2/9/2013 7:00 AM
By Carol Ann Gregg Western Pa. Correspondent
CLARKS MILLS, Pa. — Ag globetrotter David Kohl notched several hundred miles last week during a six-stop speaking tour across AgChoice Farm Credit’s territory in Pennsylvania.
Kohl, professor emeritus of agricultural finance at Virginia Tech, had a load of advice to deliver about how farmers could weather the impact of the global economy on their businesses.
As a management coach, Kohl draws on hands-on experience as one of the owners of Homestead Creamery, which provides home delivery in glass bottles in the Blue Ridge Mountains and makes 43 flavors of ice cream, eggnog and custard.
“I see four emotions in agriculture — greed, anxiety, complacency and optimism,” Kohl said.
There is a lot of volatility, extremes, he said. As some people want out, there will be more opportunities for new, young farmers to take their place.
“Plan for the extreme,” Kohl advised. “During Hurricane Sandy we had no electricity for eight days,” which prompted the creamery’s managers to put a good generator system on their capital wish list for the future.
Regardless of whether it’s expansion, transition or day-to-day operations, Kohl recommends using advisers to help make the important decisions.
Kohl also encouraged his audience to be lifelong learners.
“Follow the HUT principle — hear, understand and take action,” he said. “Learn from your mistakes. Don’t make the same mistakes twice.”
He said American agriculture has been going through a super cycle from 2000 to 2012. Land values have increased. Grain prices have increased as well as input costs.
In the early part of the cycle, Kohl said, he touted the “2-10 rule,” that farmers could expect to have two years when prices, weather and yield would all be favorable and eight years that would be challenging.
The picture now isn’t like that, Kohl warned, so beware.
“It’s not the bad times but the good times that break us,” he said.
We let our guard down. We begin to spend more. We need to be careful in the good times as well as the bad.
Cash flow is so important, he said, farmers should create a cash flow report every month. Cash and inventory that can quickly be converted to cash to cover several months’ expenses will protect them from the volatility that farms are facing.
“I hear a lot about transition planning,” he said. “That is so much more than estate planning. Put together a trusted adviser team.”
He recommended including an outside facilitator, attorney, lender, veterinarian, crop adviser and all the ownership parties.
He also recommended that the meetings not be held at the farm but at a neutral location where the facilitator will be able to ensure that all parties have an opportunity to state how they perceive the future of the operation.
Looking at agriculture as part of society, “You need to face that you are the new minority,” Kohl said.
What are your priorities in business, in life, for your family? he asked. Top producers learn how to prioritize and then to prioritize their priorities.
Kohl sees volatility continuing into the future and noted that Mother Nature is not predictable.
“Watch weather patterns. They will impact profitability,” he said.
Biotechnology, engineering technology and information technology are all other factors affecting agriculture production.
“Regulation will impact your operations. Document everything that you do,” he said, advising that people have protocols in place and recorded, and keep good records.
Farmers have to learn how to be people managers, he said, and finding good employees is difficult.
“Do you have the type of business that will attract the best employees?” Kohl asked. “It is very hard to overpay good ones.”
The program concluded with a panel of producers who talked about bringing the next generation into ownership of farm operations.
Kohl asked each panelist questions to encourage them to talk about the challenges and rewards of the process and how they have used or are using outside advisers to help them.