Kohl's Notes
Which issues should be on farm and ranch managers’ radar screens right now?
First and foremost will be energy and inputs that are impacted by oil and natural gas. Expect wide swings in these costs created by weather, supply-and-demand aspects of the energy equation and geopolitical risk. Things will be bumpy until alternative energy is developed and/or the global economy slows.
Watch the health of the U.S. economy. Canada’s biggest agricultural and general economic trading partner is experiencing an economic slowdown. The softening of the housing market, higher interest rates and energy costs are taking a bite out of the U.S. consumer’s pocketbook.
The economic world is flattening out with thinner margins, a trend which appears to be irreversible. Expect to see the gap continuing to widen between producers who do well economically and those who fall behind. This will have a direct relationship with best management practices relating to marketing, finance, risk management and their sound location or natural resource base.
Consumers will continue to drive the business model. Consumers’ demand for organic, natural, and local food and fibre, along with traceability systems, will be key drivers of success for a producer’s bottom line.
Farms and ranches that adopt and integrate technology will have a systems approach to management, which will equate to larger increases in profitability. Traditional practices and simplicity will be the mode for profits and balanced lifestyle for many mid-sized and smaller farms.
Farm real estate values will be influenced more by economics beyond the farm gate. Profits from the energy sector, wealth built in technology and business sectors, foreign investment in rural areas, and the desire to reside or recreate outside urban areas will influence farm real estate values.
Agriculture will continue to be driven by political forces. Keep a close eye on U.S. Farm Bill negotiations, and the forming of global bloc economies in North America, Europe and Asia because of the sluggish WTO negotiations and trade sanctions.
Of course, the weather here and abroad, along with global competition, will create opportunity as well as trauma for some. This will require careful positioning to capture the profits and mitigate the risk.
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