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Editor’s Note: In 2018, we know what really works

Who thinks of financial management when we have those road-trip discussions about which innovations should get how much credit for making today’s agriculture so great?

If it was a scientific technology that was adding as much capability to today’s farms as effective financial management, we’d all be quick to sing it’s praises.

We’d also have a pretty clear sense of how much value it was adding to the farm.

It’s an interesting exercise to think about it in terms of bushels per acre. What if we could actually see the returns from financial management (instead of wondering how much of our neighbour’s apparent wealth is actually real)?

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Tom Button
Tom Button
Tom Button

Regardless, the point is that not only do today’s farms have technologies like GPS and herbicide tolerance that our parents couldn’t have dreamed of, we also have access to proven financial and business management strategies that are similarly advanced.

We now know about better processes, such as being more accurate with farm cost calculations and being on top of cash-flow projections, both for short-term needs and for two- to five-year forecasts.

Business management based on hunches gets you off to a poor start, and is unlikely ever to be competitive in today’s agriculture.

There’s no surprise in this for Country Guide readers, of course. But it’s worth setting down in black and white anyway, just to give us a sense of how far things have come.

Similarly, we understand today that farms need to run on return on assets, not simply asset accumulation, they need to identify the critical accounting ratios for their farms, and they need to measure their progress toward actionable objectives.

All of this takes financial acumen. More than that, it takes discipline. It doesn’t always come easy to find the time to do scenario planning, or to see that getting advice on your cash reserves or on your non-farm investments is likely to be as important to your farm as getting advice on tillage.

Which brings up another issue, because not only do today’s farmers have unprecedented access to proven strategies, they have better access than ever before to highly trained bankers, accountants and financial advisers.

None of this is meant to disrespect our elders. If they hadn’t made careful, astute decisions, today’s farmers wouldn’t be farming. But would their decision-making, with the pen-and-ink tools that they had available to them, keep you successful today?

Shrewdness added value then; it adds essential value now. But on its own it cannot be enough.

So the question is, how well are our farms embracing these new tools, and how well are they incorporating the benefits of financial advisers and on-farm meetings and the like?

My guess is that they are heading faster in this direction than anyone could have predicted 10 years ago. The world has changed. And again, farmers are leading it.

Are we getting it right? Let me know at [email protected].

About the author

Editor

Tom Button is editor of Country Guide magazine.

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Comments

  • ed

    Good points. There are some that believe that we should ditch any and all sorts of collective marketing that helps farmers “fight the big guys”, like Ty Domi says in the phone service ad. These are such mechanisms as farmer co-ops and pools, the now defunct farmer’s Canadian Wheat Board and all the supply managed commodity groups. This keeps their market prices higher and helps get that critical ROI, (return on investment), from the market place. Simple and straight forward types of concepts easily understood by even the simple amoung us. Then there are those that feel that in the name of trade volume and general commerce we should let these commodities find their natural bottom and that the ROI come basically from the mail box in the form of tax payer subsidized programs such as subsidized crop insurance, AgriStability schemes and ad hoc payments when the walk away rates get too high and the banks start screaming. Either one will work to one degree or another. The subsidy avenue is messy and controversial but does provide the data to keep pushing prices down which can have a self fulfilling destiny which will ultimately lay at the tax payers feet. It does spring loose assets from time to time to be scouped up by the Empire builders or corporations so that does have those benifits attached. It is hard to say which is better or if a blend of the two will prevail. It is polarized and simply not as black and white as some would like. That is ag. for you. As many have said in Ottawa, the Ag. portfolio makes Medicare look like a walk in the park.

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