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Over two thirds of those surveyed stated that a producer’s knowledge of their cost of production was the most important item.

David Kohl, Contributing Writer, Corn+Soybean Digest

October 27, 2020

3 Min Read
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In the days of no air travel, rental cars, or face-to-face events, webcasts have become the medium of choice. Within these presentations, polling has been a great method to engage with the participants and take the pulse of what is happening on the front lines. Recently, polling was conducted with over 700 agricultural lenders attending a live presentation. This group was asked to name the top three characteristics out of eight choices that were the most important to an agriculture producer’s resiliency and agility.

Over two thirds of those surveyed stated that a producer’s knowledge of their cost of production was the most important item. Knowing the cost of production can assist in determining breakeven points and possible gains and losses of various enterprises. Having this knowledge can also assist in bringing more objectivity and less emotion to various decisions made about the farm and ranch business.

Next on the list was the execution of a marketing and risk management program. The COVID-19 pandemic has created volatility on both the cost and revenue sides of the business ledger. On a recent webcast, another speaker who was a marketing educator indicated that in recent months the top 20 percent of his clients had a sound marketing and risk management plan and were able to generate substantial profits, particularly on the grain side. Having a marketing and risk management plan, coupled with government subsidies, has contributed to the current divide in profits and has resulted in 2020 being a good year economically for some producers. 

Related:3 traits for post-COVID farm business success

Next on the lenders’ list was strong working capital reserves. Working capital and quickness to cash is now a leading attribute for both businesses and personal households. This variable provides the flexibility to take advantage of marketing windows and business opportunities.

The personal family living budget was listed as the next most important attribute for resiliency and agility. Modest family living costs and living within the means of the business or off-farm income generation is a crucial element. Over the next year, careful attention must be paid to possible job and benefit losses or a reduction of income and the resulting impact to the business and personal finances.  

Surprisingly, a nonfinancial business factor was listed by one-third of the respondents. Without a proactive attitude and engagement, often the best laid plans are moved aside to concentrate on the urgent tasks at hand.

Capital and equity position was listed by just under 30 percent of the agriculture lenders. This was quite surprising given that equity, specifically land equity, is a key factor in credit and restructuring decisions.

Related:Farm business planning: Tool for the times

Communications was a characteristic identified by about 10 percent of the participating lenders. However, many confided that good communication was often a leading factor in farm and ranch business success and the early identification of issues. Having an advisory team was also an item that was ranked in this list, with some lenders citing its importance for improving communications and gaining outside input.

Source: Dr. David Kohlwhich is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. 

About the Author(s)

David Kohl

Contributing Writer, Corn+Soybean Digest

Dr. Dave Kohl is an academic Hall of Famer in the College of Agriculture at Virginia Tech, Blacksburg, Va. Dr. Kohl has keen insight into the agriculture industry gained through extensive travel, research, and involvement in ag businesses. He has traveled over 10 million miles; conducted more than 7,000 presentations; and published more than 2,500 articles in his career. Dr. Kohl’s wisdom and engagement with all levels of the industry provide a unique perspective into future trends.

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