University of Minnesota Extension
www.extension.umn.edu
612-624-1222
Menu Menu

Extension > Agricultural Business Management News > August 2017

Wednesday, August 30, 2017

Your Ability to have a Critical Conversation is Important to Your Long Term Farm Business Success

By Don Nitchie, Extension Educator

Successful farm management today, often depends on your ability to discuss important items “beyond and between the numbers”, in a constructive way.  Often these discussions are about pivotal points in history for your farm business or careers.  Sometimes you may be struggling with or even attempting to have a badly needed “critical conversation” about a significant decision that has to be made or implemented.  This maybe with a business partner, spouse, other family members, a landlord, son or daughter.

While many Minnesota farms are on average holding up well financially in these tight profit margin times—there are some stress points on some farms. Some critical conversations are necessary on the best of farms  for example if;  liquidity is weakening more than average the last few years and profitability has been weak across enterprises and the whole farm for the last few years. This probably has resulted in a weakening of Net Worth and maybe over-expenditure on family living in some cases.  If this situation is not being acknowledged-a discussion of the impact of continued current trends plus ways to improve the situation needs to occur-soon. The farm manager should ideally seek out discussion and consultation before they are forced to by someone else such as their lender.

For pivotal business decision-making that is dependent on or involves others, you need to assess what you need to do to make the impending “critical discussion” productive and hopefully successful.  You may have been avoiding discussion because it will not be a comfortable situation-or you may have to deliver bad news in the process.  Whatever the case, you probably realize procrastinating will only make it worse.  Examples of critical conversations can be; informing others (partners, family or banker) of farm financial conditions; rental discussions with landlords; farm transition needs/realities with family members—as well as many others.

There are several books and self-help guides probably written on this topic.  Many guidelines and tips are very good but, often easier said than done.  I will offer some here that I have found to be helpful to me personally and professionally.  This is after attending numerous trainings myself as well as working with many students, producers and employees over the years.  I hope you find some of these helpful.  I am not an expert in this area but, have some practical experience.

  1. Try to minimize the emotion in the conversation. Talk to a neutral 3rd party in confidence first if you feel a lot of stored up anger, regret, disappointment or you feel taken advantage of. Work out some of your emotions first.  When you meet, it certainly would be accurate to let the other party know how you have felt but, doing it under control will likely lead to better outcomes for you and all concerned.  If someone does get emotional—let it happen as those feelings are probably very real, acknowledge their feeling for what they are—then attempt to bring it back to the real decision at hand.  Set the tone by using a calm and quiet voice.
  2. Try to pick the right time for the conversation—maybe let them know ahead of time or even schedule it in advance.  It is maybe OK to let them know a general topic but, save the real content for the actual conversation.  Don’t procrastinate though, just because you anticipate the conversation will be uncomfortable—or someone will get emotional.
  3. Make a very brief list of your expectations of necessary items to discuss before you meet. When you meet ask the other conversation participant to state their expectations for the discussion—then list yours.  Ask if you both agree these are the correct topics.  Set a tone for mutual respect.
  4. Prepare yourself to be satisfied with shorter term or interim discussion points—where you can maybe more easily find common ground or understanding. “Don’t try to solve world peace in one meeting”.
  5. At the end of discussions, affirm what you have heard, as a way to conclude. So, what I heard is “we both agree on……. But, we disagree on……….”.  Be careful to not put words in someone else’s mouth.  It is OK to ask the other party to clarify a point you may not agree with by asking; “Could you help me understand…or could you clarify….”? You may find out you may not have understood their reasoning; there may be information you were not aware of or, their information maybe primarily a feeling versus fact.


Friday, August 18, 2017

Finding Common Ground with Consumers

by Betty Berning
Extension Educator

Local, non-GMO, organic, gluten-free.  These are some of the words you might see if you look at a package of food at the grocery store.  Some of it might make you chuckle.  What exactly is non-GMO soda, anyway?  And wasn’t oatmeal always gluten-free?!  Why are food companies using these words?

The answer is simple.  Consumers are asking for it.  According to the Center for Food Integrity (CFI), a non-profit organization whose members and partners range from farmers to food companies, today’s consumer is different from the consumer of the past.  Their research indicates that the consumer of the past valued price, taste, and convenience, while today’s consumer is looking for more.  Health and wellness, safety, social impact, experience, and the overarching theme of “transparency” are values of younger consumers.
This explains why there are more organic and natural offerings at the grocery store.  It also explains the to be a boom in agri-tourism (berry-picking, pumpkin patches, wine tasting, etc.).  Consumers want to feel connected to their food and feel like they are buying from a trusted friend.

For traditional/conventional farmers, these trends can be maddening.  Farmers work hard to provide a high-quality product.  They are very proud of their product (and rightly so!)  Farmers consume their product and are happy to serve it to friends and family.  One can understand why farmers might feel frustrated when consumers do not seem to trust the product they have worked so hard to create.

