Use Your Off Season

Guest author Dean Heffta, published Corn+Soybean Digest

There’s no slow season anymore! Farmers tell me that often. With crop and business demands, it can feel like the year is just one long string of activity without the spikes and dips we used to experience.

With that said, every business – whether its seasons are set by the weather or not – needs to create and utilize an “off season.” LeBron James demonstrated the power of using the off-season after the Miami Heat lost the NBA tournament in 2011. He invested his frustration that following summer into training to be the best low-post player he could be. To do that, he sought coaching from the great low-post player, Hakeem Olajuwan. The rest, as they say, is history. James went on to lead the Heat to back-to-back league championships in 2012 and 2013.

We’re not NBA stars, but we are each ‘pros’ in our own way. I recently met a farmer who shared that he is very deliberate in how he uses his time between the peak seasons of planting and harvest. He has four areas of focus: equipment (the team goes through everything when they are done using it for the season), book work (he gets on top of the accounting and business planning to keep from getting behind), people/learning (he goes to various conferences and meetings to get new ideas, always bringing a different employee along to give them new exposure to the business), and recharge (without planning, it can be easy to go a year without taking time off or recharging the battery).

While every farm’s off-season is going to look a little different, there will be a few common elements.

• Review/learning – Sit down to learn from the things that didn’t turn out so well. Look for ways to make changes in the future in those areas.
• Skill development – Learn a new technology or skill that will be helpful in the future or seek advisors that have those skills.
• Planning – It can be hard to do long term planning when you’re in the middle of the fire. Use the off-season to step back from day to day operations. Consider where the farm is going and explore different ways to get there.
• Writing new plays – An important role of the leader is scripting the plays for the players in the upcoming season. Take time to plan the details so everyone knows what’s next.

Assignment

1. Take a moment to “schedule” your off season time so one season doesn’t just run into the next.
2. Consider which areas – if worked on – would make the biggest difference to the farm over time.
3. Identify three specific areas to focus your effort on.
4. Execute your off season plan.

Reprinted with permission of Corn+Soybean Digest
Photo obtained from: http://www.flickr.com

Turkey Top Ten

Thanksgiving is only a week away and to honor this all-American holiday, my blog is devoted to talking turkey! Here are 10 turkey fun facts you can share with your friends and family when you gather around the dinner table next Thursday.

1. Ohio is the 10th largest turkey-producing state with 5.5 million birds produced in 2012. Minnesota is ranked first, followed by North Carolina and Arkansas.
2. According to the U.S. Department of Agriculture, more than 45 million turkeys are served during the Thanksgiving holiday.
3. Founding father Benjamin Franklin is rumored to have preferred the wild turkey to the bald eagle as the nation’s symbol. He considered the turkey to be more respectable.
4. Turkeys, which are a type of pheasant, are the only breed of poultry native to the Western hemisphere.
5. Despite their size, turkeys prefer to sleep in trees to avoid predators, such as coyotes, foxes and raccoons. 
6. Only male turkeys gobble, which along with a strut, is used to attract female turkeys.
7. While domesticated turkeys can’t fly, wild turkeys can fly short distances with speed up to 55 miles per hour. 
8. Turkeys can rotate their heads for a 360-degree field of vision. Turkeys also have great hearing, despite having no external ears.
9. Turkeys are prone to heart attacks.
10. In 2012, U.S. consumption of turkey was 16 pounds per person.

Do you have any turkey fun facts or trivia that didn’t make the list? Please share them!

* Fun facts courtesy of livescience.com and infoplease.com.

Photo obtained from: www.livescience.com

Planning for 2014 cash flow

Guest author Paul Burgener, published Farm Futures story

Short 2012 crop creates concern for new crop demand; lender relationships critical

Let’s face it: Most farmers have been on a roll when it comes to making money. 

“Making money in farming for the past six years has been like falling off a log,” quips Terry Kastens, a Kansas farmer and former Kansas State University ag economist. “Nobody has had a poor relationship with their lender for the past 10 years.” 

This year might test those relationships, as higher prices for land, machinery and inputs are combining with lower-expected crop prices. 

“Renewal time this fall will be more difficult, with cash flow budgets tighter than they have been in years,” says Lewis Coulter, vice president and agriculture lender at Platte Valley Bank in Bridgeport, Neb. “We are going to need to manage costs better as margins get tighter.”

The past several years have allowed farmers to strengthen balance sheets and prepare for a down year. Average farm debt is lower, putting farms in strong equity positions heading into what might be a leaner profit year. The current debt-to-asset ratio for U.S. farmers is 10.2%, according to USDA’s Economic Research Service. The same ratio was 13.5% in 2003, and 19.4% in 1983 just as the farm credit crisis began. Even so, operating loans will need to cash flow.

Tighter cash flows
Lower prices for corn and wheat, along with uncertainty in the soybean market, will likely open cash flow projections with smaller gross revenue numbers than in the past few years. Farmers with a good handle on their costs are going to be better prepared to develop projections that will be acceptable to lenders.

Cost control starts with cash rental rates that have been bid up to match high commodity prices in the past few years. This could be the year to adjust those rates back a little if the farm has adjusted rental rates higher as commodity prices increased.

For those farms that were late to the game in raising rents, there might be a lag going back down, putting pressure on the cash flow projection.

“Those same guys that are overbidding for land today are the same ones that didn’t pay enough rent on the way up,” Kastens notes.

Take advantage of discounts
Suppliers recognize this will be a tighter cash flow year and will be knocking on doors with attractive deals, trying to get sales made to quality operators. Take advantage of early purchase discounts and favorable financing to get seed, fertilizer and crop protection inputs priced before spring.

Lenders should be willing to support the purchase and financing of inputs with favorable terms that will help the cash flow. Disclose those purchases and credit arrangements to the lender at renewal time, but take advantage of those low to zero interest plans when they are offered.

On farm research pays
Farms that were doing their own research during the profitable years have an advantage: knowing where their production system can be tweaked to save a few dollars per acre in tight cash flow years.

The time to experiment with a new technology or lower-cost product is when times are good and the farm can absorb a small loss. Now is the time to implement those cost-saving ideas that worked in your on-farm plots or other tests.

Lenders are more willing to support an experiment when there is adequate cash flow to cover a failure. Low interest rates and better-than-average prices for the past few years have encouraged banks to open hedging lines for customers that were not using these marketing tools.

Lender relationships critical
Long-term relationships with good agriculture lenders will help farmers get through the next couple years as cash flows tighten.

“The stable bank that is familiar with your system and has a long-term agricultural commitment to area farmers will be a good partner as margins tighten,” says Coulter.

Long term, using caution and a prudent financial strategy is the best way forward in potential lean times.

“We don’t know what will happen if there is another crash because very few of the lenders from the 1980s are still around,” concludes Kastens. ff