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Thinking Global in Agriculture



Hi, I'm Dr. Dave Kohl, professor emeritus, agriculture economics, and an academic Hall of Famer from Virginia Tech, Blacksburg, Virginia. As we close down the year and start another year, appropriate topic is think globally, act locally. It's interesting, with one in $5 of net farm income coming from export markets, one really does have to think globally. And let's look at some of the global economic shifts that are occurring.
 
For six centuries, the world economy centered around China, was actually 32% of the world GDP when Lewis and Clark was attempting to find the Northwest Passage. Of course, the baton shifted during the Industrial Revolution to Europe and then with the refinement of the Industrial Revolution, post World War II, and then of course the Information Age, of course the power center came here to the United States. But one of the things that's real interesting, the power shifts is moving back toward Asia, particularly China.
 
And one of the things that's real interesting, if you look at Chinese economic growth, in 1990 it was 2% of world GDP. Today it's almost 17%, and they've done this through their Silicon Belt Road initiative. And I want you to think about this. 40% of the buying power will reside not only in China, but in the Asian rim.
 
So as we kind of prepare as an agricultural business, what are some of the things that we have to have on our macro dashboard? Well, first of all, one of the things that we've got to watch for is the value of the dollar. Of course, lower value of the dollar, it gives opportunity for agricultural experts. Of course, we have to watch trade agreements, and particularly trade agreements, not only here in North America, but with our Asian trading partners. Another thing that's going to be very, very critical is weather and weather and major growing areas in the world throughout the year.
 
And then finally, who is going to have the purchasing power parity? Is it going to shift into Asia and what trading partners, particularly for agriculture, are going to have that purchasing power? When it's all said and done, though, the United States is still a place to be. First of all, we have good soil and water. And one of the things, soil and water health is going to be very, very critical for agriculture competition in the future. The second thing is we've got river systems. Think about this. Our river systems, we have more risk river systems here in the United States for distribution than the rest of the world combined. And then finally, one of the things is the entrepreneurial spirit is still alive and well.
 
So I want to wish you very, very well as we close down the year and start next year, and look forward to seeing you for some more additions on business and economics as it applies to agriculture.  

 

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