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Long Term vs Short Term for Agricultural Management

Dr. David Kohl
Educational Opportunities: 
Grain, Dairy, Swine, Beef, Young, Beginning Farmers
Home > Education & Events > May 2019 > Long Term vs Short Term for Agricultural Management

Hi I'm Dr. Dave Kohl, Professor Emeritus of Agriculture Economics and Hall of Famer at Virginia Tech, Blacksburg, Virginia. Let's look at some of the short-term and long-term views from the road. First of all, in this economic cycle, the little-bit-better principle is very critical. One of the things that we're finding, is the Ag producers that are not only sustainable but in some cases thriving, are little bit better in many areas; one being production. Oftentimes they'll get three to five bushels more than their next-door neighbor, holding the costs under control.

Another element is they go line-by-line management on both the revenues and the expenses. A nickel here, a penny here can amount to a lot on the bottom line, particularly the bigger the business becomes. Another thing that we're noticing on the road is that the business budget is very important but the family living budget is very, very critical. Oftentimes we see operating losses that are often tied right to family living expenses. So business budgeting needs to be right there with personal family living budget in managing the total operation.

Another element that's very critical, is managing the controllables around the uncontrollables. We can't manage the trade deal in China nor can we manage the new NAFTA agreement, the USMCA. However, we can focus on the business and it's analogous to March Madness. You're on the foul line and there's 20,000 people screaming at you. What do the coaches tell you? Look over that rim and focus on the fundamentals. And if you do that, you'll make 75 to 80% of your foul shots. And that analogy is linked to the current economic environment that we're in.

The other element in the long term we have to watch is the changing consumer trends both here in the United States but also globally. The millennials and Gen Z and Gen A, those kids in elementary school and day care, are watching us Baby Boomers age.  They're looking for four things in their food products. Number one, is it transparent? They want to know where it comes from. Can it be customized to them and personalized to them? And then finally, 75% of what they buy is an experience.

These are some of the short and long-term views that I'm seeing from the road and hopefully this will stimulate some of your thinking in your agricultural businesses.
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