The last three years have been a volatility nightmare with the price swings we've seen in corn, soybeans, oil, gold and other commodities.

Cash grain farmers seem to have done well if they managed their margins correctly; however, dairy, hog and beef producers could not wait to see 2009 end and a new year begin.

As my partner Terry Jones has said before, we never change our business when times are good. It is when we are really under the gun that we make significant and lasting improvements to our business.

About 25-30 years ago, business in America went through tough times with the recession of the early eighties, Asian manufacturing competition, limited credit and increasing costs.

American businesses made a paradigm shift during that time that positioned them for increased efficiency, greater profits and growing market share. Continuous improvement has assisted in productivity growth. The Bureau of Labor Statistics recently reported that “nonfarm business sector labor productivity increased at a 6.6% annual rate during the second quarter of 2009.” In fact, it was the largest increase in productivity since the end of 2003.

Remarkably, this is the first time in history we've experienced productivity growth during every quarter of a recession. Not only that, but even as the economy shrank by 3.8% in the fourth quarter of 2007, productivity rose 3.2%.

THE FARM SECTOR has always been proud of its productivity growth, but I see an opportunity to learn from American business and look at a new paradigm in how we manage our resources.

In the past we had loan rate protection to keep us in business if we stubbed our toe. Today our costs are so far above loan rate there is little safety net.

Credit is getting more expensive and lenders are looking more critically at how we deploy each asset. Commercial banks' FDIC insurance rates are rising dramatically and they have to pre-pay three years of premium. During good times you can shop your credit, but in my experience during tough times, lenders are very reluctant to take on new lines of credit they don't have a history with.

Input costs are rising as manufacturing companies, suppliers and vendors download more risk to producers.

Opportunity costs on capital invested in fixed assets need to be considered when working capital may be at a premium.

Traditionally, production agriculture has had ample capital available so we have not been forced to look at alternatives. That may change.

One of our clients has been very proactive in positioning his business for potential tighter credit times. He sold some land and rented it back from the owner, thereby reducing leverage and freeing up working capital. He leased some equipment and upgraded other equipment to take advantage of newer technology. Next he invested heavily in people and diversification.

He's now positioned for significant growth, and had he stayed with the previous model he might be struggling now to satisfy his lender.

It pays to be proactive and risk-wise. Waiting until you have to change limits your alternatives and reduces your control over your own destiny.

Moe Russell is president of Russell Consulting Group, Panora, IA. Russell provides risk management advice to clients in 34 states and Canada. For more risk management tips, check his Web site (www.russellconsultinggroup.net) or call toll-free 877-333-6135.