March 28, 2024

Build resiliency into farm management plans

PLATTEVILLE, Wis. — Resiliency is a forgotten part of management for some farmers.

“The need for resiliency is usually not immediate, it’s important, but not something that urgently needs to be done now,” said Kevin Bernhardt, professor and farm management specialist at the University of Wisconsin-Platteville.

Resiliency may be on farmers’ list of things to do, but they haven’t done it yet and that’s a problem, Bernhardt said during a presentation at the Driftless Region Beef Conference, organized by the University of Illinois Extension, Iowa State University Extension and Outreach and University of Wisconsin-Madison Extension.

“Resiliency is like risk management, but it is broader,” he said. “It is the power or ability to return to normal business operations and profitability after a risk has occurred.”

Bernhardt divides farm viability into three parts.

“You need enough capacity in an operation that under normal production you get enough throughput for the income you need, enough acres to support your cows and enough economic activity,” he said during the virtual event.

The second part is economic performance and profitability.

“You need enough return on assets to make the operation flourish, pay the bills, cover family living, replace capital assets and build the wealth of the business,” Bernhardt said.

Resiliency is the final part, which is the ability for the farm operation to take a punch.

“In 2020, we learned the capacity of our business to be able to take a punch,” Bernhardt said. “Last year was an unusual situation, but it is not unusual that something is going to happen. There is always something coming along that we have to build resiliency of our business.”

There is a lot of variability of farm business and family goals of operations.

“Some people say farm viability is being able to raise their family on the farm and teach values to their children,” Bernhardt said. “And they might have another job for income earning.”

However, other farmers may have different goals.

“They may be trying to not only create a good standard of living, but also build the ability of the operation to provide the same thing for their children,” Bernhardt said.

Quite often, punches delivered to farming operations are due to the agricultural cycle.

“Our prices tend to cycle, which has been around for decades, and I don’t see it going away,” Bernhardt said.

There are emotions that go along with that cycle, Bernhardt said.

“As we come out of a low profitability period, we build some optimism that works its way towards excitement, and when we hit high profitable years, euphoria,” he said. “Then the cycle turns, too much is produced, we deny it for awhile, we get fearful, then panicky followed by depression.”

Bernhardt talked about a resiliency wheel as a management process to build resiliency into a farm with the spokes of the wheel representing areas of management.

These areas include legal risk, third party risk, production, financials, marketing, human resource, new technologies, self improvement and networking with others.

“You want the wheel to be round because it’s not good enough to be good at legal risk if you don’t ever pay attention to financials,” Bernhardt said.

The resiliency wheel should not only be round, but also big.

“It is not only good enough to give attention to all the areas that might impact your operation. You also have to give enough attention to each area to build the resiliency,” Bernhardt said.

Farmers need continuous education to get better at marketing or to keep up with improving productivity. Bernhardt encourages farmers to attend meetings and conferences and get involved with associations.

The process starts with a plan which must be implemented.

“I call it a plan, do, check and act process,” Bernhardt said.

“Start with a plan to identify the needs you have, set the goals you want to achieve and then do it by buying the insurance, going to a conference or learning a new technique,” he said. “Next check if it worked because not every idea we have is a good one, so we always want to check our results.”

“Then act, find causes of the problem, adjust and go back,” Bernhardt said. “Don’t do this just once — keep doing it.”

Martha Blum

Martha Blum

Field Editor