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Get better before you get bigger

Kohl

As annual meeting time is in full-swing across farm country, one of the busiest guys in the country is Dr. David Kohl, Professor Emeritus, Agricultural and Applied Economics, Virginia Tech. This year he is travelling the country talking to farmers about what he sees coming down the road for agriculture.

Kohl says agriculture is coming off a ten-year “Super Cycle” created by emerging economies and our Federal Reserve. It ran from 2002 to 2012 and the grain industry benefited the most.  He notes that things heated-up so much for grain pricing that “We forgot about our livestock industry.”  Kohl says long-term sustainability for grain requires a vibrant livestock industry.

Now, livestock numbers are down and the global market has slowed-down. Some key changes are emerging economies have slowed, the biofuels mandate is softening and the Central Bank stimulus is ending.  He says the slowdown is a natural cycle but it affects grain, milk and oil.  He says $60 oil is fine but he has concerns with $40 oil in that it is below the cost of production for even the most efficient producers.  He points to the number of economic recessions that have been led by oil.

Kohl says he is “Cautiously optimistic” about the coming years but also expects more volatility in the markets in the next 10 years than we have seen in the past 40. He is concerned about the economic problems in Europe and warned about depending too much on exports…especially one-or-two big customers.  “We have to realize, those markets can giveth and they can taketh away.”

His final comment: “Better is better before bigger is better”. Get better at what you are doing before you get bigger.

Listen to Kohl’s comments here:

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