If there’s one thing certain about farming, it’s the uncertainty. Prices, weather and other variables are constantly changing and farmers in most sectors are tasked with doing business without being able to predict future outcomes.
Research released by Farm Management Canada last year indicated three in every four Canadian farmers are working at mid-level or high stress. Market unpredictability was found to be the leading cause.
The Healthy Minds, Healthy Farms study also concluded that regularly following a written business plan contributes to peace of mind and more effective coping mechanisms.
But how do you plan in an industry with so much volatility?
Brent VanParys, partner in business transition services at BDO Canada, knows the question gets asked. But he also says the best way to deal with uncertainty is to create clarity.
“Business planning is important because it promotes alignment and understanding” VanParys says. “There is value in the planning process so stakeholders are aligned around where the farm is going and how it will get there.”
A management evolution
For Amy Cronin of Cronin Family Farms, communicating about farm goals and actions is part of everyday life.
Cronin and her husband Mike got their start as first-generation pork producers in Huron County, Ont., in 1998 — a year when hog prices dropped to record lows and many farmers were in crisis.
Cronin says the early years of their business were focused on learning as much as they could about production and developing their skills. They were also in the midst of growing their own family and raising six children.
“We talked about our goals and where we wanted to be in two years, five years and 10 years but we didn’t really have a plan and we did not have things written down,” she says.
The business planning aspect of their operation became more formal in 2009 when the Cronins enrolled in the CTEAM management training program. “We really started to ask ourselves some hard questions. We knew that we had to change something if we were going to give our children an opportunity to farm, but we didn’t know how to do it.”
Through the two-year process of CTEAM, the couple networked with coursemates and learned from instructors and other speakers. They evaluated their management practices and ultimately wrote a farm business plan. Cronin says it was a changing point in their farming career.
The vision of “Progressive. Prosperous. Best in Class.” has since guided the couple through substantial growth as well as some challenging times.
Today Cronin Family Farms is a hog, chicken and crop operation with over 100 employees in Canada and the U.S. The hog component of their business has grown to include 22,000 sows with operations in Ontario, Iowa and Missouri.
“The most difficult thing about the hog industry is market volatility. It’s not only the biggest challenge financially but it’s also the biggest challenge mentally,” says Cronin. “It always amazes me how much markets can change… It’s a global business that is impacted by things far outside our control.”
Focus on control
Country Guide asked Cronin how farmers can develop business planning practices despite unpredictability. Her best advice? Think about the things within your control and work to do those things really well.
“Things within your control matter because they are what your banker looks at and what keeps you sane when the rest of the business seems to be falling apart,” she explains. “It’s about having something positive to focus on. When the things you can control are going well, it helps you get back up on your feet faster when volatile markets or disease hit.”
For the Cronins, record-keeping is an aspect of farming within their control. They’ve put a lot of work into consistently improving production and financial record-keeping over time and continue to adopt new technology.
This management focus means that monthly financial statements for Cronin Family Farms are produced and analyzed. As owners, Cronin says she and her husband spend time assessing cash-flow statements to identify changes. “We are always interested in figuring out what numbers are changing month over month, and why, so we can then go back and fix those things.”
Cronin believes being nimble is key to success but has learned it is essential to have accurate information readily available.
“As our business has evolved, we have become a lot more detailed in what we do so we have data at our fingertips all the time,” she says. The evolution has included hiring a full-time controller so company books are current every day of the year.
Raising team performance
The Cronins find human resources is a component of business they can somewhat control. “You can plan ahead by making sure you have adequate staff so labour isn’t creating additional pressure when unpredictable events occur,” advises Cronin.
In Canada, they rely on the Temporary Foreign Worker Program to ensure there are enough team members for everyone to take time off and enjoy holidays while maintaining productivity.
But labour is a much bigger challenge on the south side of the border — and it’s taught the Cronins a lot about management. “An employee handbook becomes really important when you have staff coming and going. We’ve had to improve documentation and make sure we have strong policies and procedures in place to deal with different situations consistently.”
Real gains in a pandemic year
Core values are embedded in most business plans and the Cronins use theirs directly when hiring team members. “A key learning for us was that finding the right people isn’t necessarily about their skill set but about who they are, what their values are and how they work in a team,” explains Cronin.
Although nobody could predict the COVID-19 pandemic, having a planned training program in place helped the Cronins pivot to adhere to social distancing restrictions. Instead of training face-to-face in a boardroom of 35 people, employees now use Google Classroom.
“We’ve even been able to use this platform to communicate with workers in quarantine so they are getting good training before they ever set foot in a barn and everything is documented.”
Manage risk, diversify what you can
In terms of market unpredictability Cronin says there are some strategies to mitigate risk but in the hog industry, producers are still very susceptible to price changes.
“It is always our goal to structure long-term contracts where we can work through the ups and downs of the market,” she says, noting that not all contracts work out this way. The Cronins also work with packers to ensure the quality of their product is adding value and book using the CME when they see opportunity.
On the crop side of their business, they utilize crop insurance programs. “When you’re a grain producer, there is more coverage in terms of business risk management programming. Insurance can give farmers the confidence to put their crop in the ground every spring.”
The payback on planning
Diversification has also been an overarching strategy at Cronin Family Farms from the beginning.
“We learned quite early that we don’t want all of our eggs in one basket. Even though we were solely in the hog industry for many years, we still tried to diversify,” says Cronin. They did this by selling to different markets in different countries and taking advantage of niche market opportunities.
Growing and maintaining a land base has also remained on their radar. “Hog markets fluctuate so dramatically that it’s important to have some assets on the balance sheet that don’t. Assets like land hold the business in check during difficult times.”
The Cronins expanded into the chicken industry in 2019. While this further diversifies their portfolio, the primary reason behind their decision was to reduce their exposure to market uncertainty and the stress it creates.
VanParys says uncertainty doesn’t negate the need for planning but actually makes it more important. “Farm business plans can be built to be somewhat flexible to anticipate changes in markets, cost structures and labour.”
It seems the Cronins have mastered the element of flexibility in their business plan — they know where they want to go but don’t have the path fully mapped out.
“We used to think that was a problem but we’ve discovered that having management practices in place and evaluating opportunities as they come our way — using the right information — is more effective,” says Cronin.
Risk management across all sectors of agriculture will be the topic of Cronin’s studies as a 2020 Nuffield scholar. She plans to take a comprehensive look at strategies used by farm businesses, agricultural industries and governments worldwide. Her travel studies have been postponed due to the COVID-19 pandemic.