The economic impacts of the COVID-19 pandemic are likely to continue through the spring of 2022, an economist predicts.
"However, I see agricultural, rural areas faring much better than urban areas," said David Kohl, professor emeritus of agricultural finance at Virginia Polytechnic Institute and State University.
Typical recessions average 7 to 13 months, but this one is more based on health issues and behavior, he said.
Because of that, recovery will be "disjointed" all over the world, he said.
"I think you're going to have to develop a business plan with about a 90% economy," he said, drawing a comparison to pre-COVID economies.
Some sectors, such as airlines, hotels, restaurants and school systems will be operating at 50% to 75% of their pre-COVID levels.
"I really don't see those businesses recovering," Kohl said.
Other sectors, such as Amazon, home delivery businesses and, interestingly, ice cream shops will be operating at 125%, he said. During the pandemic, more families are splurging on ice cream, he added.
Kohl advises watching the recoveries of California, Texas and Florida as indicators of the overall recovery.
He emphasized the importance of maintaining a stash of working capital or cash for businesses and families.
He also advised farmers to look at the percentage of their net farm income that comes from government support as Congress looks for ways to tighten the federal budget and writes a new farm bill.
"What is going to be a plan if they're cut 25%, 50% or 75%?" he asked.
Some people also favor economic deglobalization, which would impact the agriculture, he said.
One out of every five dollars of net farm income comes from export markets, so the shift will create volatility, Kohl said. Farmers will need to manage the volatility, and not just the down cycles, he said.
Kohl also pointed to trade agreement uncertainty. China is making "aggressive" moves to gain influence throughout the world and working to be the world's leading economy and military power by 2035, Kohl said.
Some of the richer nations, such as the U.S., Japan and those in Europe, may test China.
"That comes back to ripple back into agriculture, because agriculture is always at the point of some of these confrontations," Kohl said.
Farmland has been the "rock of Gibraltar" for agriculture, representing 80% of the U.S. farm balance sheet, he said.
"You take a 110-year look at farmland values, you will see often times, it's appreciating rather than devaluing," he said.
That's partly due to low interest rates and partly because there are no alternatives to farmland, he said.
Baby boomer farmers, those ages 56 to 74, will be investing in farmland for another decade because they don't trust Wall Street and want a tangible asset, he said.
Kohl said the industry is experiencing a "rural property renaissance" as people leave the cities.
"Audiences often ask me, 'Is farmland a good investment?'" Kohl said. "Go back to 1910, 79% of the time, farmland has either appreciated or remained stable. If you go back to 1941, it's 88% of the time. You're going to have those little dips. The key there is to have the necessary working capital to get through some of those down cycles."
Kohl spoke Nov. 6 during the Washington session of the Northwest Farm Credit Services virtual ag outlook.