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Working Lender for the 2009 Cropping Year
By Paul Oehlke – Fergus Falls Farm Business Management
Although the media is constantly talking about national credit lines drying up, regional agriculture lending practices will probably stay the same.
Bankers are willing to loan money on expected cash flows, as long as farmers are purchasing multi-peril insurance. Farmers who start planning for 2009 now will not be hurt by the ongoing credit crunch.
Keep your lender up-to-date with your 2008 and 2009 production and marketing plans. I have been running 2009 preliminary crop cash flow projections with a few farmers using next year’s expected crop input
expenses with present crop prices and average yields. We know the prices for fertilizer, chemical, seed, insurance and fuel will be much greater for the 2009 crop than this year. If commodity prices remain the same,
and we have average yields, 2009 will be less profitable than 2008.
Farmers who run a profit this year can use the 2008 crop to pay down short term debt and to purchase some of next year’s inputs.
You may bring your intermediate loan payments to date, and then move them to better fit into future cash flow projections. Try to do your 2008 tax estimate early so there is enough time to time your crop sales to lower your tax bill or to buy needed capital purchases. It is also important to calculate your cost of production with your anticipated crops. At present, wheat doesn’t look to be as profitable as other crops in 2009. Remember to soil test this fall so that you can have all of your options available when planning next year’s crop fertilizer program.
If you have questions about your financial condition and want to use detailed cash flows to strengthen your farm operation contact a Farm Business Management Instructor at 1-800-959-6282.
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Why Do Some Farmers Have all The Luck?
By Danie Packard, Farm Business Management Instructor, Northland Community and Technical College
Success comes easily to some farmers. They complete tasks on time, get along well with everyone. On top of that, they make the most money.
Success looks easy to an outsider. But a closer look at successful farmers reveals that discipline and choices are more important than luck in determining who succeeds.
Some say that being in the right place at the right time is all that is needed to be successful. Some may even attribute success to their ancestors, as if success is inherited. Has anyone ever
been successful entirely because of luck? Maybe, but not likely! Successful people make more right choices, keep good records, and recover quickly from bad choices. Our personal and
professional success depends on making good choices day in and day out… and not repeating bad choices.
Choices that create success include:
- Character choices. Successful farmers choose not to be a victim, to learn from criticism, and to realistically assess their strengths and weaknesses.
- Action choices. Successful farmers move beyond talk to getting things done.
- Investment choices. Successful farmers not only invest money in their farm; they also invest time in relationships.
In order to make good choices, we must constantly focus on long term goals while remembering past successes and failures. Life is filled with pressures that force us to make immediate choices
. As the old saying goes, people can be divided into three categories - those who make things happen, those who watch things happen, and those who wonder what happened. Successful
people make things happen by taking action, and by not allowing themselves to be swept along by what life brings.
Farming today is complex. The farmer has to be like a poker player who knows when to hold, when to fold and when to sell. Selling requires the farmer to recognize when he is making a
profit or when he is taking the least possible loss. How can he know? Records are the only way to know. He must keep accurate, up to date, detailed records so that he knows when he can
sell to make a profit. Profits are elusive and it takes a good manager to keep on top of all of the information that is needed.
We make the choice, plan the work, and work the plan. We choose to do the things necessary to be successful. For information on how to keep good or better records contact a Farm
Management instructor near you or call 1-800- 959-6282
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Your Best Investment
By Betsy Jensen, Northland Community and Technical College Farm Business Management, East Grand Forks, MN
No one gets into farming to “Get Rich Quick.” The radio advertisements that promise a big return on a $5000 investment never mention farming. As long as there is affordable food on the
shelf, most of the world doesn’t think twice about farming.
Today’s headlines deal with plummeting home prices, dropping Dow Jones, or the latest investment firm to declare bankruptcy. There is a lot of money being lost by major firms,
including firms that were believed to be too big to fail.
While farmers are not immune to the Wall Street crisis, farming can remain profitable despite the economic problems. Farmers are at risk as credit tightens, and don’t forget that investment
funds have purchased grain storage facilities in Duluth and around Minneapolis. Farmers will be affected by Wall Street’s mistakes, but this is a good reminder to look at the profitability of farming.
