What the Top 20% of Farm Businesses Are Doing Differently

The future of agriculture is being shaped by forces much bigger than what's happening in the field or the barn.

Consumer preferences are changing. Global competition is intensifying. Technology and artificial intelligence are opening new possibilities. A massive intergenerational transfer of farmland is approaching. And at the farm level, producers are still navigating the fundamentals of profitability, cash flow, capital, and risk.

So how should farm businesses prepare?

Following a presentation at AgView Live, Uplevel Dairy Podcast host Peggy Coffeen sat down with agricultural economist Dr. David Kohl and Lynn Paulson of Bell Bank to talk about the trends they believe producers should be watching—and what successful farm businesses are doing differently to prepare for what's ahead.

Agriculture Is Following the Consumer

One of the biggest trends Dr. Kohl sees developing is the continued movement toward protein, proactive health, and precision agriculture.

The opportunity isn't simply producing more livestock or crops. It's connecting agricultural production to what consumers increasingly want: products that taste good, support health, and are produced with greater precision.

Artificial intelligence and other technologies could accelerate that trend by making it possible to develop more customized solutions for consumers while simultaneously improving efficiency on the farm.

For producers, that means paying attention to the consumer is becoming increasingly important.

As Lynn Paulson points out, agriculture has always followed consumer trends. The producers and businesses that understand what consumers want—and can connect their production practices to those preferences—will have opportunities to differentiate themselves.

The Global Competition for Agriculture Is Changing

The United States has historically held a powerful position in global agriculture, but that position can't be taken for granted.

Paulson points to the growing competitiveness of countries in the Global South, while Dr. Kohl highlights the strategic approach being taken by emerging global economic blocs.

The challenge isn't simply producing a high-quality agricultural product. U.S. producers have to find the markets where those products can be sold profitably while maintaining strong trading relationships around the world.

That matters because approximately one in five dollars of net farm income comes from export markets, according to the discussion.

Looking toward 2030 and beyond, Dr. Kohl believes agriculture may increasingly compete as global economic blocs rather than individual countries. North America, Europe, Asia, and the Global South will all be looking for ways to strengthen their own competitive positions.

For U.S. agriculture, that means adaptability will be critical.

The "Bad ABCs" Could Hold Agriculture Back

One of Dr. Kohl's memorable observations is that agriculture needs to avoid what he calls the "bad ABCs": arrogance, bureaucracy, and complacency.

The rest of the world has become more competitive, and the gap between the United States and other agricultural economies has narrowed.

That doesn't mean U.S. agriculture has lost its advantages. It means producers and agricultural businesses need to recognize where they stand and continually look for ways to strengthen their competitive position.

Being the biggest player isn't enough. The goal has to be remaining competitive.

Regenerative Agriculture Could Become a Competitive Advantage

Another opportunity discussed during the conversation is regenerative agriculture.

While the terminology itself can be debated or overused, Dr. Kohl believes the underlying principles are important: soil health and water health.

Healthy soil supports healthy plants, animals, people, and ecosystems. Those practices could ultimately become a competitive advantage for American agriculture, particularly as consumers become more interested in how their food is produced.

Paulson points out that many farmers are already moving in this direction through practices focused on erosion, soil health, carbon, and water retention.

The next step may be communicating that story more effectively.

Farmers have a story to tell about stewardship. The opportunity is making sure consumers understand it.

And importantly, these practices aren't limited to one type or size of farm. There are opportunities to incorporate regenerative practices across different production systems and geographic regions.

2032 Could Mark the Beginning of a Major Land Transition

For young producers, one of the most important trends to watch may have less to do with technology and more to do with land.

Dr. Kohl identifies the period from approximately 2032 to 2040 as a potentially critical era for agriculture as the average baby boomer farmer reaches the late 70s.

As that generation begins transitioning out of active farming, more farmland could change hands.

That creates opportunity—but it also creates a significant capital challenge.

Lynn Paulson points out that buying land at today's prices can make ownership difficult to cash flow. In many cases, the cost of owning land can be two to three times the cost of renting it.

That means young producers need to think beyond the traditional idea that growth always means buying more land.

Land Ownership Isn't the Only Way to Grow

One of the most important distinctions discussed in the conversation is the difference between owning an asset and controlling an asset.

Long-term leases, rental agreements, and other arrangements can provide producers with access and control without requiring them to immediately purchase every acre they operate.

That could become increasingly important as more land enters the market.

