At the request of an ag broadcaster in the Northwest, I came up with the Road Warrior’s top 10 reasons why I am enthusiastic about the future of agriculture. In a recent column, I discussed number ten, the five dimensions; and number nine, technology convergence. Now let's discuss number eight on the countdown.
Number 8: One Size Does Not Fit All
What is the best business model for agriculture? The quick answer is that one size does not fit all. Local, natural and organic production will be a growing segment in agriculture. Currently, it is approximately 8% of production, but in some regions, it could amount to 20%. Granted, we will not feed the world with this model, but with effective business planning and astute production, marketing and financial management executed in an efficient manner, this model can be very entrepreneurial and exciting, adding new energy to agriculture.
The next model is the midsized farm. Yes, the midsized farm is still viable, but it will require modest debt loads and living withdrawals with a focus on efficiency. These operations should focus on the “better is better” rather than the “bigger is better” strategy.
The other business model will be large complex agribusinesses. These operations may be comprised of multiple businesses, often made up of family members or a mix of outside partners. Some businesses will operate over multiple counties or states, and even in different countries or hemispheres. Managing a larger, more complex business will require a higher level of business acumen. Growth can be a blessing or curse for this model, if not managed in a disciplined way.
Which model is best for you? Assess the resources you bring to the table. It may make sense to have a combination of two or even three of the models. Sound business planning on paper before action is critical for the success of any of these models.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at [email protected]