Curious about what's on the minds of America's top farmers? We were, so we recently convened Russell Consulting Group's clients from 10 states — some of America's best farmers — to pick their brains.
In 2005, the average return on assets (ROA) of our client base was 9.12%, and return on equity (ROE) was 14.9%. These farmers are on the cutting edge of production agriculture.
Their minds are most focused this year on biofuels, transition and succession planning, fuel and fertilizer costs and availability and leveraging the human resource.
Ron Farrell of Farrell Growth Group made a presentation on ethanol, biodiesel and fertilizer that was one of the conference highlights. He says the ethanol and biodiesel industry will significantly change local demand markets for feed and food products. These plants may limit access or raise prices on feedstocks.
Farrell's advice to help farmers manage risk and take advantage of opportunities is to:
Understand the market.
Plan your operation and work the plan.
Use available tools to hedge both costs and profits.
Concentrate on ROI or ROA.
Not put all your eggs in one basket.
Look to strategic partnerships and alliances where appropriate.
Succession planning, or transition planning, is another timely topic among this group. What's the best way to involve young people to allow equity growth, develop a team to shoulder more management responsibility and allow the senior generation to retire when they want or need to?
I know of few industries where the opportunity and excitement is better than in production agriculture. One of our clients, Farm Partners from Harlan, IA, has a unique structure and has created a way for five young farmers to be in production. Without that opportunity they would not be farming today.
A related concern is how best to use independent contractors for intellectual capital. They offer flexibility, reduced overhead and legacy costs. Legacy costs are medical and retirement costs that continue after retirement.
I started Russell Consulting Group nine years ago with my partner Terry Jones. Shortly after that our growth required adding associates to our group. We now have 20 associates servicing clients in 25 states.
Each associate is an independent contractor and provides all of his or her own supervision and expenses, yet are tied closely to Russell Consulting Group. That has many advantages since each person has excellent business acumen, experience and talent. I refer to them as our “brain trust.” It provides us great flexibility without having any W-2 employees.
We meet weekly via conference calls. My partner and I have no legacy costs, no payroll and yet have many of the advantages of other organizations with large overhead costs.
This structure works for production agriculture, too, by providing additional strength and backup.
Moe Russell is president of Russell Consulting Group, Panora, IA. Russell provides risk management advice to clients in 25 states. For more risk management tips, check his Web site (www.russellconsultinggroup.net) or call toll-free 877-333-6135.