NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

November 12, 1998

[EDITORS: This is part two in the series, "Assessing Your Farm and Ranch Business for Today's Markets and Beyond."]

The Market Advisor: In 1999 and Beyond, Integrated Business Planning Is the Key to Your Financial Survival

Harlan Hughes, Extension Livestock Economist
NDSU Extension Service

Managing a farm or ranch has never been easy, especially when commodity prices are low. Changing technologies, improved communications and an explosion of information coupled with changing federal, state and local regulations are causing many farmers and ranchers to now ask, "How do I ever start to get a handle on it all?" The answer may just be in integrated business planning.

Integrated business planning is a method of planning and managing the farm or ranch operation as a whole rather than as separate unrelated enterprises. Some are referring to this type of management system as holistic thinking. No matter the name, it provides a step-by-step method for working through the overload of information that managers must deal with on a daily basis.

Those close to farming and ranching in the Northern Plains sense that farming and ranching are undergoing pronounced transformations. Freedom To Farm is placing a premium on business management skills. These transformations and the emphasis on business management skills in farming and ranching are not new phenomena, but probably have accelerated as a lesson learned from the flawed farm business practices of the mid-1980s. In 1999 and beyond, everything must count and everything must pay.

Since the 1930s, North Dakota farm and ranch numbers have trended downward by an average of 2 to 3 percent every year. Predictions are that 1999 and beyond will be no exception. Many of those exiting North Dakota's agriculture in 1999, however, will do so voluntarilya big change from the 1980s. The idea of getting out while you still have some equity is now acceptable.

We are living in a time when one of the most important business management skills that livestock farmers and ranchers can develop is the ability to stay abreast of change. Those who have the insights about change will thrive and prosper. Those who have obsolete knowledge will suffer.

Trend watching, information gathering, looking ahead and preparing of written business plans are all important business management survival skills. Surviving will require an expanded set of business management skills.

Farmers and ranchers in the Great Plains continue to experience special weather-driven financial challenges. In addition, the Great Plains economy is subject to the swings in supply and demand conditions in the international wheat market and the profit swings from the cattle cycle and its resulting beef price cycle. Both commodities are subject to competition from foreign producers. Critical business management skills are now required to help ensure financial survival in 1999 and beyond.

Integrated business planning is the science and art of combining ideas, facilities, processes, materials and people to produce and market agricultural products. I frequently define business management simply as "paying attention to details." In fact, top business managers pay attention to so many details that they have to keep business records to monitor all of the details. These business managers continuously analyze their business records, always looking for a better way to do business. Business management records and analysis will be an absolute necessity for surviving in the tough times of 1999 and beyond. Without business records analysis, your farm and ranch business is at financial risk.

As I am writing this article, three educational programs on Integrated Business Planning come to mind.

"Farm Business Planning" was developed by North Dakota State University to teach farmers and ranchers the skills for integrated business planning. It has been offered in intensive two- or three-day workshops across the state.

"Western Integrated Ranch/Farm Education" (WIRE) was developed by a team of University of Wyoming extension agents and specialists and has now been adopted by several western states. It is a two- or three-day intensive educational program designed to increase participants' business management skills. Montana has adopted it extensively.

"Back in the Black" was developed by the University of California and is being taught as an educational response to this decade's low beef prices. It also is an intensive multi-day educational program designed to enhance the business management skills of participating ranchers.

In summary, most integrated business planning educational programs can be broken down to three basic questions:

In 1999 and beyond, everything must count and everything must pay; and if it does not pay, don't do it! Do you have the management skills to determine what does and does not pay? If not, you might want to attend one of these Integrated Business Planning workshops.

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Source: Harlan Hughes (701) 231-7380 hhughes@ndsuext.nodak.edu

Editor: Tom Jirik (701) 231-9629

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