Like it or not, consumers buy your products.  They need you and you need them.  Before I worked in Extension, I worked for a food company.  The consumer’s voice is greatly valued at food companies.  Our goal was to sell a product that consumers wanted to buy.  We did not just make a product and expect consumers to buy it. 

Our products were created based on consumer research.  We listened to our consumer, asked questions, and then we responded.  Our response was to launch a product and market it.   Marketing did not mean telling consumers all the facts about why a product was good for them.  Marketing meant highlighting how the product met the needs and values that the consumer had previously expressed to us.  We related to our consumers through our advertisements, social media engagement, and customer service.  We wanted consumers to feel like they were buying a product from a trusted friend. 

I spoke with Natasha Mortenson, Public Relations Director at Riverview Farms, about the topic of consumer engagement.  She and I have engaged with consumers, but in very different ways!  As we talked, we quickly discovered that regardless of how you are engaging with consumers (as a farmer, processor, food company, etc.), the strategy is similar.    Natasha’s process was simple:  1. Listen, 2. Ask questions, 3. Relate and express where you have common ground, and 4. If you can, come up with an analogy to explain why you do what you do. 

Think about common values that you have with most people.  You are most likely a member of a local community and farm with your family.    Like most Americans, you are probably trying to provide for your family.  Your farm could be considered a “small business”, as opposed to a corporation.  You care about your cows’ health and well-being.  Consumers value these principles, just like you do! Sharing these common values help consumers feel connected to you and provide a sense of transparency.  

I would encourage each of you to connect with consumers, which is as easy as talking to your non-farming family and neighbors.  Understand their needs and preferences by LISTENING, even if you don’t agree.  Ask for clarification or more information if you don’t understand or disagree. Talk to them about your needs and share your farm’s story (not just facts).  Finally, try to identify common values. 


Facts are important, but people are more inclined to trust facts once they trust you.  Remember that quite often we have more in common with others than we might realize.  We often want the same things, whether it is safe food, clean water, or healthy animals.  Listen, ask questions, and then highlight your common values.  Be patient and good luck!

Wednesday, August 16, 2017

Marketing Grain in Low Price Market

By David Bau, Extension Educator

Current marketing opportunities for the 2017 crop have been below the average farmer’s breakeven prices. Each year farmers in my marketing groups determine breakeven prices needed to cover their crop input costs and living expenses. The average cash breakeven price is $4.26 for corn and $10.78 for soybeans for southern Minnesota farmers. The average cash corn and soybeans prices for Worthington in 2017 has been $3.23 for corn and $9.07 for soybeans, well below the prices needed to cover costs.

Using 2016 farming results for corn and soybean producers from FINBIN database, the numbers are not good. The average of 1382 corn farmers in Minnesota lost $62.35 per acre for corn, while making $7.88 per acre on soybeans. This compares to a loss of $55.07 per acre for corn in 2015 and income of $8.34 for soybeans. A trend of larger losses was created from 2015 to 2016 even while input costs including rent rates declined and yields increased. The average price for corn sold in 2016 was $3.29 and for soybeans $9.35. This compares to $3.49 for corn and $8.55 for soybeans in 2015. These average prices are well below breakeven prices for the marketing groups.

Farmers should first start with determining their own breakeven price and use these prices to establish target prices. Target prices are sometimes set at levels below breakeven levels due the current market situation. Target prices are goals that when met will cause the sale of a predetermined portion of the crop in the marketing plan. A farmer can use the Acceptable Crop Price Worksheet to complete crop budgets for corn and soybeans. Available at: www.extension.umn.edu/agriculture/business/commodity-marketing-risk-management/ 

Decision dates should be a part of a marketing plan where a farmer is establishing a date for which to decide to establish a price for a portion of their crop. The real point here is to spread out the decisions in the March through May period which has now passed and now cash flow needs will take over. The marketing plan should incorporate a list of when cash needs to be generated.

Default dates need to be established to force action in a marketing plan so a farmer does not miss a historically good time to establish a price for their crop. Historic price information will help a farmer determine price objectives for marketing plan. Trying to determine where to start and end.

Crop Insurance can insure some revenue levels along with loan rates. In Minnesota the loan rates average $1.82 for corn and $4.84 for soybeans. These prices are well below breakeven prices.

If farmers sell crops below their breakeven price, they can reown the crop with call options, or hope that later sales will be at higher prices to bring their average above their breakeven before the last of the crop is sold.

For the last 5 years, high cash corn price $8.22 (2012) and $17.74 (2013) beans for Worthington and the lows were $2.65 (2016) for corn and $8.03 (2016) for soybeans. Today’s cash prices in Worthington were $3.16 and $9.16 for corn and soybeans.

The last USDA report was negative while the June USDA was positive, corn and soybean prices went up significantly after the June report and now after the August report have given all the increase and more in price back.

Farmers need a marketing plan with target prices and default dates to sell crop as needs and opportunities arise. Hopefully prices will rally before harvest, if not there will be losses.

  • © Regents of the University of Minnesota. All rights reserved.
  • The University of Minnesota is an equal opportunity educator and employer. Privacy