WEST LAFAYETTE, Ind. — As agriculture enters a period of
income moderation, farmers may need to fine-tune their management practices.
They learned keys to successfully managing their farms at
Purdue University’s Top Farmer Conference.
“Pick up your playbook from the later ‘90s and early 2000s,
dust it off and get back to plan B,” said Michael Boehlje, professor of
agricultural economics at Purdue. “Most of you manage your business very well.
Just return to the basics.”
He discussed 10 strategies that can position your farm for
* Manage operating risk
“You have to worry about managing cash and land costs,”
Boehlje said. “Every day when you wake up, your job is to lower your cost. One
way to manage operating risk is to buy (inputs) and sell (product) at the same
This allows farmers to get a better feel for what they’re
spending versus what they’re earning. It’s also prudent to find the right crop
insurance policy for your farm.
* Manage money and capital
Now is the time to lock in interest rates, especially on
land. Interest rates are expected to climb.
Boehlje recommended getting the longest terms for repayment
as possible. He also advised farmers to save a cash stockpile.
“A lot of people say, ‘What do I do with my cash?’” he said.
“Hold on to it. The value of cash is the value of risk litigation. It’s the
first line of defense against financial stress. It gives you the flexibility if
things don’t go well, to have a buffer.”
Go into this period of moderation with better reserves. If
you don’t have those reserves, have a conversation with your lender about
restructuring your debt.
* Emphasize execution
“I don’t know of any manufacturing business without standard
operating procedures,” Boehlje said. “It tells how we go about doing things. You
have to have a systematic way of doing it.”
Farmers should focus on details, data management and doing
fewer things better, he said.
* Increase asset utilization
Boehlje suggested that farmers have a 24/7 mentality. Keep
your planters and combines running as many hours as possible.
“If you’ve got it, you’ve got to use it,” Boehlje said.
“There’s no business I know that would not use their equipment for six to seven
hours a day.”
Farmers also should consider leasing equipment and joint
ventures as possible strategies.
* Use time efficiently
Focus on management skills and hire skilled employees,
Scheduling and work-flow planners can be great tools.
* Grow volume and sales
Homing in on increased productivity using current machinery
is an important tactic.
“Most people think they need to get more and bigger
machinery,” Boehlje said. “That’s not the right way to approach it. You get
better at what you’re doing first. Then you can think about that. We have too
* Increase margins
The first and most important marketing decision you make is
not what you sell your product for — it’s what you pay for your business,
If rent prices are too high, you are at a disadvantage.
Control your costs in every way possible.
* Focus on a strategy
Figure out what drives you as a farmer. Is it operational
excellence? Innovation? Customer relationships? Decide what you want to focus
“You need to respond to what the customer needs and wants,”
Boehlje said. “Don’t blow off things like farmers markets. they can be huge
* Create value for your customer
“Figure out who your customer is,” Boehlje said. “It’s who
you sell your goods to. For many, it’s the grain elevator. Have conversations
about how to create value for them.”
Differentiate your goods and services from other producers.
Focus on quality, storage or delivery — whatever you’re good at.
* Get smart
“Network — use consultants and make connections,” Boehlje
said. “Most farmers are good operations managers. But we need to think like a
Having a CEO mentality means managing relationships and
money, he said. Focus on people, relationships, strategies and income.