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Break Away From the Cycle

February 26, 2014
By: Sara Schafer, Farm Journal Media Business and Crops Editor
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To remain competitive as the ag economy swings, shift how you run your farm. Times are changing. The past few years have shown record prices, but corn and soybean prices are near break-even levels for many farmers.

As these factors change, Rod Osthus, president of the R.C. Thomas Company, a seed sales training firm, says farmers need to adapt.

Many farmers are caught in what Osthus calls the "ag cycle." He explains that "this is when farmers always do what they’ve always done." Osthus says this kind of thinking is detrimental to the farm.


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It takes away the ability to plan early and buy early, he says. It also minimizes the effectiveness of your decisions and makes you irrelevant as a decision-maker, Osthus adds. As if that’s not enough, being stuck in the ag cycle takes away your ability to be a leader, increases the cost of doing business, makes it impossible to significantly increase production and essentially stalls growth.

However, Osthus explains every farmer can break out of the detrimental ag cycle by following four important steps.

1. Recognize the Ag Cycle. Farmers must be willing to acknowledge that their farm is stuck in the ag cycle. For example, Osthus says 95% of farmers don’t want to plan next year’s crop, especially seed varieties, until after harvest. "That’s too late," he says. "When the planter stops rolling, start planning."

2. Don’t Rely on Analogical Thinking. In many areas of farming, consistency doesn’t exist, Osthus says. Each year is unique, and past successes don’t guarantee future successes. Additionally, Osthus says, technology changes everything so fast that you can’t keep up.

3. Plan to Increase Production. Osthus encourages farmers to develop a plan to increase production by 30% to 50% in five years. "Bushels trump every­thing," Osthus says, "It doesn’t matter if markets go up or down; your only protection is bushels." Do everything possible to produce as many bushels as possible, he recommends, noting that there are five key factors required to produce a top crop—soil condition at planting, seed placement, seed quality, right variety in the right field and post-planting management.

4. Change your Circle of Influence. Think about your biggest assets. "Who are they?" Osthus asks, noting that they might not officially be a part of your business. "Who’s on your team? Who is giving you advice right now that can help you achieve your goals?"

Osthus explains that all of these individuals, likely ranging from bankers to crop insurance salesmen to your broker, fall into four areas—production, crop insurance, grain marketing and ag finance.

"These specialists need to work together and help you make the right decisions," he says. "As a farmer, you need to get rid of the word independent. The word these days is ‘interdependence.’" 

 

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FEATURED IN: Top Producer - March 2014

 
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