WHEN asked why they got into farming, most producers say they enjoy
outdoor work. Office time is seen as a necessary nuisance, even a
necessary evil.
But evidence is mounting that a producer’s business management
expertise is a key indicator of farm success.
An analysis of large Manitoba grain farms with similar sales over
several years, including high and low grain prices, shows that farms
ranked in the top 20 percent of profitability had higher and more
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consistent incomes and lower government assistance payments than farms
in the bottom 20 percent of profitability.
The trend is not limited to Manitoba. Among farms of similar size,
producing similar commodities in the same region, there are wide
differences in performance year after year.
This consistency suggests nature alone can’t explain the difference.
There must be aspects of farm management that add to stability and
profitability.
This should not be surprising. Farming is becoming a riskier business.
Farms are bigger and inputs and equipment are more costly. More money
is gambled on each crop’s success.
Profit margins are narrowing. Operations are more diverse and often
include hired help. Markets are more demanding.
To navigate in such challenging seas, it is best to have a chart. In
management courses, they call it a business plan. In it, the business
owner sets goals and identifies resources needed to meet them.
For example, a farmer might want to include a mature son or daughter in
the business. To support two families the farm must grow.
A plan includes such things as financial status, production procedures,
marketing strategies, environmental issues, human resources, plan of
action schedule, and investment strategies. It must be flexible to deal
with the unexpected without losing sight of the goals.
Farmers in other countries appear more likely to appreciate the
benefits of a business plan.
A recent Ipsos Reid survey showed American and Australian producers are
much more likely than Canadians to have a written business plan or to
have attended a farm management training course in the last year.
This gap in business management practices threatens the competitiveness
of Canadian agriculture.
It is appropriate the new agricultural policy framework identifies
improved farm management skills as one of five areas it will focus on.
Money from the new multibillion-dollar agricultural spending package
will flow into new management courses and seminars.
Producers will be wise to take advantage of the information. It will
mean logging more desk time, but they should consider it a investment
in financial viability that will make the outdoor work even more
enjoyable.
