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Most Common Questions Asked by Agricultural Producers: 2nd Edition

Farm Business Management Update, June 2000

By David M. Kohl

The second part of the article that appeared in March's issue of this publication continues to discuss some of the most common questions asked by agricultural producers and agribusinesses. These issues are definitely challenging the old paradigm of agriculture.

GMO's Acceptance

Advances in biotechnology have the possibility to reshape agriculture, affecting virtually every aspect of agribusiness, such as livestock and crop genetics, tillage systems, and crop protection.

The first phase (occurring presently) of biotechnology advancements is in production of stronger, more resilient crops, and greater production efficiencies. The second phase (2001 to 2006) will be that of designing and producing products to provide various human health benefits. The third stage (2005 to 2015) will be technology used for medicinal purposes. However, consumer, political, and media reaction to these developments in genetically modified plant and animal agriculture has slowed adoption.

Much of the negative reaction has come from economically advanced countries and continents, such as Europe, Australia, and Japan. These areas tend to be more selective in adoption of these new technologies in agriculture because basic health and nutritional needs of their populations are already met. From a global viewpoint, biotechnology will generally be more accepted by areas such as China, India, and Africa who struggle to feed and maintain their populations, and for whom advances could mean the betterment of their living conditions. The bottom line is that 60 percent of the world population will accept bio-altered products by the period 2005 to 2010.

The implications for producers are that there will be more contract agriculture with the larger agribusiness firms and involve up to nearly 50 percent of production agriculture.

Second, segmentation or separation of genetically modified versus un-modified products will require accurate tracking systems and a possible new infrastructure to isolate production and handling. In the short run, these types of segmentation could tax infrastructure of agribusiness through all stages of food processing.

Biotechnology will create a marketplace that will be segmented and fragmented. Some farmers/ranchers will producer for the value-added markets, while others for the specialty markets. Still others will produce for the standard traditional ways of doing business, while a final segment will produce for contract.

Future of the Family Farm

A lot of press concerns the saving of the family farm. The definition of the family farm is a moving target. The family dairy farm that milked 30 cows in my youth operated by my mother and father is now 150 cows (and diversified enterprises) and operated by three families.

In the next ten years, technology, global markets, government policy, EPA, and consumers and producers goals and expectations are going to change the landscape of American agriculture. More family farms are going to be described by being operated by two or three families often owing complementary farm and non-farm businesses. These operators will tend to be clustered in eastern Virginia or the valleys of Virginia.

Another segment of family farms will be lifestyle farming, depending on off-farm employment or retirement income. They will be centered around our natural amenities (mountains, lakes, and rivers) or population centers. A few cows, horses, and crops or plants will give lifestylers the type of balance they desire in their lives. Corporate agriculture will be more visible in the forms of contract production, and vertical integration. In the next ten years, the crop and dairy enterprises could be transformed like the poultry and hog industry.

Can We Manage These Changes?

Just as with farm policy, weather, and other matters that are perceived to be out of our control, we attempt to manage around them. The first step in managing is to clearly define personal, family, and business missions and goals (consistent with new era agriculture). The second step is to do a strategic analysis of ourselves and our business to determine possible opportunities and roadblocks. Third, we should design and implement a plan and a timetable with specific measures of achievement. Fourth, we must have clear alternatives with a possible exit plan if plan A, B, or C fails to materialize.

Next time we will discuss producers' and agribusiness professionals' biggest "train wrecks" or mistakes and how to manage around them.

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