April 24th, 2013
I just came back from the Wisconsin Ag Bankers Association meeting promoting our Wisconsin newsletter. While there I was able to sit in on a few
speakers. If you ever have the chance to hear Dr. David Kohl speak it is time well spent. He is a professor in the Department of Agriculture & Applied
Economics at Virginia Tech. Not only does he give you a lot of good information he is very entertaining as well.
My take on what he had to say was that agriculture is in a “super cycle”. These cycles have happened before, they all have common characteristics and we
need to understand this is not the new norm. According to Dr. Kohl there are signs to look for to signal the slowdown, the two main ones I picked up on
being the growth in GDP of emerging nations and the second being the Fed’s policies. Dr Kohl uses the “8-5-3 rule” for the GDP growth of emerging nations
(the main ones being China, Brazil, Russia, India and S. Africa or BRICS) as one indicator. For rural America, 8% growth rate in these countries is
very positive, 5% is neutral and 3% is bad news. Regarding the Fed, Bernanke and his cronies are pumping up the economy or as Dr. Kohl puts it has the
economy on steroids. There are those within the Fed that oppose this policy. Given the speculation that Bernanke is likely to step down next year, his replacement
and their philosophy will indicate the direction the Fed will head regarding interest rates. Again this was my take on what he had to say.
Despite all of this economic information the best thing I thought Dr. Kohl had to say was about a guy by the name of Dean Smith, the famous basketball
coach from North Carolina. While he was at a basketball camp that Dean assisted, a fellow coach asked Dean how recruiting was going. Dean just smiled
and with his southern draw said “I don’t recruit, I select”. I believe Dr. Kohl mentioned this to make the point that no matter what the business, basketball,
banking or whatever, when you are the best customers want to come to you verses you convincing customers to come to you. What a great principle
(and story) if you can achieve it.
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