Smart farmers will survive the challenges that arise in 2016. Just as they’ve done in the past, they’ll reassess their spending and recognize cash is king. I also recommend the following:
Understand true cost of production. Account for every dollar. It’s how you’ll quantify whether you’re headed for profit, loss, or breakeven. Don’t overlook your true living expenses, including what you set aside for college and retirement. “Tis the year for living frugally.
Scrutinize every line item in your budget. It’s the only way you can stop haemorrhaging cash and become leaner. Is there a way to cut your overall costs? I challenge you to cut all expenses by 1%. It might seem small, but I’ve witnessed this exercise lead to six-figure savings. Question input costs and negotiate with suppliers.
Be sure to liquidate all non-productive assets. You can generate thousands of dollars by selling losers.
Stay in contact with your lender. They realise down cycles occur. The last thing you want to do in tough times is cut them off.
My comments: Just because an asset is no longer working in your operation, doesn’t necessarily mean it’s a ‘loser’ for everyone. Sometimes our goals change and someone else needs exactly what we no longer need. Of course, if the asset is junk, be sure to sell it that way.
There seems to be a resurgence of retirees wanting to get back to a ‘simple’ life of growing their own garden and/or raising their own animals for food, milk, and/or fiber. Interestingly, it also seems to attract the young set as well with high hopes of being self-sufficient on the land. Nothing wrong with those ideals, but our American culture and requirements are different than what they were 100 or even 50-60 years ago. Many of our expenses are out of our control (health insurance, liability insurance, our reliance on electricity, phones, internet, medical expenses are out of sight, vehicles, petrol, etc, etc), so the ‘farm’ whether it is a hobby size or much larger needs to not only cover these expenses, but operating expenses as well. In other words, one must turn a profit to be sustainable. Don’t forget that ‘simple’ certainly does not mean easy.
I’ve blogged on this before, but one thing that is a killer to many striking out in an agrarian lifestyle is to get FAR TOO MANY irons in the fire. Focus on what you like to do and that which will also turn a profit quickly. After you become financially successful as to being out of debt and putting away a bit of savings, find other ‘holons‘ which will complement or add value to the core activity. Don’t be distracted by get-rich schemes – they do not exist in agriculture. If you have a town job – hang on to it until the farm is a going concern. Doing both is hard – no doubt – but staying out of debt is tantamount to being successful.
This type of operation is typically termed ‘holistically managed’ and there are resources to help you determine a course of action. Our first introduction to this type of thinking was through Holistic Management Resources now known as HMI, Holistic Management International. This link will take you directly to some free downloadable planning tools and and teaching materials. Allan Savory and his wife, Jody Butterfield, started HMI, but have now moved on to start a new organisation called Savory Institute. The Savory Institute website has numerous videos and papers for your perusal.
Marketing – where will you sell your product?
Equipment – how much will the initial investment be? How often will it be used? Does it have multiple uses? How can you make money with what you already own? If there is equipment you don’t use, consider selling it.
Time – when will the cash start flowing back to you?
Weather – Ag enterprises look so easy on paper, but consider that you have no control over the weather and inclement extremes can bring diseases in both plants and animals as well as drought and flooding, damaging hail can destroy thousands of acres of crops in just minutes. Be prepared, both financially and mentally, for complete failures and steep market price declines.
Government – you also have no control over government policies as it picks winners and losers.
Don’t spread yourself out to a lot of enterprises – especially those that are not related – you’ll be exhausted all the time and seldom see a financial reward. Also try to purchase multi-purpose equipment.
Learn from others’ failures, mistakes, and accomplishments. Your situation may be different, but there is no use setting up the same hurdles others have taken down. Some practices simply DO NOT WORK in some or all locales and situations.
Hindsight, of course, is much clearer as to making business decisions, but there are basic principles to be followed.
What is your dream job/career/life? And how are you moving towards it? Have you already experienced your dream job and found it wanting? Why?
The opportunity cost of owning land is next to nil since the government insists on stealing our savings by keeping interest rates near 0% and printing money (inflation), so the easiest way to determine the cost of the grass consumed is by using current pasture rental rates, which in north Missouri is about $60/acre.
Too many times I read (even from producers, sometimes!) that grass is free. Whoa, Nelly! It is not free and, in fact, the cost of grass has sharply increased due to so much of it being ploughed up to raise more corn and soybeans. Folks, that is not sweet corn nor edible soybeans. This is commodity, GMO crops raised to be fed to animals like cattle, chickens, pigs, fish, horses, buffalo, and even lambs and deer!
But I digress – how much grass do pastured hens eat and how does that relate to a dozen eggs? Hopefully, these questions can be answered at least for our management style.
By measuring the amount of forage in a small paddock before the chooks are moved in and then again after they are moved out in 3 days (during the growing season, it is imperative to move stock at least every 3 days to prevent removing too much forage, however, if you need to improve the diversity, overgrazing is a good tool to use for establishment, but it must be part of the plan). As with any research, there are variables that are hard to control. While we will measure the amount of feed we give them and report that, there is no way of knowing how many bugs they will eat. We plan three replications.
Day 1 – Fourteeen mature egg laying Barred Rock hens – .039 acres with mature fescue and about 40% red clover. Estimated forage available is 4 inches times 200 lbs of grazeable feed is 800 lbs per acre or 31.2 lbs (800 x .039). I’ll measure what is left when we move them in 3 days to obtain what they actually consume. Chooks will mash down a fair bit, but that is okay since that will feed the soil microbes and organisms. We are offering 1 lb of seed cleanout consisting of wheat screenings – unsprouted. Sprouted would be better, but for this trial, we want to know how much forage they are eating out of the pasture.
Results: Eggs laid: Day 1: 12 eggs, Day 2: 11 eggs Day 3: 7 eggs. Indications are that without more grain – production decreases markedly, this may not be a bad thing – pencil out the costs and needs.
Grazing equivalent: The 14 chooks grazed in 3 days what 1 cows would grazing in one day
Bear in mind, however, the trampling/mob effect would be entirely different since cows would likely trample more and certainly put more poop in large piles which will then cover up more grass. With so much rain, even more grass would be destroyed. There would also be a considerable difference in mob effect with 500 or 1000 chooks vs 14 as well. Chickens range only up to 250 feet (extreme outer limits) from their nesting boxes, so more trampling would occur due to concentration. I would think with that many – chooks would need moving everyday vs 3 days.
Chooks will eat far more bugs than cows.
There are several differences in the grazing impact, so just comparing the potential grazing is just for fun.
Neverthess, this experiment demonstrates that no matter the species – pastures MUST BE ALLOWED ADEQUATE REST PERIODS TO IMPROVE AND ALLOW FUTURE GRAZING! Animal movement must be controlled and their keepers must balance animal performance and pasture production effectively.