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Face the Reality of Agriculture’s Cycle

January 9, 2013
By: Jeanne Bernick, Top Producer Editor
Sano Shimoda
Sano Shimoda > President of BioScience Securities  

Agriculture prepares for a new normal that farmers must understand

Agriculture is at its peak of an upside "long cycle," notes Sano Shimoda, whose company provides corporate advisory and investment banking services to companies focused on seed, crop protection and other ag biosciences.

Despite agriculture’s crop and geographical diversity, it is a simple business driven by economics 101 and the "power of cycles," says Sano Shimoda, president and founder of BioScience Securities, Inc. An equity analyst by training, Shimoda has more than 35 years of Wall Street experience focusing on ag bioscience, seeds and chemicals. Throughout his career, he has watched agriculture repeat itself over and over, yet never waver from basic supply-and-demand market principles. Currently, agriculture is at or near the peak of an upside long cycle that started in the mid-1980s, as measured by farmland values. This is now evolving into a new and very  different downside long cycle, Shimoda explains. "Agriculture faces a key point of inflection and a collision of forces catalyzing transformational change, creating strategic opportunities and risks for farmers," he adds.

Technology, farmland values, global finances, population and food demand, capital restrictions,  new business models—these are all key transformational drivers of change. Shimoda believes a farmer’s ability to respond is limited by his or her experience. "Many farmers entered agriculture in the early to mid-1980s, which was the last part of an upside long cycle’s bottom," he says. "They have never seen downside long cycles." Farmers must face the cyclical reality and evolve their mindset to meet transformational change. They have to start thinking like CEOs, Shimoda says. Today, farmers have a purchasing/production/risk management mentality; tomorrow, they  must have a management-oriented, decision-making mentality based on integrated knowledge,  new business models and "real-time" integrated production/marketing/financial risk management systems. "When you have a collision of evolutionary and revolutionary forces, as you do today, sometimes dramatic new ways of reconnecting the dots are created that redefine strategies, business models and competitive position," Shimoda says. "It’s all about mindset."

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FEATURED IN: Top Producer - January 2013

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