According to data from the Farm Business Management programs in Minnesota, the five year average return on farm assets was 9.7 %. That is data from over 12,000 farms over that five
year period. Think about that number the next time your brother-in-law offers a hot stock tip, or a once in a lifetime investment. While earning 9.7 % a year is never going to be a “Get Rich
Quick” scheme, it does offer a respectable return, and more importantly, the satisfaction of a job well done. An investment banker can never look at newly planted soybeans in perfect rows, or
of just harvested wheat stubble. Most farmers would agree that leaving work for the day should involve more than just piling the stack of papers neatly on the corner of the desk.
The 9.7 % return is an average, but most people do not want to be average. The most profitable twenty percent of farms earned a 15.5 % return on farm assets over the past five
years, while the least profitable twenty percent lost 2.7 %. It is important to know where your operation fits into the range. Earning one or two percent more per year can add up quickly over five years.
Purchasing assets for your farm is a good management decision. Off-farm investments, such as a spouse’s work retirement account or an IRA, can also help by giving you a balanced portfolio.
Invest in your farming operation, and let Wall Street laugh at our single digit returns. At least we can even sleep at night knowing our investment hasn’t plunged. My favorite Murphy’s Law is,
“The easiest way to make a small fortune is to start with a large one”. With good management of existing assets, this Murphy’s Law does not have to apply to farmers.
To find out your return on assets, call a Farm Business Management instructor in your area at 1-800-959-6282.
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Commodity Marketing Groups – More Important Than Ever
By Randy Zimmerman, NCTC-Farm Business Management, Ulen, MN
What a record year for commodity prices! We have seen $25 wheat, $7 corn, and $15 soybeans, along with record input costs of production. Managing risk in today’s farming
environment is more important than ever. Commodity marketing groups can help farmers manage risk by providing the extra knowledge needed for the competitive business of farming.
In a marketing group, you can learn how the marketplace operates, so that you can utilize different marketing tools and strategies.
Commodity marketing groups can also provide the following information:
- Current commodity prices (futures and cash);
- Basis, carry and cost of ownership;
- Updates on government programs;
- Recent crop reports and their impact on the market;
- Foreign crop production and trade situations and their impact on the market;
- Current market trends;
- Market planning
Other benefits of participating in a marketing group include: determining true breakeven prices for your farm, building confidence in marketing decisions, learning from others by sharing ideas
and strategies, and hopefully increasing the bottom line for the farm.
There are a number of commodity marketing groups in northwest Minnesota that usually meet twice a month. As a first year farm business management instructor, one of the most enjoyable
parts of my job has been working with marketing groups. The experience has been very beneficial to me not only as an instructor, but also as a farmer.
To learn more about a commodity marketing group near you, please contact a farm business management instructor in your area at 1-800-959-6282.
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Motivating People who Work for You
By Rick Morgan, NCTC Farm Business Mgt-Moorhead MN
It’s that time of the year when many farmers hire part-time labor, be it for sugarbeet harvest, or to harvest any fall crop. Sometimes you may hire a family member, relative or neighbor. More
often than not you may hire a complete stranger. Whoever you hire, you hope that they get along well with others, don’t get hurt, don’t damage your machinery and most important, they last the
entire harvest season. What can you do to see that all of the above happens?
Attention to detail is a key to success in farming operations and in most other businesses. “It's a matter of motivation,” says Lee Gross, educator at St. Cloud with the University of Minnesota
Extension Service. “Successful farm managers learn how to motivate employees and contributing family members to pay attention to critical details," says Gross. "It's not a matter of
making people do something. They have to want to do it. That's what motivation is."
Gross offers these ideas to help motivate workers to attend to critical details:
It's not easy. It takes a serious effort to convey these messages to your workers on a regular basis, explains Gross. It may be necessary to write reminders on your calendar, but the effort
can produce abundant benefits. “People who are appreciated are motivated,” he says. “People who are valued are motivated. People having fun are motivated. People who know they matter
to the organization or family are motivated. Motivated people do great things.”
Your farm may not have a mission statement. Why not? If you only use 2 or 3 of the above ideas to help motivate your workers, the employees may have a better chance of lasting the
entire harvest season and everyone may enjoy their work a lot more!
If you would like more information on Agricultural Labor Management, contact a Farm Business Management Instructor near you or call 1-800-959-6282.
