Agricultural Leadership: Shifting Economic Megatrends

How will economic megatrends press the paradigms of future leaders in the agribusiness sector? This thought-provoking question provides insight into the challenges and opportunities that are ahead in the agriculture industry. What strategies will individuals and organizations need to implement to prepare for proactively managing and capitalizing on economic megatrends? While this subject could fill a semester of lectures in a university class, let’s focus on a few key aspects.

Volatility

Historically, the agriculture industry has been required to navigate business operations in a volatile environment. The future leader will be confronted with extreme volatility in an economic environment of smaller margins. During the economic commodity super cycle from 2006 to 2012, high commodity prices were the norm, making it easier for producers to more easily absorb fluctuations in prices and cost. However, with today’s suppressed margins, the ability of a leader in the agricultural field to execute a well-managed game plan will be a requirement, not an option. In the future, these leaders will have to integrate changes in currency values and the impact of foreign and domestic trade negotiations into both short- and long-term strategies.

Interest rates

The agriculture industry has experienced a decade of low, flat interest rates. In the next few years, agriculture leaders must manage debt and capital in an environment of increasing interest rates. These rising rates, coupled with tighter margins, increase the emphasis on financial sensitivity analysis of cash flows, overall debt structure and repayment terms.

Special emphasis must be placed on working capital and overall capital management to absorb occasional negative changes in profits as a result of price, cost or interest rate variability. This will be the buffer for adversity, but also the catalyst for opportunity and change.

Consumer trends

There is a saying that “90 percent of success in business is about alignment.” The forward-thinking leader will align land, labor, capital and information resources with talent and management. These two components will then be meshed with changes and forces in the marketplace. Closely watching consumer trends, both domestically and internationally, will be critical for future business leaders.

The marketplace has splintered as a result of shifts in consumer preferences of Millennials and Generation Z. These generations seek experiences, and agribusiness leaders must adapt to these changes. The future of agriculture and agribusiness will not be one-size-fits-all. Some businesses will be best positioned for the commodity markets with a model based on efficiency and low cost. Other businesses will be adaptable and tap into niche markets to fulfill a need or provide a service. Some producers will employ a combination of both marketing strategies.

People

People management will be the differentiator of business performance in the future. Independent leadership will be replaced by individuals who are interdependent and can build a productive work and business culture of high-performing employees and customers. As younger generations move toward technology, maintaining the balance between interpersonal skills and technology will be a challenge. Future business leaders must embrace the confluence of these skills as an opportunity.

Many economic megatrends will impact the future of the agriculture industry. Volatility can result in opportunities, but it also can result in failure if not managed proactively. Interest rates will impact the cost of doing business and asset values. Consumer trends will require constant research and assessment. People management will continue to be an important business skill. There is a bright future for the agriculture industry when its leaders embrace these changes.

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