There are a lot of articles being written about surviving this agriculture economy; they have a lot of merit, and, for the most part, are telling you the same thing. So, here is my take on the subject. Farms have suffered reduced working
Farm Horizons • Feb. 6, 2017 • Page 14
Will you survive or thrive in 2017?
����� ������� � ������� �� ����� ��������
Myron Oftedahl Farm Business Management Instructor, South Central College
��� ������� ������ �� ����� ���� ����� capital for the last three years, primarily due to lower grain prices.
Working capital is simply current assets minus current liabilities, so if you have more annual loan payments and operating loan payments than you have inventory, you are using working capital. The farm can survive, but keeping the bills current will become very challenging.
This brings me to the first challenge to survive or thrive. Know your numbers, enterprise budgets, cash flows, whole farm and enterprise analysis, tax returns, etc. You need to understand how one item impacts the whole. You need to know your actual and anticipated cost of production, so that you can market your crop or product profitably. In this current market, you need to be pricing both the grain in the bin and some of the anticipated new crop. You need to be prepared to make quick decisions concerning these marketings, and the easiest way is to have a marketing plan.
A marketing plan that is written removes the emotion, because you have taken the time to determine what your cost of producing that bushel is, and you have developed a plan using that information. Therefore, when you see the price goals that you have set, you can easily make a sell decision because you have already done the analysis.
The key is to know your cost of production and then set profitable sales goals.
Ed Usset jokes about grain bins being hope chests, wherein you put grain in the fall and hope that the price goes up. In fact, the price usually goes up during the year, but I still hear that someone needed to sell grain in September at a loss in order to make room for the new crop. That means that you were either unwilling to make a decision, or that you were more concerned with the tax liability than being profitable.
We need to move away from tax avoidance to profitability decisions. I