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Global Happenings in the Ag Industry

Date: 
Author: 
Dr. David Kohl
Educational Opportunities: 
Videos
Interests: 
Grain, Dairy, Swine, Beef, Young, Beginning Farmers, Specialty Industries, AgriBusiness
Home > Education & Events > March 2020 > Global Happenings in the Ag Industry
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Hi, I'm Dr. Dave Kohl, professor emeritus of agriculture economics and academic Hall of Famer at Virginia Tech, Blacksburg, Virginia.

The subject matter today is perspectives from the southern hemisphere. Over the past couple of months, I've been very blessed to interact with producers from the southern hemisphere representing Argentina, Brazil, and Australia. And it was interesting getting some of the perspectives from them and how it's going to impact the northern hemisphere producers. First of all, the Brazilian producers said last year, his EBITDA, that's net income plus interest and depreciation, was 30%. And on a side note, he says he was able to obtain those stellar numbers by, one, the tariffs spats that of course the United States has had with China and other countries around the world, but he said also they've taken advantage of the strong dollar. However, he wasn't being complacent. He's already realizing that he's going to have to step it up because he said most likely United States will change and represent increased competition.

Another aspect that I really gained from interacting with the producers, they think in systems. Putting the best system together for production, finance, marketing and risk management and constantly tweaking that system to gain the competitive advantage. And I think that's something that we're going to have to do here in the northern hemisphere.

The other component that gave them the competitive edge, they were advocates of the use of advisory teams. Matter of fact, one producer said there are [inaudible] were out there at least twice a week monitoring fields. And they said that information, that input was very, very critical. But they also had consultants concerning marketing and finance as well and also in the area of compliance.

It's real interesting, historically they said they were one generation behind getting technology in the southern hemisphere. They said the same technology, whether it's machinery, equipment or seed that we get here in the northern hemisphere, they have access to the southern hemisphere. So the bottom line is there's not that lag effect that we have historically seen.

Also, they indicated that with China's investment through the silk and belt and road initiative, they have been upgrading their infrastructure and matter of fact, new processing units are coming in, and that's giving them a strategic advantage as well. We often hear that the Amazon is being cut down, et cetera, et cetera, however, they are held to high environmental standards. For example, for every hundred acres or [inaudible 00:00:02:53], they have to keep at least 10 to 20 acres in woods- and at the one farm, each one of the trees actually has a government microchip in it. And if that tree is related to the Amazon, that tree cannot be harvested.

But overall, I wanted to give you those perspectives. And the bottom line is we're probably going to see more competition coming out of the southern hemisphere of the world, and that means we're probably going to have to step up our game plan here in the northern hemisphere. See you the next time.
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