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Learn when to stop doing things

News Roundup from the December 2016 issue of Canadian Cattlemen

Farmers complain quite often about two things: they don’t have enough time or enough money. We have all seen the little phrases that in one form or another brag that farmers work long hours for little pay. It frustrates me to see these memes shared on social media as the message it sends to potential new producers is not very enticing.  It makes it sound like it’s okay to farm and not make any money, and implies that this is acceptable and the norm. In their place I would like to share a couple of phrases that I think should be promoted to new and old farmers. Let’s lose the negative attitudes and start thinking positively about our industry.

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One of the most memorable phrases that I picked up at the Ranching for Profit school that I attended many years ago was “The most common way to make more money on the farm is to stop doing things.”

We are trained on the farm as kids that the way to make more money is to work harder and do more. This is not always true.

Dave Pratt taught me at this school that the gross margin analysis is one of the most important tools that any farm can have. It is more important than your tractor; it is a powerful tool that allows you to look at your business and find out where it is profitable and where it is not.

It breaks up my operation into profit centres. Because of this I am able to see which production practices are working and which ones are not. If a production practice is not profitable, either you fix it or you get rid of it. If two of your profit centres are making money and one is not, stop working on the losing one. This will give you more time to work on the profit centres that are making money. Thus solving both issues of time and money.

Last month I wrote in more detail on the gross margin analysis.  I would recommend going back to read it if you happened to miss it.

Another phrase that I regularly use came from a book written by Stan Parsons, “If you want to be a cowboy, get a Job.”

This is quite a good book in that it describes the importance of running your farm or ranch like a business. It refers to the farmers who love the production side of farming but neglect the business side. The human resources, economics and finance sides of your business are so much more important. If you just want to deal with production practices, you should go work for someone else.

We need to stop making excuses as to why our farms are not profitable and take charge of our own businesses. As farmers and ranchers, we are not running non-profit organizations and we should not be expecting the government to step in every time something goes wrong. Farmers have so many grants available, as well as discounts through our government subsidies.  We are so fortunate in our part of the world that we have programs in place to provide crop insurance and drought insurance. Farmers in many countries are not nearly as fortunate.

I am constantly debating with people on my farm Facebook page regarding different issues in agriculture. Too often we are complaining about issues that we have no control over. It’s always the consumers’ fault, another county’s fault, the government’s fault, or it is the weather.

Let’s focus on issues that we can control. You are the manager of your business so if your business is not making a profit, then you are the only one who can fix it. Determine the profitability of each profit centre and then weigh the risk factors.

Another quote that I really like is, “You are one decision away from a whole different life.” If a profit centre only makes money every one out of three years, maybe you should be switching to another profit centre. It’s your farm and knowing your numbers makes those decisions easy.

I am regularly criticized for my custom grazing and feeding profit centres. The argument quite often goes something like this: “Well, if you owned the cows, you would not make the same money.” That is exactly right. My margin is better custom grazing than it would be owning cattle. I have determined that for my farm, in my area, with my advantages and my disadvantages, it is more profitable to not own the cows.

That does not mean it will work for you in your area, on your farm, with your advantages and disadvantages. I choose the custom grazing and feeding profit centres. If the markets were to change, and the margins were to improve in the cow/calf sector, I might buy cows again as I like to keep my options open.

What if everyone in my area went into custom grazing? The supply would be high and the demand for this service would go down. To compete, I would need to lower my rates.

If the grazing margin and feeding margin decreases, then what happens to the margin of the cow/calf profit centre? It improves. Then I might switch over to owning cows again. I choose the profit centres I do because I manage my business. Not every farm can do the same things and have the same margins. Our market values are different.

You are the manager of your business and it is up to you to manage. Worry about what you can control.

I apologize if I have offended anyone with these comments but I too become offended by all the negative comments I often hear about farmers and farming.

If you are working too hard for too little pay, maybe you should stop doing the things you are doing?

About the author

Contributor

Steve Kenyon runs Greener Pastures Ranching Ltd. in Busby, Alta. You can email him at [email protected] or call 780-307-6500.

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