How to bounce back after an industry-wide crisis
Here’s a comforting message for corn and soybean producers hit hard by the downturn in commodity prices: You’re not alone. The painful cuts economic conditions will force on some operations this year have been felt in other areas of agriculture.
Yet the reality is conditions tend to improve, as Dave Van Essen can attest. The Lebanon, Ore.-based producer of ornamental shrubs and other plants for the housing market co-owns Van Essen Nursery with his wife, Leanne. The two faced tough decisions after the housing and financial crises of 2008-2009.
“We had to get efficient and shrink our labor down as tight as we could,” Van Essen recalls. “Our staff was onboard. They saw it all through the community.”
Rather than laying off employees, Van Essen and his management team got creative. They assigned fewer hours to workers and enacted a voluntary unpaid time-off policy during winter with the promise that when the busy season returned, they would come back to work.
That kind of flexibility will be important for row-crop and livestock producers faced with tough financial decisions in 2016.
“We need to have a disaster plan,” agrees Curt Covington, senior vice president of agricultural finance at Farmer Mac in Washington, D.C.
Renewed Focus. To carefully navigate his business during the downturn, Van Essen looked at all areas of the operation.
The nursery maintains an inventory of 1 million plants or more, so it became important to monitor supply on a weekly basis to avoid overplanting. In the years since, the economy remains somewhat weak, but demand for plants has picked up. The business has increased the number of branded products it sells from suppliers such as HGTV and First Editions from Minnesota-based Bailey Nurseries. That helps ensure inventory matches customer expectations while increasing profit margins.
“It takes a lot of commitment,” Van Essen says.
Outside Forces. Such resolve paired with smart business planning will be important for all farmers in the months ahead. Top operators also need to consider winds of change beyond economics.
“Political and social risk is the biggest thing we ignore,” cautions Covington, pointing to the regulations some consumers want to impose on milk producers. “There are groups in California and Wisconsin that want to drive the dairy industry out of the state.”
To address points of vulnerability, Covington advises producers to maintain regular communication with trusted advisers and examine their finances on an accrual basis to understand profitability daily.
How to Create a Tight-Knit Business Team That Weathers Tough Times As A Family
Dave and Leanne Van Essen kept their nursery team together after
the U.S. housing crisis.
When economic clouds loomed large, Dave Van Essen of Van Essen Nursery in Lebanon, Ore., relied on the relationships he and his wife, Leanne, had built with their business team. Although the operation had to trim hours during the 2008-2009 financial crises, he says, they committed to adding hours when conditions improved and to fostering a sense of family by:
- Hosting monthly birthday celebrations for employees on their team, featuring cake and ice cream as well as gift cards
- Recognizing skilled team members and growing talent by providing job training and professional development
- Sharing financial statements in a transparent way at business meetings