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Production Managers vs Business Managers in the Ag Industry

Date: 
Author: 
Dr. David Kohl
Educational Opportunities: 
Videos
Interests: 
Grain, Dairy, Swine, Beef, Young, Beginning Farmers
Home > Education & Events > May 2019 > Production Managers vs Business Managers in the Ag Industry
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Hi, I'm Dr. Dave Kohl, Professor Emeritus of the Agriculture Economics Department at Virginia Tech, Blacksburg, Virginia. Today, let's compare the 1980s to the current economic cycle. Early this year I was in Lincoln, Nebraska, in a snowstorm; I finished the seminar and some FFA students were there having lunch with an older Nebraskan producer. And he said something rather profound. He said during the 1980s, it wiped out a lot of the average and below average production managers. However, he said, this economic cycle is wreaking havoc on the average and below average business managers.

So let's look at what that business managers must do over the next three to five years. Number one, they must know their numbers. Know the cost of production, know the cost of production via enterprise. Of course do a cash flow and monitor that cash flow, and then do accrual income statements. Second, they must have a good, sound marketing and risk management program - ranging from crop insurance, but also knowing the cost of production and marketing when that profit window comes.

Another element that is critical is to have a system designed for your business consistent with the resources, the management skills, etc. And one of the things that he said was very astute was how business budgeting is important, but also personal family living budget is very important from a cash flow standpoint.

And then, occasionally running your numbers by a team of advisors. That could be the lender, could be the crop consultant, the livestock consultant, and having periodic meetings so that adjustments can be made as the year progresses.

That is the business IQ which is going to be very important over the next three to five years. Production's still important, but the business IQ will be the separator.
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