WILLMAR, Minn. – The industry has seen the light at the end of a long, dark tunnel shaped by the most turbulent markets in recent history.
    To carry the momentum, there are five positives that will help shape the dairy community in the next decade, according to Dr. David Kohl. Yet, these positives will certainly be faced with challenges as the industry propels forward.  
    “We’ll see more change in the next 10 years than the past 70,” Kohl said. “We’ve made it through the awkward teenage years, and the 2020s are going to be the fork in the road. It’ll be up to you to decide which fork to take.”
    Kohl, professor emeritus at Virginia Tech, presented “Getting a Grip on Ag Economics and Your Business” Feb. 20 in Willmar. The event was a part of Ridgewater College’s Farm Business Management Education program.
    The first positive Kohl noted are low and stable interest rates due to $18 trillion worth of negative interest rates worldwide.
    “That’s particularly critical for young farmers or anyone who borrows money,” Kohl said. “It keeps your land values up. In contrast to the 1980s, this is a positive.”
    Similarly, energy costs are stable.
    After the terrorist attacks Sept. 11, 2001, the United States made a goal to become energy independent by 2030. The goal was met in 10 years with ethanol, fracking, solar panel and wind turbines to become the globe’s No. 1 energy producer.
    “When Iran launched those missiles, if that would’ve been 40 years ago and during harvest, you would’ve seen fuel prices skyrocket,” Kohl said.
    North America as a whole is a strong energy producer with Canada ranked No. 4 and Mexico No. 8 for global energy production.
    “We have three of the top 10 teams here,” Kohl said. “Being energy stable is very good.”
    One other stable component is land values which are aided with the low interest rates.
    Baby Boomer farmers are continuing to purchase farm ground either for themselves or a future generation. Kohl thought the industry would see this trend continue for the next 10 years.
    Market volatility will not go away, but there are tactics farmers can use to weather the sharp downturns.
    Kohl suggested making small, proactive decisions.
    “We’re only in the first inning of market volatility in the extremes. We’re entering the decade of base hits, and base hits give you a round of bases,” Kohl said. “Follow your fundamentals and put logic into emotional issues.”
    One important decision may be transferring the farm.
    The industry has seen accelerated intergenerational transfer but not all have been successful. Kohl said there is the 40-20-40 rule the industry is shaped by: 40% of farm transfers are an emotional rollercoaster and 20% will be confusion, neither accomplishing the set goal. Only 40% will be truly successful.
    “Those who are four to seven generations in will get the younger generations involved early, they will invest in a facilitator to keep it going and keep non-farm children involved,” Kohl said. “They know it’s an on-going process.”
    Plus, having a plan provides confidence in lenders too.
    “You take the old generation’s equity and the younger generation’s interface to take the business to the next level,” Kohl said.
    Despite the positive outlook of the dairy industry in the upcoming decade, obstacles will remain.
    While alternative dairy products and consumer demands continue to take center stage on this list of challenges in the dairy industry, Kohl warned about government dependence and its effect on the United States’ place in the global marketplace.
    “You better have a plan in place for when these payments are rolled back,” Kohl said. “Government payments make for complacent managers, and it sends a signal to consumers and global competitors that we can’t make it without government.”
    Other countries have been able to compete against the U.S. dollar value, particularly with the tariffs and sanctions issued in the past couple years.
    “Watch 2020, 2021, 2022; will we get our markets back? That is the major question,” Kohl said. “We need international markets to be successful because it’s $1 out of every $5 of net farm income.”
    Additionally, as the dairy industry shifts to larger farms and fewer farmers, Kohl said consumers want the opposite.
    “The United States was built by entrepreneurship not consolidation,” he said. “I see opportunities. Small is going to be the new big.”
    Farmers who were able to maintain a positive net farm income in 2018 are going to be more resilient against the troubles they may face in 2020 and beyond. Those whose balance sheet was negative will have difficulty, Kohl said.
    “On FINBIN, there’s always a top 20%, median 60% and bottom 20%. If you can be in the top 75%, you’re going to be doing OK,” he said. “OK is being profitable seven out of 10 years.”
    The key to welcoming these positives and dealing with adversity comes down to mindset and smart business management.
    “You want to align resources and production to the markets,” Kohl said. “You don’t need to have a certain number of acres, certain number of livestock to be successful. This is not one size fits all.”