transition

Capstone of the Year: 2016 the year of transition in farming

2016 is going down as a year of transition but 2017 looks to be the year of learning.

Wow, 2016 is drawing to its close! It certainly has been a transformative year as we move into latter half of the decade. From my travels to 34 states and four Canadian provinces, and presenting and networking with people from around the globe, there are several trends and observations worth examining from the year. 

The trend of transition continues to increase worldwide. The passing of the baton from the baby boom generation to the millennial generation is taking place in all industries. By the end of this decade, many boomers will phase out of agricultural lending, agribusiness and to some extent farming and ranch businesses. The millennials are the surge of fresh, new ideas and innovation with a strong grasp on the latest technologies. This energy will serve them well as they and other young producers face a prolonged economic downturn. However, some young people are actually taking advantage of the reset with lower investment costs, and a stronger set of business skills than initially required of previous generations.

In 2016, land values bent, but they did not break. Yes, most commodities are in the third year of an economic reset with suppressed profits, strained cash flow, and perhaps, a draining of working capital. Excess core and land equity continue to be strong collateral positions as the ability to bend and be resilient is imperative to success in today’s economic environment. Due to crop insurance, low interest rates, hedge funds, and minimal returns in other investments, the agriculture industry has not experienced a flooding loss of capital, at least thus far.   

The term “ground zero” was used recently to describe the time period of December 1, 2016 to April 15, 2017 in agriculture. It is possible that up to 50 percent of operating lines of credit will need to be restructured to long-term debt.  To some extent, the losses and gains from 2016 along with cash flow will determine refinance opportunities.The degree to which these refinances are approved may well dictate the speed of the decline in land values and other assets.   

Judging from several global events this year, world politics is definitely in the 50 to 70 year cycle of transformation.Technology, people and change are so far ahead of the institutional structures and policies in general, that the gap has become an economic disruptor. Among major global events were the BREXIT vote, impeachment of Brazilian Leader Rousseff, turmoil in South Korea, new directions and governments in Canada, Italy, and possibly in France and Germany, and most certainly the changing agendas of the U.S. for the coming years. This cycle is not new and happened in the 1930s, 1960s and even 1880s as many of our ancestors emigrated from Europe and other areas of the world.

An extremely positive trend emerging from 2016 is the eager manner in which people are willing to learn. Conference and seminar attendees were engaged, recognizing information and knowledge as their competitive advantage. While many focused on financial capital, I contend that the quality of human capital will present agriculture’s biggest opportunity and challenge in the coming years. 

As I review the year, our team wrote nearly 150 articles, manuscripts and research pieces. From my hotel room, I observed the recent blizzard in Winnipeg, Canada which says the winter season is definitely upon us. For those of us in agriculture, this means it is time to reflect and renew.  As you move through this journey of life, take the time to enjoy your blessings and practice gratitude. From our team nestled in Virginia’s Blue Ridge Mountains, we wish for you joyous holidays and all the best for a prosperous New Year! 

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