1. G LOBAL E CONOMICS A ND T RENDS : P OSITIONING Y OU A ND Y OUR B USINESS FOR S UCCESS Macro Clinic Video Blog: http://agstar.com/edge/ Road Warrior of Agriculture: www.cornandsoybeandigest.com Ag Globe Trotter: www.northwestfcs.com Dave’s GPS & Dashboard Indicators: www.farmermac.com Dr. David M. Kohl Professor Emeritus, Agricultural and Applied Economics Virginia Tech, Blacksburg, VA (540) 961-2094 (Alicia Morris) | (540) 719-0752 (Angela Meadows) | sullylab@vt.edu January 8, 2015

2. Commodity Super Cycle Burnout  slowing of emerging nations’ economies  ethanol & biofuel mandate softening  central bank stimulus  inefficient infrastructure in emerging nations  weather – northern southern hemisphere 2

3. Grain Industry- “Margin Flipping”  easy money has been made  top flight managers still earn profit  high overhead/fixed cost structure  game of chicken with land rents  duration of cycle  four strategic factors 3

4. Managing Thru the Cycles Cycle DurationCredit Issues One Year CycleRepayment Ability Two to Three Year CycleRepayment Ability/Liquidity Three to Five Year CycleRepayment Ability/Liquidity/Equity 4

5. Livestock Industry “Margin Flipping”  strategic resource changes over past decade  50 to 65 year olds will not return  price, early cycle margins  cost, late cycle margins  young people migration  mistakes made in the best of times  duration of the cycle 5

6. Horticulture, Vegetable, & Retail/Entrepreneurial  growth of the economy  housing starts  lower unemployment  growth of local, natural, and organic  population dynamics 6

7. Global Economy Update CountryCode EuropeRed ChinaYellow RussiaRed JapanRed Middle EastRed ArgentinaRed BrazilRed PortugalRed U.S.Green 7 Risk Ranking Geopolitical Trade tensions Natural resource Economic reform

8. World Economy Perspectives- Europe  German elections  zero growth  debt levels  Euro additions/eliminations  currency/other 8

9. World Economy Perspectives- China  new leadership  population shift  rural to urban  state directed-capital growth  consumer based capitalism & growth in Asian exports  trade  natural resource issues  social disruptions  debt:shadow banking 9

10. U.S. Economy Update IndicatorCode Employment Numbers Wages Participation Yellow/Red Factory UtilizationGreen HousingYellow Oil/Interest RatesYellow LEI & PMIGreen 10

11. Global Economy  geopolitical trade risk  volatility in revenues and cost  agriculture’s movement to emerging nations  opportunity  failure  premium on planning, execution, and monitoring “Think globally but act locally.” 11

12. Technology  convergence of technology  bio tech  engineering  information/big data  high levels of talent  innovation vs. technology  systems “High tech, high touch.” 12

13. Consumers  local, natural, & organic  GMO/non-GMO  ethnic groups  global consumers  consumer trends 2025 “Consumers will drive the business model.” 13

14. Potpourri Trends  2050 - 70% of the world’s population will be urban  85% of Americans are 2 generations away from farm/ranch  animal welfare  environmental  black swans “Expect the unexpected.” 14

15. Rural Communities The characteristics of thriving communities are:  healthcare & preventive health  internet access  infrastructure  lifestyle amenities such as shopping & recreation “Rural communities will define your business/people strategy.” 15

16. Education/Lifelong Learning  internships  experienced education  knowledge centers, blended education  vocational schools  emotional intelligence – 4-H, FFA, rural leadership groups  First job  Baby Boomers = age 12; Millennials = age 22 “750 universities and colleges will file bankruptcy by 2025??” 16

17. New Wave of Players  under 42 years of age  age wave is world wide  women  minorities  lifelong learners  new entrants “Hire for attitude, train for aptitude.” 17

18. Natural Resources  quality land is premium  water quality & quantity  infrastructure issues  energy  growth vs. efficiency “Local, regional, national, and international conflicts over water.” 18

19. Transition & Evolution  60% of U.S. farm ground will change hands by 2030  independent vs. interdependent  lending: banks, Farm Credit, FSA  agribusiness  family and business dynamics “Heart vs. head concept.” 19

20. Global Economic / Government Policy  China 2030  debt issues worldwide  tax laws  new leadership  other “You can only imagine!” 20

21. Strategic 2025 1 CEO/ leaders will be “visionary/champions” vs. “gate keepers” “big enough to serve but small enough to care”  alignment & collaboration- agribusiness, education & lenders  technology strategy- value added, big data  refinement of processes- collaboration, training, & execution  human resources- talent alignment, culture, recruit, & retain 21

22. Strategic 2025 2  knowledge, intellectual research, information  Global, domestic, industry, region, & local  capital, liquidity, profitability, & efficiency  public policy, public regulatory voice  education- internal & external- “life long learners”  natural resources- demographic, drive your model  transition- evolution of customers, association, footprint- corporate vs. family 22

23. Ten Strategic Rules on Diversification 1  Is your strategy consistent with resources?  land  facilities  human resources  Is there a market? “James Bond Plan”  takes five to seven years for branding  word of mouth marketing “media”  25% more time, money, & resources 23

24. Ten Strategic Rules on Diversification 2  Have you conducted enterprise analysis?  business financial system dashboard  business lifecycle- “wonder, blunder, thunder, under”  trend is your friend  Profit rule: > interest cost/inflation/opportunity costs 24

25. 12 Golden Rules for Business/Lifestyle Success 1  Profit Equation: P=O+C+L+M²  Profit Allocation: 60-30-10 Rule  People Equation: 40-20-40 Rule  Victims & Know It All’s Elimination  Bus Rule: Good to Great/ Coach “K”  Financial Records that Talk to Business 25

26. 12 Golden Rules for Business/Lifestyle Success 2  Dash Boards: Financial/Production  Advisory Teams/Relationship Lender  Time Management Rule: 3000/500 hours  Spend One Percent of Revenue on Education  Children Rule: 50-25-25  Goal Setting Rule: 80-16-4 26