A question from a lender in our online agricultural lender course stimulated some great thought: With all the obstacles and challenges agriculture faces today, such as bird flu, weather, imports, fuel and energy costs, what do you see as the most urgent and pertinent threat to the industry and its producers?
Thinking this question through, I came up with a response that may surprise you. The number one threat to agriculture is often the managers themselves.
I agree agriculture is challenged by a multitude of issues, but how one positions himself to proactively tackle the events is often the determinant of the outcome. Effective managers divide challenges into two categories: those that you can manage and those you manage around. Time and effort worrying about variables that are out of your control can lead to a “do nothing” attitude or a “deer in the headlights” mentality.
For example, a producer at a recent meeting had three years of corn in the storage bin, optimistically looking for $5/bu. corn prices. He may hit the home run, but has a higher probability of striking out. A producer seeking to profit on the current energy boom by planting dry land corn in an area with a probability of weather challenges eight out of 10 years has to accept the potentially negative consequences.
Outside of agriculture, homeowners who signed on the bottom line for an interest-only 125% home mortgage anticipating housing prices would never decline and interest rates would not increase can only make one shake their head with a soft real estate market.
Whether it’s the household or the agriculture manager, those with prudent management along with sound debt, investment, and marketing strategies are better positioned to handle the “blue sky” incidences or trigger events that occur in ones lifecycle.
Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.