Farming is a business that requires an ever-evolving skill set. It’s a blade that must be sharpened from time to time for those wanting to stay on the cutting edge.
That’s exactly what attendees of 2019’s Farm Futures Business Summit were hoping to accomplish, as they settled into two full days of keynotes, panels and breakout sessions built to help them learn more about farm business, marketing, lending, succession planning, networking and much more. This event was designed to help growers think outside the box as they manage the ever-increasing complexity of modern farm operations.
This year’s event kicked off with a panel discussion on the decision-making processes that accompany crop inputs, such as seed treatments and fertilizer. A lot of the talk centered around return on investment. How do farmers know they’re getting an adequate ROI for the dollars they spend on each acre?
For Jason Durschmidt, a fourth-generation Iowa farmer, that means putting ample time and effort toward research.
“There’s a ton of great information available,” he said. “There are easy things you’re already doing that you could be doing a little better that don’t require huge monetary inputs on your operation.”
The blueprint can look different for every single field, but Durschmidt has seen big dividends from practices such as in-furrow fertilizer applications to a fungicide application at tassel. A quality seed-treatment package has also become standard on his operation since most of his acres are now corn-on-corn.
Nora Schultz, an agronomist with Jacobsen Seed, agrees that research is critical for anyone trying to determine the ROI of any crop input.
“Make sure you know what’s going on in your field so you know what will pay,” she said. “Do tests on your own farm. Track the results.”
The summit also featured a panel of three young farmers, who shared fresh insights on how they have navigated generational differences and taken on larger roles on their operations.
The farmers had more than just the obvious demographics in common — they also each spent time off the farm working at other jobs after they graduated from college.
Iowa farmer Brett Heineman said the off-farm experience allowed him to bring back fresh ideas to the operation, and that working through those ideas “pushed my limits, which was good.”
For Illinois farmer Maria Cox, an initial stint away from her family’s operation helped to validate her career choice to return. “Being away from the farm made me realize that what I really wanted to do was farm,” she said.
These next-generation farmers also had to be realistic about how they were going to bring enough value and revenue to keep the business viable. Heineman took on some custom work to help bridge the gap and searched out rental opportunities from neighboring farms.
Heineman also made agronomic research a priority. That effort, in particular, began to instill confidence that his hard work was paying off.
“I kept diving into agronomy to prove my worth on the farm, and I’ve been able to prove the benefits I’ve given the operation through field trials,” he said.
For Iowa farmer Scott Henry, succession planning was a critical key to success for the upcoming generation — especially with nonfarming family members in the mix. His family farm has tried to address this reality by separating real estate wealth and operational profits into separate limited liability companies, so the on-farm siblings wouldn’t someday be put into a position of trying to buy out off-farm siblings.
It’s also important to share decision-making responsibilities across multiple generations to avoid eventual bottlenecks, Henry said.
“If you keep all decision-making in one generation, there are periods where the operation flattens out when the torch is passed,” he said. “We’ve tried to take an approach where we can avoid those plateaus.”
Time to role-play
One of the livelier portions of this year’s summit was a banker role play conducted by Farmer Mac’s Curt Covington and Bill Miller. The two walked through some common conversations bankers have with their farmer-customers and broke down a dozen or more do’s and don’ts that often spill out of these discussions.
For example, don’t come unprepared to discuss your financial condition, Covington advised.
“Always know and verify the numbers,” he said. “In today’s environment, you need to know your banker is also asked to do more with less.”
The foremost form of communication between you and your banker is your financial statements, Covington said.
And although it was less common 10 or 15 years ago, most bankers now want to know your marketing plan, he said.
Many bankers love small talk, but always plan ahead when meeting with them, Covington added. What are you asking your banker to do? It’s not the banker’s job to ask you what you want, he said.
Communication in general is as important as it has ever been. In fact, one of the biggest red flags for lenders is when a farmer “goes dark,” Miller said.
“In 2019, what if something doesn’t happen the way I hope it will, and we really run into hard times?” Miller said. “It does not put up a red flag from your bankers to ask questions about that.”
Chris Barron is in an admittedly unique situation. The Iowa farmer collaborates with eight other farming operations. These nine operations retain their own marketing expertise and purchasing decisions, but share labor and machinery.
Barron thinks more farms could adopt this type of approach and asked summit attendees an enticing question: “What would it look like if you didn’t have to wear every single hat in your operation?”
There are plenty of reasons to consider collaboration, including low prices, tight margins, the increasing age of farmers, access to quality labor, competition for growth, bottlenecks in the existing operation and general complexity to operate.
There are also many factors that potential collaborators need to consider, Barron said. Documentation becomes much more important, for example.
He also recommended streamlining insurance to a single provider. “Otherwise, when you have a loss, it gets really ugly and messy,” he said.
It’s also important to define your core values and make sure your employees are aware and share those values, Barron added.
The prospect of collaborating with neighboring operations may sound daunting, but a good first step is to think about ways you may already be doing this on your farm.
We all collaborate, he said. “We all have partners like family, friends, suppliers and customers.”
The 4 Pillars of Business IQ
At the Farm Futures Business Summit, keynote speaker David Kohl, retired professor of agricultural economics at Virginia Tech, shared his “views from the road.” He’s had plenty of opportunity to pick up insights after estimating he has traveled more than 8 million miles worldwide during his storied career.
His biggest takeaway for farmers in 2019? Work on your business IQ.
“The premium right now is on business IQ,” he said. “That’s the differentiator in agriculture in the next 10 years.”
The challenge to mastering business acumen is that we live an era choked with what Kohl referred to as “news and noise.” Manage what you can, and manage around the noise, he recommended.
“Think about yourself in front of 20,000 people in front of the foul line,” said the basketball aficionado, who often uses sports analogies to drive his points home. “The experts say shut the noise out, and that’s also what I’m trying to tell you.”
Kohl said there are four cornerstones to business IQ of which farmers should pay particular attention.
- Planning. Develop a system for your business, Kohl said, noting that there are no real one-size-fits-all approaches.
- Strategize. What are the biggest financial decisions you need to make? Kohl asked.
- Execution. “This is one of the things that frustrates me — when people get a great plan but don’t follow through, and repeat the same mistakes over and over again,” Kohl said.
- Monitoring. With so many commas on the balance sheet, it’s no longer possible to check financial documents once a year, or hand them over to an accountant without being in the trenches with them, Kohl said.
Turning back to basketball, Kohl said there are ultimately only four or five things a team needs to do on a given night to win the game. Business IQ is not so different, he said — focus on a few key points and try not to overcomplicate the game plan.
“If you can’t explain your business on a napkin, it’s too complex,” he said.