The Ag Globe TrotterDr. Dave M. Kohl
Welcome to the weekly edition of The Ag Globe Trotter by Dr. Dave Kohl.
One of my most enjoyable venues with Northwest Farm Credit is their young, beginning and small producer conference, known as the AgVision Summit. The concept of the conference started on a napkin outlined decades ago. This investment has paid dividends over time and has positioned many young, beginning and small producers for the future of agriculture.
Fast-forward 22 years later to a three-day conference in Coeur d'Alene, Idaho, for the 2022 AgVision Summit. On the final day of the conference, we asked the over 70 attendees to present some of the most notable points and perspectives. The following are some of their responses.
Many of the participants were surprised by the large number of farm risk management programs and insurance products available to mitigate financial risk. These programs are particularly important for the young and beginning segment of producers whose prime objectives are often profit and growth.
For those operating family businesses, a succession plan will happen whether you want it to or not. All family members are not equal in succession planning. In today's economic environment it is difficult for producers attempting to purchase farms and ranches to afford a buyout. This is particularly true with inflated asset values purchased from family members considering the cash flow and profits in today's environment. This situation often breaks up the farm or ranch into uneconomical units that may be dispersed to investors or growth-oriented producers. When transitioning a business, the longer you wait to start, the fewer options exist. Time is definitely not on your side!
Northwest FCS customer-members are invited to start the conversation and learn a step-by-step process to build a succession plan at the in-person Family Business Succession Workshop on Dec. 15. Click here to register.
The participants indicated that the sessions presented by Northwest Farm Credit cash flow were invaluable. Cash flow budgets are the foundation to business planning. They require one to think through production plans and integrate them into the financial, marketing, operational and risk management strategies. Cash flows are great communication tools to utilize with your lender, suppliers, spouses and other business partners. The group realized the importance of the financial sensitivity analysis in light of extreme volatility in prices, input costs and interest rates. Ideally, cash flows are monitored on a monthly or quarterly basis and compared to a three-year trend analysis, if the history of the business exists.
One must have a profit plan. This includes an outline of capital expenditures for upgrades and growth. It is important to prioritize your needs over your wants.
The value-added business panel had many nuggets. Direct marketing and value-added production are not for everyone. Many of the panelists said they benefited from the quick feedback from their marketing which allowed them to make adjustments in marketing and in production. They discussed many of the online resources available to build a business plan. The panelists also indicated that a team of advisors can be invaluable for ideas and critical thinking.
Return on relationship (ROR) is critical in building and retaining a brand. If the business has a ROR culture, then obtaining a return on assets (ROA) and a return on investment (ROI) will result.
Much engagement and learning were observed at the latest AgVision Summit on the lake. This conference was a concept from the last century that is fueling young, beginning and small agricultural producers in Northwest Farm Credit's territory in the 21st century.
Dr. Kohl is Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University. Dr. Kohl has traveled over 8 million miles throughout his professional career and has conducted more than 6,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FSA and regulators, as well as producer and agribusiness groups. He has published four books and over 1,300 articles on financial and business-related topics in journals, extension and other popular publications.
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