The Management Calendar

Farm Business Management Update, June - July 2008

Gordon Groover (xgrover@vt.edu), Extension Economist, Farm Management, Department of Agricultural and Applied Economics, Virginia Tech

There’s been ample rain so far this spring; not enough to recharge the ground water and get the ponds back to capacity, but enough. So far in the New River Valley, we are behind our normal hay harvest schedules with limited days of clear skies to allow for cutting, curing, and baling. Along with weather uncertainties, there are many more. For example, what will happen to fuel, fertilizer, feed, and chemical prices? Will higher commodity prices offset the high input prices? What will happen to the dollar? What about the Farm Bill? All this adds up to more questions with no clear answers. Yet we know managers who keep focused on their costs-of-production and know their breakeven points for major inputs, and have business strategy in place to adjust the production plan survive uncertain times in a more favorable position. For example, most heavy field operations use about ¾ - 1 gallon of fuel to complete. At $4.00/gal diesel, it is more important than ever to know your costs. Fuel alone will cost $4.00/acre. It might pay to schedule fuel supplies when prices are more advantageous. These strategies need to be thought through in advance using family members, employees, and other advisors as a sounding board.

Selective information available that might be useful in planning your management strategies:

• Return of the Good Times: How Long Will They Last? is the topic of a paper by Michael Boehlje, Distinguished Professor of Agricultural Economics at Purdue University and can be found at http://www.agecon.purdue.edu/extension/pubs/paer/2008/may/boehlje.asp.
  
  
• Ag Decision Maker (AgDM) at Iowa State has two articles by Don Hofstrand, Extension Value-added Agriculture Specialist that all managers should read: first, Managerial Costs http://www.extension.iastate.edu/agdm/wholefarm/html/c5-209.html and second, Opportunity Cost http://www.extension.iastate.edu/agdm/wholefarm/html/c5-210.html. Both of these articles discuss costs and how to use them in making sound decisions and formulating strategies to succeed long term.
  
  
• Congress passed all 673 pages of the 2008 Farm Bill. Be sure to read Jim Pease’s article in this issue on the highlights that affect Virginia. The complete Bill can be found at http://agriculture.house.gov/inside/FarmBill.html.
  
  
• Make sure you keep your knowledge update on commodity markets and adjust your marketing plan by reading the Roberts’ Weekly Agricultural Commodity Market Report at http://www.ext.vt.edu/news/periodicals/roberts/ and the weekly Tennessee Market Highlights at http://economics.ag.utk.edu/tnmkt.html.
  
  
• Be sure to stay in touch with your local Farm Service Agency office as changes go online driven by the 2008 Farm Bill.

Listed below are the items that need to be included on the farm business managers' calendar for spring of 2008.

• Half the business year will soon be behind us and a six-month financial record check-up is in order. Updating your records through the month of June allows you to quickly gauge financial progress by comparing the farm's actual expenses and income to your budgeted amounts. If you did not develop a budget, compare your mid-year expenses and income to half the items reported on your 2007 Schedule F. Flag any items that are different from budgeted amounts. These differences are not necessarily problems, just items that need to be examined and explained.
  
  
• Watch your line-of-credit and be sure to keep in touch with your lender. They all know that prices of all inputs have gone up, yet it’s good business practice to keep them informed of major changes and that you are managing the situation.
  
  
• Production records for livestock and crops should be updated for the first half of the year. Look for big changes from last year, and make sure to cross-reference these with production expenses.
  
  
• Even with the time constraints of summer activities, try to plan and hold regular staff meetings with family members and employees to discuss work plans and set priorities for the next day/week. Consider brainstorming about alternative ways to deal with problems. Use some of the time to help discuss positive outcomes of previous plans and recognize individuals for being creative and doing a good job.
  
  
• Checking your credit rating in July should become an annual event. Independence Day should remind you that you should be independent from identify theft and credit mistakes. All individuals and business owners should annually check their credit ratings. Additional information on your rights to access your credit report and links to the site for obtaining a free copy of your credit report can be found at the Federal Trade Commission’s (FTC) web site at http://www.ftc.gov/freereports. The FTC cautions consumers to make sure they use the correct site because there are “Imposter” sites.

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