ReachOut: Surviving a Changing Economic Environment

ReachOut: Surviving a Changing Economic Environment from Central Valley Ag on Vimeo.

Mike Zwingman

Mike Zwingman

You can hardly change the channel anymore without stumbling across a survival show.  Some of them are pretty informative; some of them just make you sit and ponder humanity.  However good the show though, there’s an analogy there: when I look at what is going on in our current economic landscape it’s a bit like getting dropped off in the wilderness.  It’s disorienting, distressing, and full of chaos.  Today’s article is about how you can survive these tough, stressful times by employing the Maximum Economic Yield (MEY) strategy to help manage your profitability.

Friends, the reason some of you have read or heard about this more than once is because my conversations with growers on the topic go in many directions.  Two particular strategies dominate the conversations though.  The first is the hunker down strategy: I am going to minimalize my inputs to manage my total cost and my profitability. The second is the extremophile response:  I will make drastic changes to my cropping system to capture perceived value or premium in the market.  Both of these carry some significant risk in relation to their reward though.  You may see gains in the short term with either strategy, but both risk your long term goals.  In the wilderness, you can guzzle that nasty puddle water to quench your thirst now but you’re probably going to pay pretty dearly for it later on, if you know what I mean.

The hunker down approach definitely could get you through this year, much like seeking shelter with no plans for food, water, or heat would get you through one cold night.  It lowers your input cost for now, but the short and long term impacts on your operation are many and strongly negative.  If you cut back on your fertility, for example, there is a chance you’ll see no negative effect on yield this year, but long term, that mining of your soil will have a negative effect on your operations, and we have no idea what the future replacement cost of those nutrients will be.  You might also consider moving to a very basic herbicide program: it saves money now but just think of the weed seed bank you’ll get to address next year.  No fun.  And potentially hazardous to your relationship with your landlord in a leasing situation.

The drastic-move approach is very high risk because it asks us to plant a crop that we would normally not be accustomed to managing.  It’s alluring to think about planting high-value crops like white corn, wheat, or a non-GMO crop that may give you some sort of premium, but you have to consider the potential added management needs necessary to attain the quality that would maximize that premium.  Falling short of quality requirements could negate any premium you were counting on to make this idea cash out.   And let’s not forget to mention that you may not know how the genetics available to you will react to any disease or insect pressures in your fields and how that will in turn affect your management decisions.

Consider the survival shows again: the way these guys survive is not about hunkering down hoping to be found or about doing something extreme to get out of the situation.  They survive by being tactical, focused, measured, and task-oriented.  True success in survival in any situation, environmental or economic, requires you to be able to improvise, adapt, and overcome your situation without taking unnecessary risks.  Using technology and experience to implement a MEY strategy is about doing all those things, understanding the situation, developing a plan, and using the resources available to you to make your own fortune.

This is where I hope to be able to offer you innovative solutions to help you manage your profitability via the MEY strategy.  Let’s assist you out of the scary wilderness with these Agronomy Survival tips:

1.)  With as little emotion as you can, assess your situation.

Remember that ground that is cash rented, farmed on shares, or owned has different elements of risk.

Understanding the “real” land cost of each of these acres will help us formulate your plan—it’s akin to standing on the hilltop to plot your way out.

2.)  Understand how relative yield affects profitability.

60-80% of profitability is carried by 20-30% of your acres—we can positively impact your profitability by managing those relative yield differences.

Treat acres for what they are from a yield stability standpoint and manage for the right number of bushels not the max number of bushels.

3.)  Set realistic profitability (not yield) goals.

You can’t get “out” unless you know where “out” is.

These profitability goals are by relative zones in your fields, not by averages.

4.)  Work with a trusted advisor to develop and build your plan using technology, expertise, and communication.

We’ll take into account your long term goals to make sure we are not taking undue risks and help you generate the map you need to survive.

5.)  Execute your plan, but maintain situational awareness and operational flexibility.

When called for, improvise, adapt, and overcome!Blue Box

As the season goes on, we’ll lay out the step by step plan to implement the MEY strategy.  This will take lots of communication and openness about not just what your goals are, but also the hopes, dreams, and aspirations you have for your operation in the long term.  I can’t rescue you from the economic wilderness, but we can partner up to help you out.  I can’t tell you that things will get better soon or that it’s going to be easy or fun, but I can say without hesitation that you can survive.

Survival comes down to the willingness to do what it takes, and refocusing is the first step.  We look forward to helping you blaze the trail out of the wilderness.