Family dynamics called key to farm profitability

Producers also need to know cost of production, make a business plan and adjust to changing situations, say experts

CALGARY — When Richard Stamp listed the top five risks for farm operations, he realized he has changed perspective over the years.

The owner and operator of Stamp Farm and Stamp Seeds of Enchant, Alta., learned that family dynamics have to be managed if any other part of the agricultural operation can survive and thrive.

Stamp provided his insights Nov. 24 at the Agricultural Excellence Conference organized by Farm Management Canada.

His initial list of the top five risks looked like this:

1. operations

2. access to capital

3. fortitude

4. education

5. family business and dynamics

Flip the order around and you get Stamp’s current list.

He and his wife and partner, Marian, started farming in 1978, with no cash and little business sense, said Stamp.

“Risk management, in those days, was nothing you talked about,” he told the assembled crowd.

A venture into the seed potato business ended in disaster, but the farm business survived and now operates with Richard, Marian, and their three sons, Greg, Nathan and Matt, all part of the business.

He said having a market for commodities before producing them is key, and a marketing plan should include full knowledge of cost of production. Profits rather than size should be the focus.

“Don’t get hung up on this big farm talk because at the end of the day it’s all about profits,” said Stamp.

Other tips include using equity to leverage expansion rather than refinancing, using accrual accounting with quarterly analysis and treating customers as partners in the business.

But it all comes back to family dynamics, said Stamp. Allow family members to dream, and make sure each person is in the right job, one that they enjoy.

David Sullivan of Global Ag Risk Solutions, who grew up on a farm south of Moose Jaw, Sask., is another proponent of accrual accounting to reduce farm financial risk.

“A lot of farms, their accountant produces the financial statements and then they put it in the filing cabinet and never look at it,” said Sullivan.

Knowing cost of production is vital. He recommended getting the best agronomy advice possible, using it and keeping ruthless control on fixed costs.

“Bad things will eventually happen,” he said. “You just have to have a business structure … to get your way through it.”

Scott Ross, director of business risk management and farm policy with the Canadian Federation of Agriculture, said risk management involves planning, and more planning and then adjusting the plan to suit changing situations.

“When I look at what the biggest risks facing producers today are, one of the ultimate issues I see is that the risks today aren’t the same as they were a year ago, aren’t the same as they were a year before that, and depending on what you’re producing and where you’re producing it, your risk profile facing your operation could be completely different,” he said.

Farm managers face more challenges than ever and requirements change quickly, Ross added. Today’s agricultural industry is increasingly consumer driven, and it is hard to predict trends. He suggested that farmers develop a team of people they can trust who have skills that supplement their own.

Ross said medium-sized farm operations are disappearing, while large and small farms are each becoming more common. Each of those has different risks and complexities.

“The more you can look forward, plan and have procedures in place, the better shape you’re going to be in moving forward.”

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