How Should We Farm? Part 1
Looking back on the rampant changes that have taken place over the last decade in costs, prices, technology and trade agreements, we may well ask the question, How should we farm?
We can look to the future with trepidation, or we can look with a sense of expectancy and opportunity. I have identified some goals we can continue to work toward in the 21st century. If we move closer to these goals, I believe we will achieve a significant measure of success, both as farmers and as managers, and impact the farming industry positively for the future.
One goal we should pursue is a good return on capital invested. With the multitude of investment options currently available, many farmers could make more income with less physical work by liquidating their assets and making wise and prudent investments outside the farming industry. Because farming has always had the allure of providing not just an occupation but also a desirable way of life, we have been reluctant to apply this measurement of efficiency to it in the same strict fashion with which we evaluate other business opportunities. If we don't make money at farming, or even if it costs us to farm, we reason that the benefits (having a business in which the entire family can participate, raising our kids in the country instead of on the city streets) outweigh the cost and make it worthwhile.
What have been some results of our assumption that to farm is good, irrespective of the economic return? One result is that farming has evolved as a sometimes high cost, low profit margin industry, causing many farmers to draw on their equity capital just to maintain an acceptable standard of living. And while this may have kept them on their farms in the short term, over time the erosion of equity capital has put many farmers into a financially perilous position.
Another result is that the farming industry has become less and less attractive to young people. Interest on the part of our sons and daughters to stay on the farm has waned; and very few young people from non-farming families are attracted to farming as a viable business opportunity. They see farmers in their communities who are working too hard for too little pay. Young people are outfaced by the seeming necessity to invest heavily in depreciating assets such as expensive machinery; they see that farmers who make these investments in order to achieve economy to scale for one person cannot always maintain profitability. They also see problems within an industry whose products are viewed by consumers as necessities rather than luxuries, often forcing real prices down while real costs go up (on an inflation-adjusted scale). They see farmers putting in long hours just to keep afloat, with little or no time for researching new products or lower cost methods which could improve profits.
If farming is not attractive to young people today, the industry is deprived of the injection of new creativity and critical thinking. These things are necessary for any industry to grow and make dynamic changes to meet market demands.
How should we farm? First and foremost we should have as our goal to farm profitably, and to achieve a good interest return on capital invested. If we can do this, we can help people stay on their farms. We can also attract new people to the industry, which will benefit them and also farming as a whole.
Doug Parker is a farm consultant. He expresses assumptions and observations, and proposes solutions he has developed through brainstorming with commercial farmers, businessmen and bankers over many years. This article is Copyright by Doug Parker and Kencove Farm Fence, Inc. All rights reserved. This may not be reproduced or copied in any form, by any means without the written consent of Kencove Farm Fence, Inc.