Outlook for 2020 and Beyond
2/4/2020
Dr. Dave Kohl
grain falling into a container
 

photo of Dave KohlWelcome to the new decade with all of its challenges, but also some bright opportunities. This decade will be characterized by both social and global competitive shifts and could be defined as the “fork in the road” for many businesses, industries and economies. The following are just a few of the questions, perspectives and observations to consider when conducting short- and long-run planning and strategy sessions.


Will consumer trends, driven by the millennials, Generation Z and Generation A, continue to shift rapidly? Plant-based and cultured meat have established a place in the market. Will these alternative products cut into the demand for more traditional products? Will individual producers and industry leadership groups develop a game plan to align with consumer desires? Or, will they be satisfied to be the low-cost commodity producer for the U.S. and global markets?


Will trade disputes be resolved in 2020 with our trading partners? If so, will the loss of demand to our competitors around the world impact prices for commodities that are exported? The major question for cash flows and profits will be whether government support payments will continue making up a larger share of producer profits. The fork in the road concerning global economics is whether there will be a return to globalization or a shift to “decoupling” and populism as the mode of operations internationally.


Will farmland values maintain their resilience in 2020? If interest rates stay low and skepticism about alternative investments such as stocks and equity remain, expect farmland values in most regions of the country to stay strong. Baby boomer farmers and investors with new money have enough equity and cash to continue investing in hard assets, such as land, that come with other attributes including mineral and development rights, energy and water.


Political volatility and uncertainty will be key words for 2020 in the U.S. and abroad. The unpredictability of election outcomes will put a cautious, conservative stance on the stock market as well as capital investment strategies for businesses.


The year 2020 and beyond will be dominated by consolidation. Will consolidation continue to accelerate or will political, consumer and social forces result in a black swan for big business? The power struggle between big and small businesses may be in its early innings for business owners and strategic thinkers. Will non-governmental organizations (NGOs) continue to place pressure on business and institutions to regulate in favor of their desires?


The next decade will continue to bring extreme weather in both the U.S. and abroad. Will improved management practices and genetics be enough to overcome these weather aberrations without impacting worldwide supplies?


A major question for 2020 concerns the health of the economy and interest rates. The U.S. economy has set a record for economic expansion with 126 consecutive months of growth. Interest rates in the U.S. and abroad have been at record low levels for nearly a decade.


Will the U.S. energy sector still remain number one in world output followed by high rankings posted by our northern and southern neighbors? If the output of the North American energy sector continues, the resulting stability and cheaper energy will be beneficial to producers, businesses and consumers. Any disruption could lead to volatility and be advantageous to possible enemy forces.


With all these questions, one variable remains constant: good, solid planning with alternatives will be critical. A focus on execution and monitoring results will be even more important going forward. Manage to your strengths and complement your weaknesses or areas of improvement. With the best talent and a strategic plan, you can increase the probability of traveling the high road to profit, overall success and fulfillment. Best wishes for the upcoming year and the next decade!


Dr. Kohl is Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University. Dr. Kohl has traveled over 8 million miles throughout his professional career and has conducted more than 6,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FSA, and regulators, as well as producer and agribusiness groups. He has published four books and over 1,300 articles on financial and business-related topics in journals, extension, and other popular publications.



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