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The art of managing risk in wheat or anything else

"Kick the cow chips on down the trail."

Kim Anderson

October 25, 2019

3 Min Read
SWFP-SHELLEY-HUGULEY-19-REOC-web.jpg
Kim Anderson, Oklahoma State University, center, with Shannon Mallory, Oklahoma State University Extension, left, and Mitch McLaury, Farm Credit Association Oklahoma, right, at the 2019 Rural Economic Outlook Conference, Stillwater. Shelley E. Huguley

My thoughts shared in this article are not original. I’ve stolen, plagiarized, and borrowed most of them. Major parts are from Sun Tzu by Samuel B. Griffith and a pamphlet by Gene Ross, marketing manager for Doan Information Services. The pamphlet, “8 ways to guarantee that you and your farm prosper in the ‘90s,” was published in the 1980s.

This is mine: “Kick the cow chips on down the trail.” My mind sees me as a kid on the dairy farm bringing the cows in to milk. It’s slow and easy, so you follow the cows and kick cow chips down the trail. In my opinion, that’s how you should manage risk, slow and easy. It’s not always easy, however.

See, COTTON SPIN: No downsize in forecasted foreign mill use

I tell farm audiences that I earned a Ph.D. in agricultural economics. But most of what I teach is what I learned from successful farmers and a few who went belly-up. Both successes and failures are learning opportunities. “Knowledge is power.”

Sun Tzu said, “Know the enemy and know yourself; in a hundred battles you will never be in peril. When you are ignorant of the enemy but know yourself, your chances of winning or losing are equal. If ignorant of both your enemy and yourself; you are certain in every battle to be in peril.” Yourself is be you and your farm. The enemy is everything else: who you buy inputs from, the brand of equipment you buy, the weather, etc. “Knowledge is power.”

The 80/20 rule is applicable to almost everything. Eighty percent of what we do we don’t like to do, but if we don’t do that 80 percent right, we will not be able to enjoy the 20 percent of the things we enjoy doing. Managing risk is in the 80 percent.

Write everything down. While at the University of Kentucky (1981), I read an article that said, “Writing something down will dramatically increase the odds of success.” I wrote down that I wanted to increase my salary by 50 percent in three years and posted it. I also wrote down what I would have to do to accomplish the objective. Two and one-half years later, I accomplished the objective.

Objectives, plans, strategies, records, budgets, actions, what went right, and what went wrong must be written down. The only way to know if something turned out right is to check the results (written down) with the objectives. Written plans help us recognize what worked (repeat it), and what didn’t (avoid it).

Objectives should be specific for the operation as a whole, for each farm, for each field.

Include how many bushels per acre, test weight, protein level, maximum dockage, maximum foreign material, and how much profit per acre. Write the objectives down and then for each objective, write the steps needed to accomplish each objective.

Don’t settle for average. Average will not pay for the land. Average will not put food on the table and clothes on your family. Yields must be above average and costs must be below average.

Cost is a function of input costs and yield; $175 per acre is different for a 30-bushel average ($5.83) and a 45-bushel average ($3.89). The only way to know the cost per bushel is to keep meticulous records. Keeping records is essential, but it isn’t fun.

Don’t go it alone. “It’s not what you know; it’s who knows you.” Make sure successful people know you and learn from them.

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