Agricultural economist David Kohl recently shared a number of important risk management recommendations producers and agribusiness professionals should consider to protect farmers during volatile grain market conditions.
As summarized by University of Nebraska Extension educator Brandy VanDeWalle, the recently retired Virginia Tech University economist gave a brief synopsis of five key points he says are critical to the success of agricultural operations today.
1. Stash that cash. Having money available allows you to better weather market swings.
2. Maintain liquidity, liquidity, liquidity. It’s important to have some assets that can easily be converted into cash.
3. Be innovative. Manage all aspects of risk. Risk management is more than grain marketing. Itis essential to take a three-pronged approach that includes costs and inputs; crop insurance and marketing; and interest rates. Kohl says it's an old, but true adage, particularly when you're managing risk: Don’t put all your eggs into one basket.
4. Be resourceful. Have another person look at your business plan and/or operation and have them challenge you. Discuss various options. Seek people who will provide good feedback and have a positive impact on your success.
5. Be selective. Only select or buy tools that are within your management abilities or fit into your system. Also, don’t buy the “love property” — that property which you just have to have, even if it doesn’t make sense to buy it. When you buy land, be sure to have liquidity. Don’t borrow money just because “the money is cheap.”
VanDeWalle says Kohl also listed a number of attributes of prosperous producers, including:
* Proactive in changing environments
* Can see different perspectives and think outside the box
* Have networks and alliances with a strategic focus
* Possess excellent people and human resource skills
* Negotiate win-win situations
* Can coordinate one’s production system
* Are solid risk managers and calculated risk takers
* Has financial management systems
* Has excellent time management skills and balances work, family, and play
* Is selective about technology adoption