Klinefelter: By the Numbers

By Danny Klinefelter
DTN Farm Business Adviser

When it comes to research and continuing education on business management issues, commercial producers are pretty much on their own. The federal government and private foundations have chosen to direct their research and extension funding to start-up beginning farmers and socially disadvantaged producers. Academic research in agricultural economics and agribusiness is almost entirely oriented toward refereed journal articles which are almost never read by producers. Undergraduate teaching programs don't address many of the areas needed by students who plan to go into farming or ranching careers, and most extension programs delivered at the commercial producers' level are fee-based.

Unfortunately, most of the voting population is almost completely removed from agriculture with their only real connection through social media and the internet, which are often negative about commercial agriculture.

If commercial producers need help in the area of strategic business management, whether it's research or education, they are probably going to have to find ways to fund it themselves, possibly with some help from firms in the agribusiness sector that rely on them as their primary market. The AACREA (Argentine Association of Regional Consortia for Agricultural Experimentation) groups in Argentina learned this quite a while ago. In effect, commercial farmers funded their own Extension Service.

While a few land grant universities have excellent websites, most agricultural programs lack the critical mass of faculty focused on emerging areas of importance in farm business management. The likely result is that only a few universities will have the resources to focus on applied research in strategic decision making and in-depth continuing education/extension programs which target commercial producers' increasingly specialized needs. Until now, this level of focus has been primarily in agricultural, food, and natural resource policy, and only 3 or 4 schools have had the budgets or the staff to develop centers of excellence in that area. I'm biased but, I believe there is a need to do the same in strategic farm business management. As in the case of the policy centers, the focus would need to be national, including both applied research, course offerings and continuing education/extension.

Funds are very tight for most producers and their focus is currently on maintaining sufficient liquidity to survive, to continue to obtain credit in an increasingly regulated lending environment, and to try to be in a position to take advantage of opportunities that will likely become available. Survivors will be those who have developed financial strength and management expertise while their peers are unable to attract capable successors or aren't able to hire the expertise needed in the more specialized areas of management. The extent of this transition will obviously depend on how long the current downturn in farm income lasts.

As I have said before, strategic management is all about anticipating, adapting to, driving and being able to capitalize on change in an increasingly volatile market and production environment. Competition and markets are becoming increasingly global, consumer driven and controlled by government regulations. Technology will continue to change at an exponential rate, with real-time information making verification and compliance easier for food processors and retailers who want to be able to differentiate between producers.

Continuous learning and improvement, specialized management expertise in an expanding number of areas, more timely and detailed information about what's going on, both in the business, and the external environment, the quality and development of human resources, and the ability to collaborate with other business up and down the supply chain, will determine the winners and the losers. Unfortunately, some very good people will fall by the wayside.

It is critical to heed the advice of ag economists Mike Boehlje and Dave Kohl: Get better before you get bigger, and realize that your business success will increasingly rely on interdependence, building stronger networks with people who challenge your thinking, and learning from others, both inside and outside of agriculture. Doing business the way it's always been done isn't going to cut it for long.

EDITOR'S NOTE: Danny Klinefelter is an agricultural finance professor and economist with Texas AgriLIFE Extension and Texas A&M University. He also is the founder of the mid-career Texas A&M management course for executive farmers called TEPAP. Grains Pro subscribers can access all of his columns online using the News Search feature under News.

(MZT/CZ)

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