Focus on the Fundamentals: Q&A with Dr. David Kohl

6/21/2024 8:00:00 AM

AgViews Live Focus on Fundamentals June 2024_998x396

In 2024 so far, Dr. David Kohl has traveled to 32 states for agriculture-related speaking engagements. Even though he’s already spoken to audiences in more than half the country, there’s still one event to come that he’s particularly looking forward to.

For the 10th time, Dr. Kohl, professor emeritus of agricultural finance and small business management and entrepreneurship at Virginia Tech University, will join Lynn Paulson, Bell Bank's director of agribusiness development, at AgViews Live on July 15, 16 and 17.

“AgViews Live is a special event,” said Dr. Kohl. “There’s always an energy there. It’s one of my favorite events of the year to do.”

We recently caught up with Dr. Kohl to find out what to expect from his AgViews Live presentation, and to discuss some of the more pressing issues affecting ag producers today.

With everything going on in the world – politically, economically, geopolitically, etc. – where can ag producers find opportunities?

I think one of the things that’s very critical in a world of chaos is to make sure you maintain your focus. Manage the things you can control, and manage around the things you can’t. If you put all your time and energy toward the things you can’t control, you’ll just spin your wheels.

I find that the people who follow the basics and the fundamentals of business, marketing, risk management and finance will be best positioned to take advantage of profit opportunities no matter what’s going on in the world around us. You build the best business model during uncertain times, because that’s when you’re forced to focus on your fundamentals and your basics. People often get into trouble during the good times, because they can get complacent.

Something we’re seeing more and more in agriculture is consolidation – among producers, landowners and many agribusinesses. What’s the long-term impact of this trend?

As these companies get bigger, my concern is that they may not have the technicians and support to deliver their services. What happens if a computer chip goes out, and you can’t plant or harvest when you need to? What if your only dealer is 200 miles away? As these firms consolidate and become bigger, they have to have the support staff and resources to deliver their services to the people who depend on them, on a timely basis.

Another concern is the relationship aspect. When these companies focus on the bottom line, sometimes they forget about the balance between the head and the heart – but relationships still matter. If you can keep those relationships, you won’t have to worry about return on equity.

What can we look forward to in your AgViews Live presentation?

I always like to inform everyone about what’s going on globally, in China, India, Europe and the Southern Hemisphere, and some of the elements I’m seeing from an economic standpoint. I’ll share about interest rates, of course. And then my goal is to give people four or five takeaways or tools that they can go back and implement in their business or personal lives.

Lynn and I stress that some of the variables we talk about will impact your business, others will impact your family, and others might impact your personal lives. We’re there to inform, we’re there to provide some action and strategy that attendees can take back, and we’re there for engagement – our favorite part of the event is the question-and-answer session.

Let’s talk about the event’s main theme: “Have we seen this movie before?” What is this referring to, and what do ag producers need to know?

What that’s referring to is how our current period is feeling very similar to the post-commodity super cycle, which lasted from around 2007 to 2012. That was followed by what we call the “grinder years,” from 2013 to early 2020, when we had lower prices but the costs hadn’t inflated and interest rates were at record lows. This time, we’re getting hit by a triple play – prices are down, costs are up, and interest rates are up.

We’re seeing a sense of urgency now, much more so than in the previous period. With all of these factors going against you, you can easily have a big negative cash flow and take working capital and equity away from your business. One of the elements that I want to stress right now is that it’s important to take ownership of your numbers. You can’t just look at your financials once a year – with these conditions, you have to be on them at least quarterly. Ownership of your numbers has never been more important.

It’s also important to have a good advisory team. That could include a crop or livestock consultant, but a good lender – someone you can trust and who can be candid with you – is imperative during this period of time. A good relationship with a lender has never been more important.

Like I said earlier, all of this makes it important to maintain your focus on the fundamentals. Those who are able to do so will be best positioned to take advantage of profit opportunities throughout the year as they arise, despite these challenging conditions.

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