“I see more opportunities in the dairy industry in the next 10 years than I’ve seen in the last 30,” says David Kohl, Virginia Tech University emeritus professor of ag economics and agribusiness entrepreneur. “But those opportunities also come with significant risk,” he cautions.
Kohl made these predictions as he kicked off the Professional Dairy Producers of Wisconsin’s annual business conference in Madison, Wis., yesterday.
He notes that 70 percent of North American farmland will change hands by 2025, leading to many changes within the agriculture industry. The one thing that will not change, though, is the fact that there is room for all types of management styles and strategies.
“One size will not fit all,” Kohl says. “We will have local, natural and organic operations, efficient traditional dairies and large, complex dairy business that focus on systems management.”
And, as it more evident each day, special interest groups and consumers will drive everyone’s business model. “Animal agriculture is under attack across the globe; it doesn’t matter where you live,” he notes.
Furthermore, volatility will be the new normal. “We will experience volatility to the extreme,” Kohl predicts. “This will be a serious challenge to even the best managers.”
Therefore, he says dairy farmers need to learn from the lessons of the past, including:
- Risk management is too risky. “Get over the mindset that ‘I left a lot of money on the table because of my marketing plan.’ You need to optimize your plan and minimize your risk for inputs and output,” Kohl says.
- Cheap-rate lenders. “You need financial partners that understand your business, not just those that offer the lowest interest rates,” he says.
- Money is cheap, so let’s just borrow and expand. “Businesses do need to grow, but you need to be better before bigger is better. You cannot grow your way to profitability,” Kohl cautions.
- Millionaire on paper, never earned a dollar. “Land values covered a lot of bad business decisions in the past,” he notes. “That’s not necessarily going to be the case going forward.”
- Prices and costs are too volatile to plan. “This is exactly why you need to plan,” Kohl insists. “Use scenario planning to figure out how you will deal with these challenges.”
- Over-reliance on non-recurring revenue.
Finally, he sees agriculture as a huge engine of growth, and suggests you surround yourself with positive people to increase your odds of success. “You can be around people that bring you up or people that bring you down. It’s your choice,” Kohl says.