016-Lancaster Farming Saturday, October 11,1986
Survival
THOMAS MILLER
USDA Economist
Surviving and prospering. That’s
the name of the game in
agriculture, as in any business.
The farmers who intend to thrive
m the challenging environment of
the late 20th century may have to
develop new strategies, skills, and
priorities that weren’t necessary in
past generations.
In a recent issue of the
Agriculture Department’s
FARMLINE magazine, Thomas
Miller, Warren Trock, and Danny
Smith describe the successful
farmer of the future, and the
demands that he, or she, is likely to
face. Miller is an agricultural
economist with USDA’s Economic
Research Service. He is stationed
at Colorado State University, Fort
Collins. Trock and Smith are
professors there. Here are some of
their thoughts and observations on
what it will take to survive and
prosper in the years ahead.
The successful fanners of the
future will be better managers
than today’s farmers-production
managers, marketing managers,
and financial managers. In other
words, they'll be highly skilled at
obtaining both technical and
economic efficiency.
On the technical side, they’ll
seek always to squeeze the “last
drop” of benefit out of each unit of
input, whether land, labor,
chemicals, or machinery. New
technologies, in both crops and
livestock will enable them to
monitor the production process
and maintain peak efficiency.
Although the prices farmers
receive for their products will
probably continue to fall in relation
to the prices they pay for their
inputs, this ratio has been drifting
downward for decades. Greater
productivity from improved inputs
made up the difference. There is no
reason to think that future
downward pressure on prices will
prevent efficient farmers from
maintaining net farm income at
acceptable levels in most years.
Financial Managers, Too But
focusing on technical efficiency
alone will not get the job done.
Farming is becoming more risky,
and capital requirements are
higher than they are in other in
dustries. Thus, business expertise
in general, and particularly
financial management skills to
operate in a high risk environment,
will be every bit as important as
production skills.
The ever-changing business
environment will require
proficient use of accounting,
financial statements and analyses,
budgeting and planning, and
sophisticated office management
procedures. The successful far
mers will better understand the
Skills For Tomorrow’s
risks of the economic and financial
environment and utilize the best
available marketing and financial
management techniques to
counter or control those risks.
On the business side, the em
phasis will be on controlling costs
and maximizing net income from
each farm enterprise, rather than
on maximizing volume and gross
sales. For example, attention will
shift to obtaining higher calving
percentages and weaning weights
rather than more cows, limiting
applications of fertilizer to
maximize net returns rather than
yields, and producing crops with
the most efficient machinery
rather than the largest.
Increasing price variability in
world markets will intensify the
need for reliable marketing in
formation and forecasts. While
such information is provided by
USDA and many other public and
private institutions, the greater
level of price uncertainty will
strengthen the incentive for far
mers to acquire their own in
formation.
Furthermore, emerging
technologies in telecom
munications and microcomputer
systems will offer farmers instant
access to the best information
available for making production,
marketing, and financial
decisions. The ability to ac
cumulate accurate, detailed in
formation and to form reliable
expectations from this information
will become crucial to survival in a
farm business.
Opportunities Along with Risks
Increased fluctuation in financial
conditions and markets will
present opportunities for gains as
well as losses. Successful'farmers
will be those who maintain the
resiliency to survive during the
busts so they are in a position to
take advantage of the booms. This
resiliency will be reflected in the
way farm investment is financed,
in the organizational structure of
the farm, and in the use of
technologies so that production can
respond to changing conditions.
Structurally, the adjustment
seems to be away from the
savings-f inanced sole
proprietorships that have long
been traditional to U.S. family
farming. Partnerships and family
held corporations are, to some
extent, replacing the sole
proprietorships for commercial
size farms. At the same time, debt
financing is declining as the
principal means of acquiring the
resources necessary for farming.
Leasing and various methods of
outside equity financing are
growing in importance.
Overall, these changes appear to
represent the slow emergence of a
more “Industrial" type of business
organization and financial
structure in agriculture. Whatever
drawbacks this may have-outside
financing, for instance, may entail
some loss of control over assets by
farmers-it should improve the
financial resiliency of the
agricultural sector in the same
Capacity Diameter Length Gauge Weight Price FOB
(Gallons) (Thickness) (Pounds) Quarryville
285 3’o” 5’6" 12 277 *149.00
550 4'o" 6'o" 10 1 537 225.00
550 4'o” 60” 7 738 280.00
1.000 4 0” 10’8” 10 845 380.00
1.000 4’o” 108” 7 1,158 440.00
1.000 5'4" 60” 7 1.059 445.00
Capacity Diameter Length Gauge Weight Price FOB
(Gallons) (Thickness) (Pounds) Quarryville
550 4TT (To” 7 831 555.00
1.000 4’o" 10'8” 7 1,266 820.00
1.000 5'4" 6*o” 7 1,164 820.00
1,500 5 7 4 7: 9T)” 7 1,577 1,100.00
2.000 5’4” 120" 7 1,914 1,248.00
3.000 54” 180” 7 2,657 1,670.00
4.000 5*4” 240" 7 3,403 2,080.00
5.000 6TT 2310” '/«” 5,508 3,090.00
5.000 80” 13’4” W 4,800 2.660.00
6.000 6=o* 2810” 6,239 3,535.00
6.000 8’0" 16'2” ‘/«’ 5,500 3,000.00
8.000 80" 21'6" ■/«’’ 6.927 3,660.00
10.000 8 0” 2610" '/«" 8,357 4,310.00
10.000 lO’O” 17’0" '/«” 7,446 4,020.00
10.000 10’6" 15’9” '/«” 7.412 4,070.00
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Farmer
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Although the future is impossible
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seems to be the painful part of a
permanent shift to a new baseline
environment for agriculture. If so,
it should be noted that American
farmers have successfully adapted
to changes of this magnitude in the
past. Moreover, many farmers-a
majority, in fact-have already
made adjustments to position
themselves so they can survive,
and prosper, in the challenging
economic and financial en
vironment of the next few decades.
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