For the past several years, my message has been simple yet constant: cycles always have been and always will be part of production agriculture as long as fear and greed—two basic human emotions—exist.
Cycles have highs and lows, which means commodity and input prices and interest rates hit both ends of the spectrum and every point in between. While we all wish we could predict the ups and downs, we can’t. So how do we survive in a volatile environment?
That’s where personal accountability comes in. Knowing that cycles come full circle, take the initiative to plan ahead and control your destiny. Personal accountability means you don’t blame those around you, or the weather, government or markets. It means you make your own luck.
I’ve been challenging farmers this winter to pull out their income statement and model today’s costs against $4 cash corn and $9 cash soybeans. Look at each line item expense and develop an action plan to manage every cost. I hope we don’t ever have to pull those action plans off the shelf, but going through the exercise when times are good will help you take the high road to personally accountability when things go wrong.
The key is preparation. Planning for the low points in a cycle is easier said than done, especially when we’ve been riding high for several years. A prime reason why some businesses are successful is that they plan ahead. They know that managing cycles is critically important to the longevity of their business.
Case in point: Caterpillar. The company’s current CEO said the recession of the early 1980s gave them a strong dose of reality and forced them to make their own luck for the future. When the cycle ran its course and turned sour again in 2008, the company was able to breeze through the recession and come out on the other side turbocharged for whatever lay ahead.
As I’ve said many times before, bulletproof your balance sheet during the good times, so you can catapult ahead of your competitors in the bad times. Those who are greedy during the good times will likely be on their knees in the bad times.
That’s a polarizing statement, but what side of the fence do you want to be on when the market cycles? Do you want to be on the side where the primary concern is damage control? Or, do you want to be ready to capitalize on opportunities. Cycles in production agriculture will hurt some, but those same cycles will create opportunity for others. The difference between those who suffer and those who prosper comes down to preparation.
It’s easy to take the high road to personal accountability when things are going great. It’s tough when you get caught up in the vortex of everything going wrong.
I’ve been in both of those positions, professionally and personally. The biggest challenge is dealing with the basic human emotion of fear.
Tom Kelly of University of California Berkley’s Haas School of Management gives clients strategies to get past the four fears that hold most people back from taking control of bad conditions. They are:
- Fear of the messy unknown
- Fear of being judged
- Fear of taking the first step
- Fear of losing control
Breaking fear down into these four areas and thinking through what you need to do, how and when, really helps. Simply saying "I like" or "I wish" rather than "That will never work" is a good strategy, Kelly adds.
Moe Russell is president of Russell Consulting Group in Panora, Iowa. He provides risk management advice to clients in 34 states and Canada. For more risk management tips, visit his website at www.russellconsultinggroup.net. To submit questions, call (877) 333-6135 or