of farm and ranch land has appreciated or remained the same about 80% of the time over a 110-year timeline.
Direct to consumers
Where does one see direct-to-consumer sales going in this decade? All signs point to an upward trend. Producers serving niche markets that prioritize product transparency while utilizing the latest innovations in distribution to connect with the market and make the purchase an enjoyable experience for the customer will be successful. However, competition from large corporations will require you to stay two or three steps ahead of the curve as they seek to commoditize your products and services.
Is government stimulus creating inflation and how will it impact the agriculture industry? As one respondent indicated, we are about to feel the pressure of a margin squeeze. Generous stimulus payments and central bank policy in the U.S. and abroad are factors behind inflation. While the Federal Reserve contends inflation is tame, the basket of goods that measures agriculture inflation is much different. Fertilizer, fuel, chemicals, distribution and construction costs are increasing by double digits. If the prices received do not follow suit, producers will see their margins shrink. Environmental policies, disruptions in trade and distribution issues could also accelerate margin compression. Currently, rising inflation is one of the top risks to the agriculture industry.
Next time, we will continue to discuss more questions and dialogue from the webinar participants.
Dr. Kohl is Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University. Dr. Kohl has traveled over 8 million miles throughout his professional career and has conducted more than 6,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FSA and regulators, as well as producer and agribusiness groups. He has published four books and over 1,300 articles on financial and business-related topics in journals, extension and other popular publications.
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