Farm Management Minute: Weighing decisions
In talking with agriculture producers, decision-making weighs heavy on their minds with the fact that decisions have greatly increased in dollar value, and profit margins have become slim over the past few years. This is added stress to an already hectic production agriculture lifestyle and the worry of whether the correct decision has been made. By using several resources, we can make decisions with more confidence and strive towards goals we have set for our farm or ranch operation.
Decisions need to be looked at with these four things in mind — importance, frequency, imminence, and revocability. First, the importance of each of our daily decisions needs to be looked at and not be consumed by less important choices or a not sweating the small stuff mentality. Many choices are high risk but may come with high reward, but if the reward is not worth the risk, we need to choose the path that meets established goals of each operator’s comfort level.
Managers of farms and ranches need decisions to be as infrequent as possible, or we can have too many choices throughout a season and are always second guessing what seemed like a good decision weeks prior. This can be done with long range planning, cash flows, and calculated breakeven costs for areas of production. An established marketing plan is also very helpful as we have seen the rise and fall of market prices over a short period of time.
The imminence of a decision is very important in the process, and it is always best to not make last minute decisions when possible. We can never eliminate the need for having to make split second decisions, but allowing time to research and contemplate your choices before having to decide affords some peace of mind. As I have often heard, hope is not a marketing plan.
Revocability of a decision is your ability to change horses mid-stream, and these types of decisions are easily overlooked, but they do need to be evaluated so they do not impact other more important decisions.
Through the evaluation of decisions, we gain confidence needed to manage and make future decisions within operations.
Having the facts about your operation is very critical to help in making decisions on your farm or ranch. The South Dakota Center for Farm and Ranch Management strives to help our students in the program gain the useful financial information within their operation by completing an annual analysis and cashflow projection to better base future decisions with more confidence.
For more information please contact me at either 1-605-299-6760 or Blaine.Carey@mitchelltech.edu if you would like more information about the South Dakota Center Farm/Ranch Management.