A24>Lancast*r Farming, Saturday, November 26,1988 R r V > MANAGEMENT CAN YOU AFFORD ANOTHER DROUGHT? Roland P. Freund Regional Farm Management Agent The drought of 1988 has focused much attention on the risks and perils of crop production. As the harvest is gathered in and yields are calculated it is a good time to assess the full impact of the drought Bad years are easily for gotten, but they do tend to repeat themselves. It is important to eva luate the chance of survival for the farm business should crops fail again in 1989. What did the drought cost you? The cash crop producer’s cost is the lost production at the prices at which the crops would have sold. The livestock feeder has a similar ON RODENT CONTROL ft'"H fV RODENTS carry diseases which can endanger the health of your poultry flocks. Your business is raising them. Ours is protecting them. We Specialize In Sanitizing And Disinfecting Since 1928 2ilW Pest control is too important to trust to anyone else physical loss, but he needs to price that lost production at the cost of the replacement feed which must be purchased. There may be other indirect costs associated with livestock los ses due to feed quality or interest on the operating loss. In virtually all cases a crop loss will show up as lost equity. For many farmers in south central Pennsylvania such losses could exceed $l5O per crop acre. Assuming a total of 335 crop acres on an example farm, the loss might be about $50,000. Can you afford another severe loss? Some can and some can’t It Houses Lancaster, PA 397-3721 Lewistmrn, PA 248-0963 ;tate College, PA does not depend on how good an operator runs the farm, nor on how well he knows the banker. It all depends on how much equity there is to loose. Let’s look at three example farm business situations. Farm A. has assets of $350,000 and debt of $250,000 giving it net worth or equity of $lOO,OOO. Farm B. has assets of $500,000 and debt of $250,000 giving it equity of $250,000. Farm C. has assets of $500,000 and debt of $50,000; equity of $450,000. A crop loss of $50,000 would impact each of these differently: Farm A’s equity would be down to $50,000 and it would probably not get credit to continue. In such a situation Farm A would have to be liquidated, so it cannot risk another disaster. Farm B. could possibly survive with $200,000 equity, but the banker would start to get quite nervous about future risks. It needs risk protection. Farm C. Might need to “tighten the belt" for a couple of years, but should be able to spring back rela tively quickly. It can afford to be self-insured. When can we expect another loss year? Let’s not think about that and hope it will not happen! That Bailey Elected As Eastern Director, Fyock Retires SYRACUSE, N.Y. Dairy farmer Harold Bailey of Roaring Spring, PA., has been elected to a three-year term on the Board of Directors of Eastern Milk Produc ers Cooperative. He succeeds Norman Fyock of Osterburg, PA., who stepped down in October after serving three terms on the board, the max imum permitted under the co-op’s bylaws. An Eastern member since 1966, Bailey operates a 138-acre farm in partnership with his brother, Ber nard. They milk 90 cows out of a herd of 180 Holsteins. Harold Bailey took over the farm from his father, John, in 1969. His brother became a partner in the operation in 1972. As a director, Bailey represents over 200 farm families in District 13, which covers South Central Pennsylvania. He has been presi- .«,