RIPPLE EFFECT: Virginia Tech Emeritus professor David Kohl predicts that covid-induced issues, such as global supply chain disruptions, will continue for another couple of years and will continue to influence economic dynamics.
Farmers can expect more volatility in their returns and expenses for the next 10 years as the world’s economy continues to grapple with the effects of covid-19.
But there will also be opportunities too, Virginia Tech Emeritus professor David Kohl said at the Foundation for Arable Research’s Resilient Maize virtual conference.
Getting through it will require properly managing issues that are beyond a farmer’s control.
“We can manage the controllables around production and operational efficiency, finance and marketing. Really good managers know how to zone in on the controllables,” Kohl said.
Covid-19 caused a double-barrelled effect. Fearing they were on the verge of an economic depression, many countries’ central banks wrote massive cheques. In the $85 trillion global economy, 14% of it came from these cheques.
This combined with the supply chain issues seen in covid has led to an artificial supercycle, he said.
He predicted these issues will continue for another couple of years and will continue to influence economic dynamics.
These are all contributing to inflation around the globe. However, this may alter later in the decade, as more of the older generation retire and adopt more conservative spending habits.
“We’re on the down part of this rollercoaster and this is where business IQ, the operational management, the financing, the efficiency and production is really going to kick in over the next few years,” he said.
Eventually the Government stimulus fuelled by those cheques will run out, he said.
The world was also in an era of deglobalisation and this will impact international trade. More companies had activist investors and consumers who demand accountability in environmental, social and governance issues.
New Zealand was also well-positioned for the rise of the power of Asia.
China was 2% of the world’s GDP in 1990. Today it is 17%, the second-largest economy in the world. By 2030, 40% of the world’s economic power was going to reside in Asia. This all put a new emphasis on the importance of trade agreements, he said.
In Europe, countries were looking to cut back on fertiliser and agrichemical usage, which will change the shape of agriculture in that region.
Plant-based meat and dairy alternatives are also here to stay, as well as an accelerating carbon market. Many farmers within his home country have also invested in crypto currency.
It will also be a decade of management transition as the older generation of farmers bow out of the industry. This younger generation has to have a high business IQ if they are to succeed within this environment.
Managing all of these trends required a different mindset and he suggested hiring young people was a good way for the older generation to keep in touch with the latest global trends and technologies.
The transition from fossil fuels to green energy will mean a lot of volatility in fuel costs to growers. The current labour shortages around the world could give way to job shortages as more growers switch to automation.
This will create opportunities for the younger generation because it will require high level jobs to understand this technology.
The next generation needed to be able to understand, analyse, critically think about data – and then communicate their findings if they are to be successful in the face of these trends, he said.
