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April 29, 2022
One trend that is sweeping the land is the rapid acceleration of the transition of agribusiness professionals such as salespeople, managers, farmers, ranchers and educators out of the agriculture industry into retirement. At almost every conference I attend, a handful of these individuals that started their professional journey in my tenure say their final goodbyes as they embark on another chapter of life. On their way out, they will often mention that the current times remind them of the beginning of their careers in the late 1970s.
It is déjà vu all over again decades later. In the late 1970s, inflation was running rampant at 12% to 15%. Farmland was being purchased as an inflation hedge, similar to today. Farm input costs were skyrocketing due to high energy costs. Too much money was being printed by the Federal Reserve, which meant too much money chasing too few goods. Global markets were hot with the expectation of feeding a growing world population and that trade was going to provide sustainable, higher prices. Total farm debt in the 1970s tripled in a matter of a decade as producers used financing to grow their operations and purchase farm and ranch land. Does this sound similar to the current economic environment?
Of course, those years were followed by the 1980s farm crisis. The collapse of international markets, the rapid rise of interest rates on borrowed money, and government constraints of debt through regulators was the cocktail for the agriculture financial crisis. Two deep recessions as a result of high energy prices, high unemployment and interest rate increases created an environment similar to the Great Depression, particularly in the farm and rural sectors.
It is impossible to know the future, but as the senior generation bows out, let’s draw on some of the wisdom of those that made it through the 1970s. What were some of the common denominators for success?
One-third of the farmers and ranchers failed to bridge those decades and stay in business. In the decade of the 2020s, both challenges and opportunities will arise. Drawing on some of the wisdom and principles from the past can help provide perspective for the future.
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 10 million miles throughout his professional career and has conducted more than 7,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FSA and regulators, as well as producer and agribusiness groups. He has published five books and over 2,500 articles on financial and business-related topics in journals, extension and other popular publications.