A successful farm used to be judged by good yields, well-maintained fields and machinery, and timely planting and harvesting. With the burgeoning land and commodity values that characterized the first decade of the 21st century, coupled with advances in risk management and an often volatile grain market, it is clear that the skills necessary for agriculture success are often the ones that go on behind the scenes. What are the skills that a successful farm manager must possess in 2014 and beyond?
The Purdue University Ag Extension compiled a self-assessment checklist to help farmers and farm managers gauge their efforts on a number of crucial business management fronts. The first area explored deals with production management. Production management is typically described as the hands-on aspect of farm management. Managers who are well-acquainted with the processes of crop production are in a better position to achieve the goal of successful production management: To have a cost of production that is lower than the industry average. With this key aspect in mind, successful farm managers seek to stay on top of the latest technology for their particular operation, know their machinery, and focus on making their farm run efficiently at every stage of production.
The next area is in procurement and selling. Procurement deals with the purchase of needed inputs; selling with the selling and delivery of the product. Smart procurement and selling practices are critical to farm management success, and involve more than simply buying low and selling high. Seeking and getting good marketing advice, where to price products, when and how to deliver, and risks taken to enhance price are all necessary things to take into consideration.
Successful farm managers also need to be mindful of their financial management practices. Financial management involves where funds will be obtained and how they will be used. It is important for farm managers to have a good understanding of the concepts of leverage, interest rates, the rate of return on assets and equity, and the cost of debt and equity capital. Along with this, good financial farm managers also understand and utilize good tax management strategies, as well as the use of insurance to protect against financial losses.
Finally, successful farm managers have a good grasp of the risk management tools available to them. Farming involves a lot of risk; in addition to the price variability of commodities, the farm manager also faces production risks, financial risks, and legal risks as well. To combat them, successful farm managers take advantage of futures price contracts and options, crop insurance, and health, life, and liability insurance. In addition to this, farm managers must have a contingency plan, and be aware of world market trends that are occurring in the industry.
In addition to assessing these skills, it’s also important to re-visit them from time to time, to see if they are being used effectively. If you’re concerned about the proper management of your farm, contact UFARM, and they can help you assess your operation so that you are operating it to its highest potential. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact us today!
Source consulted: Boehlje, Michael, Craig Dobbins, and Alan Miller. “Are Your Farm Business Management Skills Ready for the 21st Century?” Purdue University Dept. of Agriculture Economics. Purdue University Ag Extension. Web. 04 Dec. 2014.