In the March issue of Soybean Digest, we discussed North American competitiveness to other regions of the world. Now let's zero in on your farm and determine whether you have the necessary ingredients to be a competitive player in the domestic and international marketplace, regardless of your management abilities.
Let's examine, for your locality and business, the same criteria that were used in the global rating game. They include resources (land, water and labor), infrastructure (roads, agribusiness and technology), political and public support of agriculture, financial stability and your access to markets.
Those are bigger issues than you might expect. I was recently in Yankton, SD, where a group of young producers told me that they couldn't expand their operations because the community wasn't supportive of their type of agriculture.
In Freeport, IL, farmers were concerned that they couldn't afford to buy or rent land that had inflated value due to development pressure from Chicago.
Then, flip on the Weather Channel. Weather disasters have producers wailing like a country western song gone bad. Welcome to the changing structure of agriculture.
Also, consider this. A windshield inspection from a rental car or a cross-country red-eye flight finds fewer rural yard lights — lights are clustered. That's because about 387,000 commercial farms are generating 87% of farm revenue. Agriculture is pocketing in regions that demonstrate the necessary attributes to make it competitive.
So let's look at factors that will help evaluate whether your farm operation will compete for profits in the 21st century.
A tour of North America finds that globally competitive farms are clustering in areas with Class I or II soils that can be economically purchased or leased. Class III, IV and V soil areas often are supported either by government payments or the Farm Service Agency (either direct or guaranteed loans), or are utilized more as recreational use. That's because, in times of razor-thin margins, managers are severely challenged due to the increased potential of farm financial losses brought about by the limitations of the natural resource base.
The Class I and II areas give managers the extra edge in timeliness of planting, harvesting and yield response, and have the effect of separating the winners from the losers.
In the future, domestic and possibly global wars could be fought over water as it becomes the most precious commodity.
Examine the quality and availability of water on your farm. Can it be accessed for irrigation to reduce risk at a reasonable cost? Are weather patterns consistent to provide sufficient rain in a timely manner? What are the water quality issues in the area?
Finally, analyze the quantity and quality of labor available and the competition for this labor in the region. Granted, many crop farms have minimal hired labor needs. However, being able to hire well-trained individuals at a reasonable cost is essential in the critical planting and harvesting periods, or on a regular basis if you have a diversified farm.
Infrastructure And Agribusiness
Hop in the pickup and examine the 30- to 50-mile radius around your farm business. Do you see schools consolidating, machinery dealerships and agribusinesses leaving the area, main street districts with empty storefronts, and bank lobbies with a growing number of elderly people? Or do you see golden arches (McDonald's) being constructed, dealerships and agribusinesses expanding, and research being conducted by agribusinesses and universities?
The first scenario is a rural community that's in decline with fewer support services. The second scenario describes areas that will not only provide services, but also the lifestyle that a younger generation of producers and families will want to conduct their businesses and lives. The proximity and access to information, technology and support services will become increasingly important in the profit and lifestyle equation for the 21st century manager.
Political risk is probably the largest risk facing early 21st century agriculture throughout North America. Political issues range from environmental and property rights to development of farm ground and farm program payments.
Assessing your specific farm requires you to answer the following questions: Are your neighbors (farm and non-farm) receptive to your type of enterprise and size of business? What's the pressure from development and recreational uses? How stringent are environmental and conservation practices? Can you move machinery down the highway without creating a major traffic jam or the rural version of road rage?
In certain regions, more of your time and energy will be consumed in front of planning boards. It could be negotiating lease agreements with granny landlords. Or, more challenging are people who have inherited land but live in urban areas and only see the bottom line. In the future, more effort will have to be focused on documentation concerning environmental and natural resource practices or inputs that are used in your crops and livestock. Public relations and relationship management may be critical 21st century skills for bottom line financial success.
Over the past quarter century I have worked closely with the lending community. Areas generally thrive where lenders are pursuing ag loans. Observe the time and monetary commitment they express through sponsored seminars, youth programs and overall visibility in the community.
Pundits might say that more lending and financial services will be garnished over the Internet. My contention is that ag lending is still an eyeball-to-eyeball business. It requires that the staff understand your enterprise's challenges and opportunities.
If you're a commodity producer, are you located near terminals and markets? What is the status of the rail, highway and waterway systems near you? Do you receive premiums because of proximity?
Is your region a hotbed of producers who network and seek strategic alliances to better themselves in buying inputs and selling products?
If you produce value-added products or services, are you near local markets? What's the competition? Is the infrastructure available to meet the more demanding domestic and international consumer? These questions need to be answered to gain a marketing edge.
This article probably raised more questions than it answered. It's now time to size up these five criteria as they relate to your farm. Conduct your own personal SWOT analysis (strengths, weaknesses, opportunities and threats). You may be able to manage some factors, but you'll be required to manage around others.
For more on world competition, check out Dave Kohl's story “The Global Playing Field” on our Web site (March issue). While there, click on Kohl's weekly column, “The Road Warrior Of Agriculture,” written exclusively for SoybeanDigest.com.