Farm Management Minute: What does the future hold?
Even though I was only in middle school, I vividly remember the tough times of the 1980s. My family farmed and raised cattle, as did most of our friends and neighbors, and the agricultural economy was bleak during those years. This affected every business in our small rural home town. Twenty-six years later, are we heading into a similar financial situation? Most of today’s young producers in their 20s and 30s have not had to operate during extended times of financial hardship. Grain prices are low, cattle prices have dropped considerably from last year and input costs keep rising. So what is your game plan? Here are a few suggestions from profitable producers that I work with through the South Dakota Farm/Ranch Management Program.
1. In order to decrease cost, you first have to understand what your cost is per animal and per acre. You can’t decrease expenses if you don’t know what your costs are.
2. Equipment cost per animal and per acre rises with the purchase of new equipment. Every time you purchase any equipment, your cattle or acres of crops have to pay for it. Keep equipment purchases to the bare minimum of what is needed.
3. Each animal and acre has to make a premium. Be creative on how you market your commodities.
4. Risk management: This year, there were some opportunities to lock in profitable prices. Stay on top of market trends and educate yourself of what options you can utilize to be profitable.
5. Cash flow: What other opportunities are available to generate income? Extra income becomes crucial with everyday living expenses. Complete a projected cash flow for the next 6 months.
6. Family living: We are getting close to the most expensive time of the year for family living cost. Christmas presents and winter heating costs add quickly to the family living expenses. Start saving a little now to help cover winter heating costs and Christmas gifts.
7. Bartering has been around for a long time, and for good reason. Instead of paying cash for needed items, see what you have that could be traded for what you need.
8. With livestock, don’t be afraid to look at feed alternatives. With the low crop prices, calculate your rations using different feed substitutes.
9. Be creative on how you can create more cash flow. Is there off-ranch income you can make with the labor and equipment you already have?
10. Set goals that will set you up for success. Every ranch should review their goals each year to see if they are on track and determine what changes need to be made.
The 1980s are in the past. Hopefully, the tough lessons learned during those years will prevent a repeat of those lean times. Agriculture is a great occupation and lifestyle, and we need to do all we can to make it possible for the next generation to pursue a career in agriculture. Continual education for our ranch or farm management can make it profitable for us and the next generation. If you have questions about your operation and its financial stability, please contact David Koupal (David.Koupal@mitchelltech.edu) at South Dakota Farm Ranch Management, 605-995-7193 or 1-800-MTI-1969.