New Century Farmers Focus on Future Challenges
"It's not the bad years that get you into trouble – it's the good years," Dave Kohl told 50 FFA members selected from 150 applicants across the U.S. to participate in the 2013 New Century Farmers Conference July 14-20 at DuPont Pioneer in Johnston, Iowa. "A winning streak causes a sense of complacency, and it leads you away from following sound business fundamentals."
Kohl, professor emeritus, Virginia Tech, Blacksburg, was one of a top-flight faculty of ag financial, production, and industry experts assembled to offer specialized training in entrepreneurial leadership, practical knowledge, vision, global perspective, and personal growth. The students also toured DuPont Pioneer facilities and other Des Moines industry plants during the week.
Kohl's topic, Managing in the Wild World of Global Economics, also highlighted the influence of technology and data gathering a well as best management practices and Super Commodity Cycles.
Kohl, who grew up on a dairy farm in New York, is involved in a small dairy farm and creamery that markets milk, ice cream, and eggnog direct to consumers. He highlighted the importance of robotics and data in the dairy industry. "Robotics is bringing the younger generation back to small farms on the East Coast," he said. "Data is revealing how making incremental changes in production practices can improve management. Cows chew their cud about four hours and 52 minutes a day. if it drops to two hours or less, they are in heat, or sick. Technology can detect this."
Data gathering is associated with grain production, but Kohl said that livestock applications, including precision cattle management, may be equally important.
Kohl said that the most successful farmers in his generation have a younger generation in the farm operation. "You put a new dog in with an old dog, and it pushes the older generation, and energizes it," he said.
He shared his concerns about the economic outlook for U.S. agriculture. "Financial ratios give a green light at today's high grain prices," he said. "But at $4 corn and $9 beans, all signals turn red. Things can go from good to bad quickly. Look for a punch coming in four years. Your best management practice is to have a lender who understands your business. That doesn't mean the lowest interest rate. Cheap money is expensive if you don't have the earnings to pay it back. When you hear a lot about the 'new normal,' be careful. Things may be close to crashing."
He reminded students of his three C's: "Be conservative during good times in order to be courageous during bad, times so you can be consistent all the time," he said. "Build working capital. Cash flow and earnings pay back loans, not appreciation. Examine your margins and how volatility may affect margins, both positively and negatively."
Kohl discussed the four Super Commodity Cycles since 1900. "This one has lasted longer, almost a full decade," he said. "I advise you to make a profit plan."
First, allocate 60% of your profits to efficiency and incremental growth. "You need to get better before you get bigger," he told them. "You get efficient by making incremental changes. Next, devote 30% of your profits to working capital. Spend 10% of profits doing what you want," he added.