By Dr. David Kohl
The sudden impact, depth, and breadth of the proverbial black swan has touched most of society around the globe. COVID-19 has been a major paradigm shifter. Whether it is government, businesses, families, or personal households, the methods of business and interaction have been permanently changed. For those of us involved in agriculture, this event was difficult for which to plan.
When examining the business implications, one has to step back and observe the progression of the black swan event. Phase 1 was the "big splash" of the dirty bird in March and April. Preventative health strategies resulted in 40 percent of the consumer-based economy in the U.S. being shut down. Globally, many economies were placed on life support which shocked, numbed, and caused anxiety for many consumers.
Phase 2 will last from May 1 to the end of 2020 and will result in the emergence of the angry bird. Once the recovery plans and stimulus funds have been exhausted, the true effects of job losses will be realized. New health surveillance systems will be unveiled, and de-globalization discussions will become more common. These changes may result in market volatility and uncertainty. Expect revenge, blame, and frustration, all of which can wreak havoc on both financial and emotional health.
Phase 3 will begin in 2021 and beyond. This phase will be characterized by the rise of the mythical bird known as the phoenix. Entrepreneurial agriculture, driven by young and beginning farmers and ranchers with mentorship from the senior generations, will create new methods of business that align to the markets. These producers and leaders will create new energy with a commitment to move forward. A premium will be placed on being innovative, agile, and resilient.
The positive attributes of new models in agriculture will be built upon black swan disruption in individual businesses and as an industry. Linking society to agriculture and the importance of diversified and safe food, fiber, and fuel sources for the basics of life will become a much higher priority.
Next, transparency in where food is produced, processed, and how it is distributed will move into prime-time importance to reassure U.S. and global consumers. While there will continue to be a place for large agriculture and processing, local and niche markets will emerge stronger and better. Producers will target customers who want reasonably priced food and an agriculture related experience.
One variable that needs to be advocated for by individual producers and the agriculture industry is soil and water health. Many of the health-related issues that have emerged in recent decades are in areas of the globe that are deficient in soil and water health. Healthy soils and water result in healthier plants and livestock for human consumption and are ultimately better for the environment. Finally, repositioning the image of agriculture as a vital industry rather than the villain is an opportunity on the horizon.
While this discussion has centered around the agriculture industry, what can you as an individual do to change this black swan into a phoenix?
- Whether you are running a business or a household, get your financials in order. It will be important during this summer and fall to document your losses resulting from COVID-19, particularly if you receive or seek government assistance. One lesson learned from this event is the importance of a strong, up-to-date financial record-keeping system.
- Conduct a trend analysis as a part of your overall financial examination. Three or four years of side-by-side financial analysis can bring logic to a very emotional event. If you lose money, determine how much equity depletion is occurring and brainstorm with positive businesspeople for methods to turn a financial lemon into lemonade.
- Communicate and seek advice from your lender, accountant, and other advisors. Teamwork for solutions can provide a balanced perspective of the situation.
Analogous to rafting in whitewater, you must be dependent upon others. Do not go it alone and seek financial and mental health guidance, if necessary. Remember, while financials are important, do not equate your self-worth with your financial net worth!