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Ukraine - “The Bread Basket of Europe”
By Greg Kalinoski- Northland College- Farm Business Management, Red Lake Falls, MN
This past July I had the wonderful opportunity to travel to Ukraine as part of a study tour through the Top Producer Magazine and United Soybean Board. Our group of fourteen
consisted of the editor of Farm Journal and Top Producer magazines along with crop producers from the Midwest, instructors and representatives from business and industry.
Our mission was to learn about the agriculture and economy of Ukraine as well as the challenges they face since gaining their independence in 1991. The second largest country in Europe,
Ukraine is located on the Black Sea next to Russia. It’s famous for its agricultural production and known as “The Breadbasket of Europe.” Its moderate climate and deep, rich black soil
have made the country one of the world’s most productive farming regions. Winter wheat, rapeseed, sunflowers, soybeans, vegetables and sugar beets dominate the country side. Ukraine
has a fast growing economy with exports of food and manufactured goods to Russia, the Mediterranean and surrounding countries.
Ukraine has a tremendous infrastructure because it was the former Soviet Union’s most important republic – strategically, politically and economically. The country has excellent four
and six lane highways, rail systems, massive irrigation canals in the southern area and state of the art seaports on the Black Sea. We were further surprised to see its massive shelterbelts,
installed in the 1970’s, to protect the valuable soil from wind erosion.
Our tour group first visited Kiev, the capital of Ukraine, and then traveled by bus to visit seven farms in the agricultural regions. We had the opportunity to visit with farm operators with
assistance of a translator and to observe their harvest. We were also treated to a feast of Ukrainian dishes prepared for us by several farm families.
We observed Ukraine’s good crop production this year but agreed they will need to improve their agronomic practices and timeliness to increase production in future years. For example, we
were amazed at the amount of technology and size of equipment available to operators but were appalled by the lack of efficiency in their use of it. At one farm we visited, a large wheat field
had eight new combines but four sat idle with full hoppers for two full hours while waiting for trucks to come and remove their grain. Farm managers continually stated that training workers
and improving the work ethic is a major problem they’re struggling with.
This tour allowed me to see firsthand the challenges faced by the people of Ukraine and the tremendous opportunity their farms have. There has been much progress in the last few years
despite the many obstacles the country has faced since gaining their independence. It became obvious early in our tour that they’re still trying to shed the mentality of communism while making
great efforts to move forward. Some things are slow to change
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Do You Have Your Forage Supply Lined up for This Year?
By Jim Clark, NCTC Farm Business Management Instructor, Bemidji/Fosston, MN
Last year was a tough year for some beef producers. Drought reduced pasture and hay yields. Short hay inventories caused a jump in prices. Some producers who were looking for hay in the
winter had to pay much more than their cash flow plan showed to keep the cattle fed while they hoped for an early spring. It was not unusual for hay to sell above one dollar per ton for each point of relative feed value (RFV).
This year is a little different. Good weather has given us sufficient pasture in most locations and good hay yields. Still, many producers have relied more on purchased feed as their operations
have grown, and hay prices may stay higher than in the past. As you take your last cutting of hay for the year, now is a good time to inventory what you have and to make plans for your
winter feed supply. While it is difficult to predict, hay is generally cheaper in September than in February, and finding feed of sufficient quality at a reasonable price becomes more difficult as the winter progresses.
An important first step in managing your forage supply is to inventory not only the quantity but the quality of your hay. Feeding hay with too high RFV is wasting money, while no amount of
hay with a very low RFV will keep a cow from losing weight. As most know, poor quality feed in the winter can result in poorer reproduction and performance in the following year and long
term loss of income. Once you know the quantity and quality of your own hay, you can purchase the appropriate feed to round out your ration for the winter, and to feel secure that you
will not be faced with spending money outside your budget next winter.
Sampling hay is relatively simple and inexpensive. A core sampler generally works best. For each lot of hay, samples should be taken from 15-20 bales and blended together. For example,
you probably want to test different cuttings separately. Most testing labs charge from $15 to $20 per sample. So if you have 2 cuttings from 5 fields of different quality, you might spend
$150 to test your hay. Compare this price to the loss of income if just one of your cows fails to breed back because you had to buy junk hay in February, and testing will more than pay for itself.
Feeding the right amount of the right quality feed will help insure your operation is as profitable as possible over the long term. A Farm Business Management instructor can help you sort
through the inventory and sampling process, and develop a cash flow plan for the year. Then you can be secure in knowing that you are in a good position next winter. To find a Farm
Business Management instructor in your area call 1-800-959-6282.
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