Columnists share what today’s young farmers must know
Producers and farm business experts have advice worth hearing. That’s why we reached out to our group of trusted Top Producer columnists to learn what they think today’s young farmers should know. In the aggregate, they advise focusing on financials, managing risk wisely and documenting everything. These are challenging times, but economic uncertainties and difficult odds haven’t kept past generations of farmers from success. That much remains the same.
Business Tips: First, do a disciplined budget. Focus not only on all of the cost of production items but additionally the family living and owner-draw expenses. Second, have a clearly defined vision with an actual mission of what you want to accomplish. Be specific: For example, you might say, “I want to farm 4,000 acres by 2020.” Third, recognize that marketing plus production equals gross revenue per acre. Know what that gross income allows you to market based on your production.
Top Tactics: Start with good documentation. Take pictures of processes, people, systems, equipment and your ground. Document financials, plans and strategies. A lot of times, that stuff is in people’s heads. Focus on transition and succession. Ask questions such as, “What’s the backup here?”
Challenges and Opportunities: The biggest challenge in the next 18 months is going to be commodity prices and potentially the lack of volatility. The biggest opportunity is commodity prices and volatility. Document your costs of production and what you need to do to be profitable.
Volatility give us the opportunity to sell at a profit, but those opportunities might be really short windows. Recognize there’s no silver bullet, and there’s no one thing you can do to improve. It’s all details. It’s staying focused every day and doing a little bit on every line item in the budget, agronomy and marketing. Take baby steps on everything. The bottom line is intensive focus. Seven-dollar corn does not make us better business people, but $3.50 corn makes us much better business people so when the opportunity comes, we will be better for it.
Be optimistic and think big. I don’t mean big in terms of a lot of acres. Think positive and think you can make things work out. If you have that attitude, you’re going to get there. But the minute you don’t, that’s not a good thing. Make a plan, and make sure you make it happen.
Jerry Gulke with Jamie Wasemiller
Business Tips: First, determine the expected return on investment (ROI) for different projects, machinery, buildings, etc. Consider a minimum ROI equal to two times interest costs. Second, focus on lowering debt. If you don’t start early, it can be a difficult goal to achieve. Strive to be in a position where you can survive and grow, regardless of the economic situation. Third, learn the tools of marketing to provide you with the ability to use different methods to tackle what the markets throw at you.
Top Tactics: Learn how to manage volatility effectively through education. Add a line item in your operational expenses labeled “Marketing Education,” and make it a year-over-year expense. At a minimum, attend three to four educational conferences or workshops each year.
Challenges and Opportunities:
- Land: Ag land has been largely left out of the asset bubble in ag, but we must be prepared if that changes.
- Lending: It is remarkable lenders have stood by our side for so long, but things might have to change in 2018 if markets do not improve. You are already starting to see some changes in 2017. Operating loans seem to favor crops with lower expenses.
- Interest Rates: They are likely to move higher. A 1% increase means a 25% increase in interest payments.
- Government: A basic rule is to watch what they do, not what they say.
You are the future of American agriculture. Thank you for your willingness and desire to step into this role. We need you. The world needs you. No, it won’t be easy. Damn hard in fact. But bring all the challenges the years ahead have in store because you seek to pursue what lies deep in your heart. There is a way. There is always a way.
I humbly offer three tips for your journey.
- Learn To Think Long Term: We live in a short-term world. Here is your opportunity to be different and better. Why do you suppose auction sale prices have trended higher in the fourth quarter for 12 of the past 14 years? Because folks buy to get that year-end tax write-off. When everyone else thinks the same way, prices go up at the end of the year.
- Listen: God gave us two ears and one mouth. Put your cellphone down once in a while. Engage your neighbors and elders with a smile. Ask questions about farming and life. Look them in the eye and really listen.
- See Opportunities: Train yourself to read daily outside of agriculture. What’s happening in the business world? Why? Opportunity lies everywhere. Use a drone to take video of planting and harvest on your farm. Three years from now, when it’s time to trade in that combine, you’ve got beautiful video of the machine in action. That makes it worth more to buyers or at trade-in. Create a Facebook page and Instagram feed for your farm. Use the drone video to help tell the story of your farm.
Business Tips: First, stay educated on health insurance. Know the difference between health care costs and insurance costs. Understand community rating, pre-existing conditions, deductibles, rescission, etc. Develop sound information sources to guide your choices, as health care will continue to consume more of our income every year. Above all, recognize sick people and healthy people are the same people at different points in life.
Second, master the ability to make any business decision from anywhere. Your smartphone should be your office. Erect effective information filters to build your own fact-checking system. Value and reciprocate trustworthiness in friends and business partners.
Third, recognize that competition for market share and assets outside of family influence will be done at essentially unprofitable levels. Much if not most of your future success will be determined by chance. Inequality in farming will mirror the rest of the economy. Build your expectations accordingly. Calculate a financial benchmark to determine failure objectively. Realize opportunities will look more like headaches than sure things.
Top Tactics: Continue to move the sole-proprietor farm operation model toward cooperation and farther from competition. Recognize and avoid race-to-the-bottom situations as much as possible.
Challenges and Opportunities: Farming falls into a category of repetitive and physical work that is ripe for automation. Don’t base your career plan on your father’s lifestyle. Acquiring complementary skills that monetize underemployed time can add both income and life satisfaction.
Business Tips: First, I’d like to see young farmers get some training in accounting and taxes. You can attend Top Producer Seminar and even take an accounting class at a local community college. Second, continue to do a lot of reading. It doesn’t have to be in your field. Third, recognize that successful producers work hard and make more “lucky” decisions than their competitors.
Top Tactics: Young producers need to save taxes, but they need to manage them more appropriately than some members of the older generation might have done. Young farmers can also learn from older ones. Older farmers have been a little more risk averse, and that can be both positive and negative. Some young farmers haven’t gone through any type of hard times until now, and maybe they were a little bit too aggressive. That older generation has done a little bit better job in some areas of risk management.
Challenges and Opportunities: I think the biggest challenge over the next 18 months is continued deterioration of working capital. If you can refinance equipment and land, lock in these very low interest rates, lock in working capital or create additional working capital by restructuring, I think that will be very important. Younger farmers need to continue right-sizing their living expenses. Meanwhile, there will be additional transition in farm businesses throughout the country because some no longer view it as fun. Keep your nose to the ground and look for “lucky” opportunities.