2022 Brings New Challenges To Ag Companies

By David Aeschliman

It’s been an interesting scene in agriculture over the past 2-3 decades, but this year may be pivotal in which companies continue to do business and which become non-entities. Why? What’s so imminent to pick out a single year?

Life values are changing…very, very rapidly. That, more than anything, is impacting future challenges ag companies will face. If managerial adherence to “what’s worked in the past” is important to ag firms, they might face a bit steeper wall in the future than those willing to adapt and adopt change. So, what are these life factors that will challenge us this year?

1. The employment picture has changed. Workers, in times of economic stress and in short supply, are demanding wages rise rapidly with an emphasis on annual raises that outperform annual inflation. With 2021-2022 inflation pegged at 7-8%, that’s going to create financial stress on some companies that are unable to pass those costs on to consumers.

Further, workers aren’t settling for just paychecks anymore. They want enriched work environments with flex time as the number one requested item. Second is an employer contribution to a retirement plan in which employees can participate as well as some health insurance company copayment. With health insurance costs staying steady to slightly lower over the past four years, employee focus isn’t necessarily on plan costs; it’s on an increase for more company participation.

Third, full-time employment may be a thing of the past within a few years. Out of every negative comes a positive and Covid’s positive is millions of companies learned they can redefine how they interact with customers and employees. And employees preferred the flex time, work-from-home scenario. That will continue to be a factor fueled deeper, faster and more widespread, given digital tech evolutions to come.

2. Vertical organizations will flatten. Older organizations that have been around for decades tend to become rigid in reporting structure, with top branches overshadowing lower ones. Teams are now being assigned to tackle challenges and pursue opportunities, and progressive firms are rapidly adopting this method of tackling today’s challenges.

3. Resilience will move into place quickly. Resilience is defined in companies as the ability to be fluid enough to adapt forward thinking, responding to customer trends, minute, but important, marketplace shifts and survival trends. Those firms with rigidity vs. resilience in how they position their future with customers will become outdated.

4. Authenticity and purpose will rise in importance. Today’s consumers are a far cry from what they were even a decade ago. Yesterday, they wanted product and performance. Today, they want much more in the way of building a meaningful relationship with their preferred brands. Those future relationships will find integrity, reliability, customer empathy/input and humility to be incumbent. That will become the new definition of performance more so than just product performance.

Additionally, purpose will need to go beyond the definition of why a company is in business. Yesterday, that tended to be simple: make money for the shareholders/owners. Tomorrow, consumers will demand to know what role you’re playing of importance in their lives. It will stretch far beyond historical mission statements.

5. Coopetition will displace competition. Increasingly, tomorrow’s challenges often call for diverse skills not found under every roof. Building strong alliances with firms who can work with you to solve problems will become commonplace. Look today at web site development. Company A hires Company B to write it, Company C to design it, Company D to host it and Company E to perform SEO work on it. These circles of solutions work much more efficiently with each pitching in their unique value than one company trying to house all those skills. That’s what the future of many businesses will look like.

6. M&As will continue. Let’s face it. Mergers and acquisitions have been filling the headlines in ag for decades and with all the infrastructure changes, ownership tendency to hang on to yesterday’s practices for tomorrow’s challenges and a new outlook towards a career by young people, I expect many companies will flounder before falling. But M&As will definitely continue as yesteryear’s owners tend to continue aging in place.

7. Financing sources will change. If one studies the macro trends around the world, decentralizing funding is happening more and more often. Peer to peer exchanges and direct financing are displacing traditional banking institution loans. Again, going back to coopetition, one can see how someone with wealth might do peer lending in exchange for product or service.

8. Surviving inflation and supply chain delays will be critical. The feds printed $2.7 trillion in new money in just one year. Most business owners don’t clearly understand the implications of that. But, that money was sent to consumers, who are flush with cash. And they are spending it.

When demand exceeds supply, prices go up and they’re skyrocketing. Today, 40% of all dollars in the U.S. currency were printed in the past year. That puts the U.S. Mint printing capability in a new light. This makes for a very difficult economic environment as the government continues to spend money it doesn’t have.

If companies aren’t able to pass inflationary expenses they incur on to customers via product/service price increases, they’re going to be in trouble. We expect the government to raise interest rates three times in 2022, which is designed to slow this out-of-control inflation, but that itself brings about the potential for recession.

9. The government is coming. There is more zeal and effort to regulate ag at the highest level in history. Water quality, soil erosion, worker safety, animal rights, supply/demand control, distribution channels, government support for start-ups and regulatory oversight in general will all be forthcoming in waves, nearly taking the fun out of farming.

It’s a new world out there for company managers and owners. With the rapid progression of the above trends, it should all make for a fun and challenging year requiring big decisions to survive…and thrive. As I’ve always said, today’s change is required for tomorrow’s growth.

David Aeschliman is the CEO of Growth Work with expertise in developing growth strategies in selling and marketing. He has worked with more than 200 businesses across the country. You can reach him at davea1@frontiernet.net to schedule further discussion.

January 20, 2022

By David Aeschliman

David Aeschliman is a nationally recognized strategist with an astoundingly rich resume of creating growth within firms. David graduated from Kansas State University with a double major and minor. His hobbies include gardening, cutting firewood, fishing and helping farmers during planting and harvest.

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