In my last blog, I reviewed how as a seedsman, I observed the struggles my customers experienced due to the Crop Financial Cycle.   This led us to the create the Farm Financial Four℠, or FF4℠.  Today, let’s look at how early season budgeting and capital alignment are pivotal to creating opportunities for your operation, what we call the FF1℠ stage.

During my time in banking, I noticed that when a business struggled, there were always two factors that contributed.  Regardless of the business type, financial planning and proper capital alignment were the common functions that the successful businesses implemented.  Execution can’t happen without a plan, and proper capital alignment can’t occur without a solid budget.  It’s football season, so let’s look at a sports analogy.  What successful team relies solely on physical talent to win?  The teams that rise to the top are excellent at implementing a plan that best utilizes their talent.  This all happens in the pre-season, and is adjusted for each game.  Growing an excellent crop, hands down, takes talent and physical effort.  That’s most likely what you love about farming.  However, a “farm first and take care of the business second”, strategy doesn’t prepare you for winning at farming.

Successful crop marketing is another aspect of planning that begins in the pre-season but must be reviewed and tweaked situationally during the growing season.  To win at crop marketing, you have to be able to capitalize on the opportunities as they are presented.  If a mis-match occurs in the defensive secondary, the quarterback has to be able to recognize that, and execute on the play.  Similarly, proper planning provides the basic cost structure for your operation, and gives you the ability to “pull the trigger” when the time is right…or adjust the plan if the markets aren’t providing opportunity.  Lack of planning can also cause you to miss a chance to reduce input costs through heavy, early season discounts. 

What is your game plan going into the winter?  Farming-wise, you and your talent will have plenty of time to rest and prepare for planting the next crop.  Financially, are you prepared to play?  Next week, I’ll address the seasonal adjustments that are a huge factor for all crop farms.  Until then, thanks for all your do to grow food and fiber, and I hope you have a safe harvest.

Allen Lyon