What Does the Next Generation Need to Know?

What does the next Generationneed to know about to take over?

Lee Melvill, P.Ag.

Farm Marketing Advisor

403-376-0419

Brooks

First and Foremost I believe. . .

Farms and Ranches arebusinesses!

What Is a Farm or Ranch? . . . .

Prairie Farm & Ranch Situation

across all operation sizeswith similar markets,

with similar gov't policies and

with similar weather

some operations will "succeed",

some will be marginal

some will fail

Why?

Because there are no guarantees for successluck sometimes a big help

Prairie Farm & Ranch Situation

But . . . . . . . .

There are ways to significantly improve probability

of "success".

To be "successful", farms and ranches need to be

run like any other "business".

What Is a Farm or Ranch? . . . .

Farm/Ranch Business

Production

Management

Business

Management

Human

Resource

Management

What Is a Farm or Ranch Business? . . . .

Crop variety choice

Spraying

Machinery Repair

Harvesting

Choosing Bulls

Picking Replacements

Calving management

Livestock health management & treatment

Keeping comprehensive production records

We're pretty good at this but THERE ISALWAYS ROOM FOR IMPROVEMENT

Production Management

What Is a Farm or Ranch? . . . .

Business Management

(Pencil Farming)

Financial

Management

Marketing

Management

What Is a Farm or Ranch Business? . . . .

Identify, Set & Record Personal, Family & Farm Goals

Understand & Use a Historic Income Statement

Understand & Use a Historic Balance Sheet

Create an Annual Income & Expense Projection

Develope a Cash Flow Projection

Manage Actual Cash Flow & compare to projection

Develope & Use Enterprise Budgets

Develope & Use Partial Budgets

Develop & Use Break-even Costs of Production

Astute Financial Management

What Is a Farm or Ranch Business? . . . .

Manage Capital Investments

Manage Production & Financial Risk

Keep comprehensive financial records

not just for tax reasons

Fully understand the financial implications of ourpersonal spending decisions

Astute Financial Management

What Is a Farm or Ranch Business? . . . .

Producing what the market wants

Calculating Your Per-Unit Cost of Production

Use your COP to set Farm Target Prices

Managing Price Risk

understand contracting alternatives?

understand futures market?

understand basis?

Knowing for certain the quality of your products

Understanding & Using Quality Market Information

Astute Marketing Management

What Is a Farm or Ranch Business? . . . .

Developing & Using a (Written) Marketing Plan

Profit-based, not price-based marketing

Astute Marketing Management

What's New in Farm/Ranch Marketing?

Ag commodity marketing using the Internet hasn'ttaken off!

Much more price volatility over the past 5 to 10 yearsfunds - trend-following and commodity index

Much more market info available than even 5 yearsago.

More Price Info

Better Market Analysis - what's happening and why and whatwill it take to change it.

More Market Outlook

Better Researched Strategies

Market advisory services more readily availablenot all will succeed

What do I need to think about?

Do I want a life-style operation?

Need to have little or no debt & have cash forre-investment - replacement and/or expansion.

Do I want a business-style operation?

Need to believe re-investment is important.Complacency leads to risk of obsolescence

Need to believe in life-long learningTo improve production, business management & humanresource skills

Need to take time for personal development (hobbies)and family.

Lee Melvill, P.Ag.

Farm Marketing Advisor

403-376-0419

Brooks

Questions & Discussion . . . . .