Farming is froth with risks – price risks on buying and selling ends, production risks, weather risks, and a whole herd of management risks. They all consume time and money, says Bruce Dehm, president of Dehm Associates Farm Business Services.
"But for all your efforts, you at least feel you have some degree of control over the outcome," adds the farm management expert based in Geneseo, N.Y. Consider these excerpts from his recent Dairy Dashboard newsletter:
Modern production agriculture has blunted all but the worst of the threats of flood, drought, disease and pestilence via invention and use of technology. That's why America produces the most abundant, safest and cheapest food supply the world has ever known.
But the man-made risks, including government regulation, creation and preservation of wealth and capital, and our interaction with other humans continue to pie up. Not surprisingly, we have developed ways to deal with them including things such as lobby organizations, insurance, legal contracts and common social norms.
However, the increased complexity of these risk management schemes rivals the increased complexity of tools developed to reduce risk in the natural world. Successful management of a dairy farm, for instance, demands attention on all of these risks – not all at once of course, or we'd go insane.
Which management realm do you operate in?
There are three frames of reference that every business owner operates in. The better they are at lower levels, the more time they have to devote to the higher levels. The highest level is where there's more potential for long term profitability.
The past: The first duty of management is to make sure that solutions to problems that have already been solved stay in place. This is commonly referred to as avoiding "procedural drift."
Many tools have been developed to make sure cows are fed, housed, milked and bred consistently including written procedures, employee training and regular communications. Fixing the same problem over and over is a tremendous waste of time. Inability to control procedural drift gobbles-up precious mental energy for more productive efforts in the present and future realms.
The present: Solving existing problems with "new and improved" solutions takes up a majority of management's mental energy, and it should.
This year, alone, we've had to develop solutions to: May weather in March, March weather in April, army worms, forage shortages, spiking fertilizer prices, drought, and commodity price inflation to name a few. If a manager's time is consumed by dealing with the past, how much is available for dealing with the present?
The future: As Wayne Gretzky put it: "A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be."
Spending time in this realm has the potential of the largest payback. Instead of solving problems, you're looking for opportunities. From something as simple as developing a written capital investment plan to calculating the business impact of national and international events, contemplating the future of your business is as important as it gets.