Year in Review: Perspectives And Outlook
Well, we’ve come to the end of another year by the calendar. This is my 244th column since the beginning of this series as the Road Warrior, and it’s fun to sit back and reflect on 2005 and envision possible changes on the agricultural landscape next year.
2005 was a year full of surprises, but other things just stay the same:
- Land values and cash rents continued their bullish ways, increasing in value in many areas by more than 10 percent.
- Government supports continue to bolster income and balance sheets between the Rocky and Appalachian Mountain chains.
- Input cost related to energy with geopolitical risk and Mother Nature were major dark side surprises on the income statement that will not be felt until 2006 or 2007.
- Fewer agricultural suppliers, machinery dealers and more consolidation in the food retail sector continues.
- Agriculture tends to be below the radar screen for much of the time-compressed public.
- The rise of interest rates to suppress inflation
Let’s look to 2006:
- The range of oil price variation (U.S. dollars) has historically has been less than $10/barrel. Expect this to widen to $30-40/barrel due to tight inventories and the geopolitical risk in oil production and refinery areas. Producers will be required to have more stretch in their financial waistband as a result of this.
- The new Farm Bill will be negotiated and pondered in 2006. I can see several reasons for change:
- High federal deficits with no end in sight.
- The wars and budget priorities
- Medicare, which needs drastic overhaul
- Loss of major agricultural legislators in the last elections that supported programs.
- Change in voter demographics could impact decisions. Loss of older voters that supported agriculture and new voters that support green initiatives and the environment could be a reason for change.
- Globalization negotiations and pressure on subsidies and agricultural programs in developed countries.
- Expect the next Farm Bill to emphasize energy, environmental, rural issues and food security.
Five other trends that could impact your pocketbook in 2006 and beyond:
- Mr. Greenspan’s and Mr. Bernanke’s transition process
- Domestic and international consumers’ changing consumption patterns.
- Use of technology by more sophisticated producers in production of agricultural products, energy and other byproducts.
- More women and minorities influencing the management decision making of agriculture.
- Volatility of the business model and business successes will be the result of Mother Nature, factors relating to the security of developed countries and wild card events like terrorist activity, pandemic flu and media hype.
A big thanks to all of the loyal readers of this column, and thanks to those that come to see me at seminars and speeches throughout the year.
A thought for 2006: With an environment of extremes comes opportunity if you strategize and execute the strategy properly.
Best wishes to you and your family for the holidays. Take time to shut off the technology, reflect and re-energize for 2006.
Dr. Dave Kohl and Alicia Morris
P.S. – As I reflect on 2005, I’ve traveled 283,000 air miles and 71,000 Hertz rental car miles. I’ve visited 39 states and played basketball 101 days this year.
My e-mail address is:[email protected]
Editors' note: Dave Kohl, The Corn and 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.
To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.
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