C2-Uncast*r Farming, Saturday, Fabniary 7,1987
NEWARK, Del. - Financial
management is the process of
selecting the business strategies
that have the best chance of
achieving desired financial goals.
Income statements, balance sheets
and cash-flow projections are
traditionally considered the cor
nerstones of farm financial
analysis. But success also depends
on effective production, risk
management and marketing.
Actually, financial planning and
marketing go hand in hand. The
tools of sound farm management
include both the balance sheet and
the cash-flow projection, say ex
tension economists at the
University of Delaware.
Selling at the top of the market is
a frequent dream of farmers. But
is it a realistic goal to shoot for?
Extension crops marketing
specialist Carl German suggests
that producers who approach
marketing as selling a product to
achieve the greatest net financial
advantage to their business are
likely to develop a more effective
marketing strategy - one that’s
more consistent with the risk
bearing ability of their business.
Sometimes that means locking in
prices that are less than total costs
but which will cover variable
costs.
The marketing process starts
with production decisions, German
says. The first step is to evaluate
the potential profitability of a
particular crop or livestock en
terprise, given the prices and costs
that currently exist and an
ticipated changes during the
production process. “If your an
ticipated returns are greater than
your expected costs,” he says,
“the production decision is a go.”
The next step is to assess the
risks involved in the enterprise and
the implications for adverse
changes in market conditions over
the course of the marketing year.
Compare these risks with the
potential cost of reducing or
transferring your price risk
through the use of such marketing
tools as cash contracts and options.
“The challenge is to devise a
marketing strategy that is con
sistent with your cash-flow needs
and income goals,” German says.
“You must develop a plan for
future action and then make that
plan a part of your total financial
planning process. You can’t just
forget about marketing until you
need cash for a payment and then
try to sell something.”
A more effective approach is to
determine when sales will be most
financially advantageous to your
farm business, considering cash
needs as well as the cost of holding
the product.
“Base both production and
pricing decisions on expected
supply/demand conditions and
anticipated costs,” the marketing
specialist advises. “This will bring
your expectations in line with
current conditions in agriculture.
Grain prices, by any standard, are
depressed. A good manager looks
ahead and plans marketing and
production over the next 12 to 18
months.”
The grain supply and disap
pearance tables that are published
periodically are one valuable tool
when developing a marketing
strategy. By looking at anticipated
THE CLASSIFIED LIVESTOCK SECTION
HAS BEASTLY SELECTIONS!
Financial Planning Must Include Marketing Strategy
stocks at the end of the year,
growers can get a good feel for
what marketing conditions will be.
German has written two regional
publications that can help local
grain producers develop more
marketing strategies - “Using
Basis in Making Grain Marketing
Decisions” and “Agricultural
Options: A Guide to Writing vs.
Buying.” Both were prepared for
the Northeast Marketing Com
I'M
NOT
10N...
Alfalfa growers
demandme best.
Horse farms sprawl over the hills and through the vafes surrounding the Woodbine, MD
farm of J. Stanley Harrison. Within driving distance are numerous paddocks of fine thorough
breds and standardbreds of the racing industry. Growing alfalfa hay for choosy horsemen is a
speciality at which Stanley excells. Here is what he tells alfalfa growers. 'They want good
quality ■ It It Isn't good, thoy won't taka It at any prlcm," His Twin Pond Farm hay has a
good reputation among horsemen. In fact, they drive to the farm and load his alfalfa them
selves. No trucking or handling his hay crop! "Maybe thm bast part Is tho $ l5O In cash that
oaeh ten brings", he tells with a little smile at the corner of his mouth.
Business has grown so much that Stanley built a new pole barn to store hay and straw,
What alfalfa variety does he use to fill the barn and get the quality alfalfa he has to have?
"I plantmd Cimarron In thm tall of 1983. It was a dry fall but It startod out vary wall.
I've cut It for three years now . Our Cimarron alfalfa has been a good cash crop. Even If
you get a dry year like we had this year, It comes through," he says. Horsemen from
miles around know where to find the leafiest, greenest hay. They fust keep coming
back to the born full of Cimarron."
That’s the Cimarron story from Woodbine,
Maryland.
RDI2Box4I3A
Emmaus, PA 18049
(213)967-4131
MHfHntarg Warehouse
(717) 9*6^841
mittee’s (NEMC) Grain Marketing
Task Force. To obtain copies, call
or write: Carl German, Extension
Marketing Specialist, University
of Delaware, Townsend Hall,
Newark, DE 19717-1303 (302-451-
2511).
Cost of production is another
essential piece of information.
University of Delaware extension
specialists have just completed a
series of one-page cost of
production fact sheets for ap
proximately 20 Delaware grain
and vegetable crops. Copies of
these fact sheets are available
from county extension offices in
Newark (451-2506), Dover (697-
4000) and Georgetown (856-7303).
“Anyone can settle for the
average going price when selling
agricultural products,” German
says. “Effective marketing is
getting the edge on that price.”
Cimarron
The high yield, high quality alfalfa
The most successful products
are generally those with a specific
marketing plan, or who have used
specific marketing advantages
that are available to them, the
economist says. “This includes
producing a higher- than- average
quality product (such as seed
grain) that commends a better
price. Do you have some com
parative advantage you can ex
ploit in your fanning operation? ”
55 Willow Springs Circle
York. PA 17402
(717)764.9814