Today’s uncertain world rewards innovation, says Mark Drabenstott, a global economist, Federal Reserve 25-year veteran, and recognized thought leader on regional development and digital commerce. Today he’s executive chairman of MarketSquare, “which connects businesses globally for digital commerce, swifter delivery and smarter decisions,” he says.
“Agriculture is the story of productivity: doing old things better,” Drabenstott says. “The future belongs to those who innovate, doing better things. Commodity markets require even more risk management in an ever-riskier environment. Because commodity production has very thin profit margins, growers need economies of scale and hefty balance sheets to finance it. One option to grow more profit with less investment is to capitalize on niche products characterized by specific qualities instead of quantities,” he adds. For example, “New food products have better margins, they’re focused on value rather than volume, and they reward management, not scale.”
Another example: Iowa farmers Bill and Joe Horan grow pharmaceutical crops to reproduce medically useful proteins on fewer than 40 acres. (They also grow other identity-preserved crops on 3,960 acres.
Three options for higher margins
Drabenstott recommends three strategies for thriving in a new economic world order characterized by slow economic growth, high risk and new consumer food tastes:
The following global forces are reshuffling which and how enterprises win, he says:
Rapid change provides a huge premium for innovation. A more dangerous world hurts trade and growth and boosts risk a lot, he says. “In this environment, farmers who innovate will be highly rewarded.”
For more from Dr. Kohl, follow his "Road Warrior" blogs.