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What's on the Radar for the Agriculture Industry?

Dr. David Kohl
Educational Opportunities: 

Hi, I'm Dr. Dave Kohl, Professor Emeritus and Academic Hall of Famer of Virginia Tech. Today's subject matter is: What's on my radar screen?

Well, it’s interesting. Many macro events are really dictating the future of agriculture. And front and center, is international trade. Over the next four months, the negotiations concerning NAFTA and also TPP or the Trans Pacific Trade Agreement, is going to be very, very critical to the cash flow profit fortunes of agriculture and to the balance sheet. One of the things that I'm watching for concerning NAFTA is, if we tear up NAFTA, this could be extremely devastating to agriculture because our number one trading partner, and our number three trading partners in agriculture are Canada and Mexico. Combined, they represent about forty billion dollars.

For example, working with the Mexican bankers, I had one of the bankers indicate that we export one in seven days of milk, thirty-nine percent goes into Mexico. When President Trump threatened to tear up NAFTA, the Mexicans actually looked for other sources of milk and, of course, Europe is very flush. In addition, two billion dollars’ worth of corn goes to Mexico and this could also impact our trade because they have looked at other avenues in Brazil and Argentina even though it costs more. 

The other element we need to keep an eye on, of course, is the TPP or Trans Pacific Trade Agreement. Three out of every seven customers in the world that have money reside in the Asian area. So keeping an eye on that is going to be critical

Finally, one of the things is, watch for interest rate increases. When you're doing your cash flow, plan on three interest rate increases possibly at twenty-five basis points or a quarter percent at a time. Again, these macroeconomic events are going to occur throughout 2018 and have to be implemented in your game plan for success.
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