There may also be opportunities for young farmers outside traditional family succession. Dr. Kohl notes that approximately 21% of American farmers and ranchers don't have a next generation coming into the operation.

Some of those owners may ultimately be looking for trustworthy young producers who can carry on the legacy they've built.

For young farmers, that creates an opportunity—but one that requires preparation.

Young Producers Need More Than Capital

Having access to land and capital will certainly matter, but Dr. Kohl argues that young producers will also need a strong management mindset.

That includes business IQ, emotional intelligence, and what he calls AQ—the ability to assess and adapt.

Young producers entering agriculture today can't necessarily operate the way previous generations did. They may not have the same equity, land base, or financial resources.

Instead, they may need to start smaller, delay gratification, make sacrifices, and build toward larger opportunities over time.

Paulson describes it as taking "small bites" and reaching specific benchmarks along the way.

The goal isn't to acquire everything immediately. It's to build a business that is financially viable and positioned to take advantage of opportunities when they arise.

Have a Plan—and Actually Execute It

Planning is one thing. Executing the plan is another.

Both Paulson and Dr. Kohl emphasize that successful young producers need a strategic plan, measurable goals, and milestones they can monitor along the way.

They also need to take ownership of the financials.

Financial statements shouldn't simply exist because the bank requires them. They are management tools that help producers understand what is actually happening inside the business.

Knowing your cost of production, break-even point, cash flow position, and capital requirements gives you the information needed to make better decisions.

And those decisions become even more important when opportunities arrive quickly.

As Dr. Kohl points out, opportunities don't always arrive one at a time. Sometimes several pieces of land or other assets become available at once.

A strong manager knows how to prioritize: What is the A opportunity? What is B? What is C?

Not every opportunity is one you can—or should—take.

Don't Choose a Lender Based Only on the Lowest Interest Rate

Another major theme of the conversation is the value of relationship lending.

It's tempting to choose financing based solely on the lowest interest rate. But Dr. Kohl warns that producers can fall into what he calls the "lowest interest rate trap."

Some lenders operate primarily through a transactional model. They may offer attractive rates, but the relationship can change quickly if the producer no longer fits their credit parameters.

A relationship lender, on the other hand, understands the business, the producer's goals, and the long-term plan.

That relationship becomes particularly valuable when things get difficult.

As Paulson explains, downturns are where the difference between transactional and relationship-based lending often becomes clear.

A lender who knows the producer and understands the business can help navigate challenges rather than simply walking away when the numbers become uncomfortable.

Don't Surprise Your Banker

Open communication works both ways.

Producers don't like surprises, and neither do lenders.

If a producer has taken on new debt, made a major purchase, or changed their financial position, communicating that information early gives everyone a better chance to manage the risk.

Dr. Kohl emphasizes that producers need to be willing to share the downside news, not just the good news.

In difficult times, a lender who knows the risk early can potentially help manage it.

That requires trust—and trust comes from consistent communication.

What Separates the Top 20%?

Perhaps the most powerful question in the conversation comes near the end: What separates the top 20% of producers from the bottom 80%?

Dr. Kohl's answer isn't one revolutionary strategy.

The top performers know their cost of production and break-even. They have marketing and risk management plans. They take ownership of their financials. They have an advisory team to help them think through decisions. And they're intentional about allocating both capital and family living expenses.

Paulson adds another important observation: It's not one big thing.

It's a collection of small things done consistently and correctly.

They monitor cash flow in real time rather than looking at financials once a year. They pay attention to details. They make adjustments when necessary. They execute their plans.

It's what Dr. Kohl ultimately calls "excellence at the margin."

Not one giant competitive advantage.

Just a commitment to doing a lot of little things right.

The Future Belongs to Adaptable Farm Businesses

Agriculture is changing quickly, but that doesn't mean producers need to chase every new trend.

Instead, the strongest businesses will likely be the ones that understand their fundamentals while remaining adaptable enough to respond to what's changing around them.

That means understanding the consumer. Watching global markets. Taking care of the land. Preparing for the coming land transition. Building strong financial relationships. And most importantly, taking ownership of the numbers and decisions that drive the business.

The future may look different than the past, but the fundamentals of good management remain surprisingly consistent.

Plan. Execute. Monitor. Adapt.

And, as Dr. Kohl and Lynn Paulson put it, pursue excellence at the margin.

Follow the Uplevel Dairy Podcast for more conversations with the people shaping the future of dairy. Subscribe at UplevelDairy.com and follow along on YouTube, Facebook, and Instagram for more stories, insights, and lessons from leaders across the industry.

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