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What next in the ag economic cycle?

Photo by Ben Nuelle

The theme at this year’s American Bankers Association Ag Bankers Conference was “The Next Cycle”. With fall ending, what’s in store for winter?

A popular speaker at the meeting was Dave Kohl. He’s an economist and farm financial analyst. Kohl gave his take on agriculture’s economic cycle.

“I make it of the seasons of the year. Take the period between 2006 to 2012, it was the summer. (We) had high commodity prices in every major commodity. Then that period from 2013 to now is the fall of the year.”

Kohl adds commodity prices are in an elongated reset.

“People have been resilient because they had built up working capital, land values were also strong, and they had equity on the balance sheet.”

He says the year between 2018 and 2021 is going to be the winter period.

“I have a certain group of producers who have made adjustments and are starting to make some money. Another group is called the bridge because they are looking for a refinance. Then I have another 30 percent of producers at the end of the pier burning through land equity etc.”

Kohl calls the period from 2021 to 2025 the spring.

“What will happen is, we will weed out the inefficient and less progressive type of managers. Those 40 percent will buy out the operators who are inefficient, so we are going through this elongated downturn. (We are) in a grinder cycle,” Kohl says.

The national Ag Bankers Conference took place in Milwaukee earlier this month.