The Future of Farm Management Extension in the Context of Teaching and Structural Changes in Agriculture
Farm Business Management Update, February 2001
By David Kohl and Alex White
During a recent address to the Canadian Farm Management Extension Meetings in Winnipeg, Manitoba, Canada the authors were challenged to examine the future of farm management extension in the context of the Internet, technology, and structural changes occurring in agriculture and rural communities.
While some differences in the role of extension and advisory services exist between the two countries, there are a lot of common ground and similarities. In this article, we will examine the structural changes and client needs, discuss programming and delivery systems, and discuss how academics, government, and private entities must work together in the implementation process.
Biotechnology, information technology, global markets demographics, and political and economic factors are dramatically changing the landscape of agriculture and rural communities. Four distinct quadrants of agricultural clients appear to be emerging with specific needs and advisory services in the area of farm management.
Quadrant I are those producers with under $50,000 in farm revenue, which represent 70 percent of United States and Canadian producers. Their goal is to maximize rural lifestyle. They earn over $35,000 in non-farm revenue and are located in or near urban centers or satellite cities with populations over 30,000.
They will request farm management advice ranging from production systems (nutritional and cropping) to how they impact financial and time management. This segment will require programming that is technology savvy and seek convenience in delivery systems. The group, while small in total revenue contribution to agriculture, has tremendous political and financial clout and must be well served.
Quadrant II producers represent 15 percent of farm numbers and have revenues between $50,000 and $150,000 annually. This group is both financially and psychologically stressed in the business. They have limited ability to generate off-farm revenue because of lack of employment or business opportunities, skill base, or previous investment patterns that limit potential income options. The Quadrant II segment is in the wealth preservation or exit mode and has limited technology skills.
Farm management programming in the future will be challenged to create wealth preservation or exit specialists. These specialists will be required to conduct profitability analysis and be communications experts to candidly assist this group in exiting the industry. Quadrant II producers will require considerable one-on-one counseling, which will challenge the schedules of most specialists.
Quadrant III producers, because of size and management ability, are the fast rising stars of global competitiveness. They represent only 10 percent of farm numbers but are competitive because they have between $150,000 and $530,000 annually in farm revenue and generate off-farm revenue over $20,000. They will require specialists who have in-depth knowledge of specific industries. These specialists must be able to provide assistance with commodity and value-added, marketing labor, transition management, and investments. Advisors must deal with multiple family members, strategic alliances, and groups that are well networked on local and regional levels.
Finally, Quadrant IV producers consist of only 5 percent of farms, but they generate between $500,000 and $20 million in revenue and frequently have earned large sums of off-farm revenue. They are aggressive in growth patterns, and business technology savvy. They have a large voice in agricultural and non-agricultural affairs. This segment challenges the extension specialist by not only demanding the services of Quadrant III producers but by requiring expert information on regulations dealing with the environment, labor, and international markets. The specialists will be required to facilitate programming with business partners outside the family. These arrangements will be complex negotiations.
Future Programming and Delivery Systems
Historically, farm management extension programming focus was in the areas of record keeping, capital budgeting and analysis, tax management, commodity marketing, and estate planning. In the future, these traditional areas will be important, but more emphasis will be in value added marketing, labor management, business and transition planning, non-farm investments planning, bench marking, best management practices, and environmental and public relations. These changes will challenge farm management specialists and advisors in two ways. First, they must be able to handle a large number of clients in a solutions-based expedient manner, and second, they must provide the one-on-one counseling that many have come to expect.
Five distinct tiers of programming are emerging driven by technology and quadrant specific needs. Tier one programming is the basics (Figure 1). It will include farm management oriented toward nutritional, crop, and operational analysis. Basic record keeping, accounting and tax management, finance, marketing, and household budgeting will be included in these packages. This programming, generic in nature, will be targeted toward Quadrant I and II producers. Delivery systems and programming will be more Internet based, particularly for Quadrant I producers with hectic daily schedules.
Tier two programming will provide the standard business and trend analysis, net worth, and cash flow projections. However, another component that will be more popular for all groups will be commodity and value-added marketing. Farm management specialists with farm commodity perspective will be required to provide information and educational programming on economics of scale, technology adoption, cost of production, and financial analysis as it relates to marketing strategies. More specialist time will be required to serve the entrepreneurial oriented, value-added client. Marketing will focus on systems of quality control, relationship management, market development, and partnering and strategic acclaims. The use of technology to distribute information and analysis serves this tier of programming as well.
As we progress through the levels, programming becomes more customized and human interactivity. In the future, more advisory services will emerge supported by agribusiness lenders and private consultants.
Tier three programming will be targeted toward Quadrant III and IV producers with a focus on business planning. Enterprise budget variance analysis, including sensitivity to micro and macro events such as interest rates, economy, and global markets, will be demanded. Through emerging technology, one could envision a group of specialists or advisors handling clients on a state, regional, and provincial level in Canada. Country and state boundaries will disappear.
Tier four producers will emphasize the area of total risk management, including labor management from recruiting to training to communications to compensation. Technology and information management as it relates to a system of tracing the product through the production chain will be seen as a tool of value-added, not compliance. Benchmarking financial and operational databases by the industry and state, national, and international organizations will be requested. Benchmarking will require the advisor to work with other specialists or organizations to gain access to information expertise and solutions.
Investment planning for farm and non-farm investments and proactive environmental and natural resource planning will be more prominent.
The most specialized human interactive area will be tier five, which includes profit based planning, return on asset and equity using the Dupont financial and business models. In the future, more specialists will become applied researchers to enumerate information of the best management practices in operations, labor, finance, and marketing to achieve high profit results. Trouble-shooting, transition planning, government and public relations, and international markets will be included in this package.
Given the changing needs of clients, limited time and financial resources, and changes in delivery systems, successful implementation will be challenged.
The future of farm management extension will require the use of strategic alliances between government, industry, and the private sector. Whether it is sharing the cost of website development and maintenance, benchmarking and databases, online education and chat rooms, the independent Lone Ranger attitude will not work. Linkages and alliances between entities and institutions will have to be formalized to create the free flow of information and ideas and establish institutional memory.
The farm management specialist will have to work to eliminate some of the more common dislikes of technology. First, clients must be assured that shared business and personal information remain confidential and not sold to the highest bidder. Second, data must be provided in a manner that the client can use to further knowledge or enhance solutions on a group or individual basis.
Delivery of Education and Information
Another role of specialist in the future will be to organize and facilitate chat rooms and online education. Already business and industry are creating mini-knowledge centers that link world-wide experts in specific disciplines to provide valuable information and, in some cases, to assist in facilitating solution alternatives. This service will be particularly relevant for Quadrant III and IV producers who demand tier three through five programming that the local advisor, because of skills or resources limitations, may not be able to provide.
As one group of participants at the conference indicated, the use of technology, particularly the Internet, is demand driven, just in time learning not what the specialist/advisor thinks is needed. This will require the specialist to be an air traffic controller, assessing needs of clients and then directing them to information, knowledge, and a team of experts who can zero in on a specific need.
The future specialist will have four roles. One, is a teacher who is an organizer of information, an analyst, and explainer. Second, is a facilitator who is sharing alternatives and linking to other professionals to find the total solution. Third, is a coach who provides guidance to clients and leadership in organizing the alliances to accomplish the task. Finally as a sounding board, who is a part of a think tank attempting to uncover needs and alternative programming.
The tasks of future extension farm managers will become increasingly complex. The audience will demand a wide array of services that will become increasingly challenging to provide.
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