Sharpen Your Wits and Your Pencil

These are uncertain times, to be sure. With a new farm bill in the works, trade upheavals around the world, a recent surplus of rain in many areas of the Midwest and a mountain of pork to sell this fall and winter, it’s easy to see why producers are nervous.

This isn’t a time to make hasty decisions, though. Producers who take a long view are more likely to come through difficult times more successfully.

Karen Kerns, CEO of Kerns and Associates, and contributor to Farm Journal’s PORK, explains how our brains react in stressful times: “We can’t stop our primitive brain from responding to ‘danger’ when we feel exposed or excited. Our brain defines truth as our experience of reality; but our experience is not truth. In any situation, especially in an urgency-based one, we serve ourselves and others better by inviting the “pause” part to mediate, mitigate, manage and contextualize environmental data in a way that allows for a reactionary response but doesn’t indulge it.”  

I couldn’t agree more. While your immediate response may be to react; try to stop, pause and consider your options. A long-term approach will lead you to long-term solutions.

Constantly Evaluate
That doesn’t mean you shouldn’t reevaluate your positions regularly, however.

“Put together a budget based on where you are today and where you end up through the next year to help understand what your cash needs will be,” says Kent Bang with Compeer, who writes the Money Matters column for Farm Journal’s PORK magazine. 

“Fortunately, many of our swine clients have built working capital and equity over the past five years and are in a good position today to withstand some adversity. However, when you look at the broader industry and how it has expanded in the past few years, some producers will likely be in a tough position if we don't see some resolve to export issues in the next few months,” he says.

Bang suggests you look for cash-generating or cash-saving opportunities that may exist, and “communicate with your lender and develop a strategy to manage the business through the down-cycle,” he says.

There are positive trends on the horizon: I believe the trade situation will improve in the next few months, and that in the interim, we’ll find new markets that desire high quality U.S. pork. Packing plants are adding second shifts, and another new plant will be coming online in early 2019. And as economist and PORK columnist Dennis DiPietre says, “one of the benefits of a full employment economy is increased eating out and purchases of meat.”

You’ve been through tough times before. You can get through them again by utilizing good planning, listening to trusted advisers and working to improve efficiencies.