Farm management best practices

Best management practices are hot topics inside and outside of agriculture. Have you ever wondered how you stack up as an agriculture producer? Well let’s go to the Executive Program for Agricultural Producers (TEPAP), which I consider the zenith of lifelong learning events for agricultural producers. This year represented my 24th year at TEPAP, and it once again provided a week of education, information, networking, and management stimulation. Dick Wittman, the highly respected farm management consultant from the Northwest, conducts and summarizes an annual survey of best management practices of this group. The following are some of the highlights of this year’s survey and a summary over the years. This year’s group survey results exhibited three potential weaknesses given the current agricultural economy which is transition.

Less than half of producers at TEPAP indicated that they review key performance measures and ratios annually. However, compared to a historical average of 27%, there was marked improvement by this year’s participants. Having a dashboard of key financial ratios, comparing ratios to previous years, and benchmarking them to farm financial databases is a high priority best management practice.

For those specializing in the grain industry, monitoring performance each quarter is becoming more important. Ag lenders are getting much more cautious, with potential losses mounting given the projected prices for 2015.

Another area of concern was owner withdrawals from the business. A best management practice is to have a defined policy for owner withdrawals that is followed and also monitored. It was interesting that only 21 percent of the group had a policy, but historically this was 18 percent. A worst management practice is co-mingling business and personal expenses. It is important to develop a financial system to separate business and personal expenses so accurate cost of production can be developed. Ag lenders will be closely monitoring family living withdrawals as the difference between the high and low one-third of producers amounts to $50,000 to $80,000. Placed on a per acre basis, the low one-third was $80 per acre and the high one-third was an astounding $240 per acre. Tightening the belt in these areas will be a high priority in the economic adjustment on the horizon.

Next time I will cover more of this survey.

Road Warrior pit stop

Over 75% of this year’s TEPAP group was under 42 years of age, which is totally opposite of the Ag Census data. However, these will be the future leaders of the industry. The average producers in the census data may have difficulty operating in 10 years.

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