The high wire balancing act
David Kohl shows how to walk the fine line between being a producer and a marketer
Many of you feel that you are part of a high wire circus act attempting to find a balance between the time and effort spent on producing crops and livestock versus marketing. Some of you tire of hearing the so-called experts saying that you have to market what you produce.
Is there a way to strike a balance between both components without breaking into a cold sweat or a fit of anger? Finding that critical balance in today's world of tight margins can prevent falling into business oblivion with no safety net.
Many producers will go to seminars and meetings hoping to find that magic silver bullet that will turn their operation around.
Success in production and marketing is not doing one aspect 1000 percent better; it is doing 1000 little things one percent better.
In other words, the devil is in the details. Let's move forward and examine each side of the production and marketing equation to find this common ground and balance.
Examine your resource base including land, water, and livestock. Determine the quality and quantity of the workforce. If you have good quality resources like land, water, labour, and livestock genetics and have the skills to adopt new technologies that are economical, you've got the foundation for long-term success as a production plant manager.
Second, determine if you have the proper crop and livestock enterprises to match the resource base. Pushing the pencil or clicking the computer keys with your farm management advisor, or account manager, may find the optimal mix of enterprises. From the balance sheet, or cash flow statement, a little more working capital margin reserve (cash or items that can be turned to cash quickly) may be necessary to manage the peaks and valleys that can get your financial operations out of balance. Finally, if you are dependent on a single commodity, have less than desirable resources or have lower levels of overall debt, then less aggressive growth patterns may be the best management strategy.
Now let's turn to marketing. Keep an open mind and don't be like one producer in a seminar who was quoted as saying "Marketing is too complicated. Just let me produce the crop or cows and let others worry about the marketing."
There are five specific attributes that market leaders tend to exhibit. First and foremost, they know the cost of production, including fixed and production costs. Second, they have an integrated marketing and production plan, which may include options, futures, hedging and is timed to meet cash flow requirements.
Third, a timetable and checkpoints for executing the plan in line with production operators keeps marketing objective, rather than emotional. Fourth, they have a monitoring and measuring system, including production, traceability and identification. Finally, many have in place the necessary risk management tools that can range from insurance, contracts, irrigation, to bio-security to protect the downside but lock in a profit.
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