The vocation of agriculture began thousands of years ago when the first farmer dug a hole in the soil and planted the first seed. Way back then others began working with and domesticating animals that have evolved into present-day hogs, cattle, sheep, chickens and other livestock.
The farm and ranch creed has always been to nurture the land and livestock while making improvements and coaxing a bountiful harvest. Farmers and ranchers hold enduring respect for the land that sustains them. Their reward has resulted in abundance.
With this evolution in agriculture, today’s producer faces many new and sometimes unexpected challenges. Profit margins and production costs are in a constant state of flux. Weather patterns change while farmers and ranchers continue looking for ways to make profits and stay in this business.
This week Insight takes a look at the opposite end of the spectrum. Here are 11 ways to cut your profit margins. Think long and hard before implementing any of these in your operation.
1) Blindly follow seasonal trends or patterns. If the market is going up, do not sell. It may go higher. If the market falls – do not sell. It may turn around and go up.
2) Never trust a U.S. Department of Agriculture crop or livestock report. From all the information available these reports are “strictly legit.” But never mind; discard these reports at all costs.
3) Blame the big grain companies. Everyone knows they manipulate the farmer and make all the profits.
4) Blame the big cattle packers. Everyone knows they manipulate stockmen and make all the profits.
5) Assume prices and costs are related. No place is it written that because you spend $1,000 an acre to produce irrigated corn you are guaranteed a profit on your grain.
6) Hold the short crop because less corn, wheat or beans must mean the price of these commodities will increase. In reality, by the time you hear a crop is in short supply, everyone else has heard the news too and the price has already gone up.
7) Follow the majority. If your neighbor sells his corn, it is probably the right time for you to sell yours. Ignore most conversation in the local coffee shop or coop. Figure out your own marketing strategy.
8) Ignore the futures market and basis because everyone knows that a bunch of speculators are rigging the market. Remember, speculators lose money too and provide liquidity for the market.
9) Never sell until you have a crop. Oftentimes, before you harvest a crop is the best time to lock in profits. Take a hard look at future contracting.
10) Shoot for the market high. Smart marketers have abandoned this philosophy for the goal of, “shooting for higher.”
11) Blame the banker or your wife. Again, everyone knows a banker lends you money when he/she shouldn’t. And if all else fails, who has any broader shoulders than your spouse.
You may just want to take a hard look at yourself. Operating a farm or ranch is as tough a profession as there is going these days. It takes all the wisdom, knowledge, technology, dedication and determination, luck and the blessing of Mother Nature to grow a profitable crop or market outstanding livestock.
And that’s not even taking into consideration a continually evolving marketing plan. Each farm and ranch and farmer and rancher is different. Look to yourself and those who are knowledgeable and can help you be successful.
Best of luck.
John Schlageck is a leading commentator on agriculture and rural Kansas. Born and raised on a diversified farm in northwestern Kansas, his writing reflects a lifetime of experience, knowledge and passion