You may not have much book work to do in your office at this point in the year. It is well past the lending and tax seasons. You are doing some crop scouting and monitoring the markets, but if your crops are all planted, you probably have time to do some thinking about your farm business. While that should always be at the top of your mind, let’s focus on analysis and new ways of thinking about your future.

Economist Don Hofstrand has a wealth of information about business strategies in the June issue of the Iowa State University Ag Decision Maker. But there are two particularly noteworthy elements in his section on Strategic Management for Farm Businesses.

To analyze where your finances are at any point in time you compile a statement of financial position. But to see were your business organization is, you need to conduct some external and internal scanning.

1) External scanning is analyzing the world around you. Hofstrand says, “External scanning involves looking past the farm gate and examining and assessing the economic, business and social environment surrounding your business.” Everything changes every day: technology, markets, farm policy, and neighborhood competition for land. If you are raising corn, beans and hogs, you need to scan those industries to ensure you are knowledgeable about the dynamics in those industries. Look at your competitors, particularly if you are producing a specialty item along with several other farmers in your vicinity. Scan such things as interest rates, business regulations, consumer preferences and anything that will impact your business from outside your control.

2) Internal scanning is exploring your business from the inside to identify strengths and weaknesses, evaluate your performance as a manager and the other personnel resources available to you. Look at each enterprise from the inside and break each down into different segments that can be analyzed for strengths and weaknesses. For example, if recordkeeping is a weakness, farm it out to a professional, or someone else in your operation that would do a better job than you.

After your internal and external analysis is complete, Hofstrand encourages you to consider some new ways of thinking about your operation. During your external scanning you probably determine that agriculture is in a constant state of change, from the realm of production, to the marketing change. We entered the biotech age less than 10 years ago, and now we are energy producers. Farmers who are quicker to adapt and take advantage of new opportunities will carve out their niche in the most profitable areas.
• Today you are producing commodities for the food industry, but tomorrow you will be producing food and energy commodities with potentially volatile markets.
• Today you are producing corn, soybeans, hogs and cattle for commodity markets where every unit of production is the same, but tomorrow you will be selling products with specific attributes, and if it does not meet specifications it may not have a market.
• Today you produced a commodity and then tried to sell it, but tomorrow you will determine what will sell for the best revenue for your operation, then produce that item.
• Today your focus is maximizing your production techniques of a few commodities, but tomorrow your focus of how to produce may be overshadowed by what to produce.
• Today you expanded until your labor and management were fully employed, but tomorrow you will have a team of consultants and specialists to assist with labor and management.
• Today you are an independent farmer working for yourself, but tomorrow you will be the CEO of a business with a team of specialists and managed labor.
• Today you worked for yourself to produce a commodity for the open market, but tomorrow, you will be producing specific desired traits for an integrated market system.
• Today you have managed assets because it took a large amount of capital to farm, but tomorrow you will be managing information which will become the most important resource to manage.
• Today you leveraged money by either borrowing or leasing assets, but tomorrow your ability to leverage information will be just as important as leveraging money.
• Today you expanded by farming more acres, raising more livestock or expanding horizontally, but tomorrow you will vertically expand by controlling a portion of the food and energy chain below and/or above your operation.
• Today you increased your income by maximizing your production with additional bushel or head of livestock, but tomorrow your revenue will be maximized with the specific traits or attributes you decide to produce.
• Today you were confronted with a mature, stable food market with little opportunity for increasing revenue, but tomorrow you will be challenged with the opportunity to produce for a volatile food and energy market.
• Today you have produced a generic commodity and been a price taker, but tomorrow you will produce items with specific traits and have more influence over their marketing.
• Today you have bought retail and sold wholesale, but tomorrow you will buy directly from an input producer at wholesale levels and market your specifically traited products to end users.
• Today you competed with buyers and suppliers on similar price levels, but tomorrow you will be partnered with buyers and sellers as part of a supply chain.

Summary:
Farmers have the opportunity to strategically control their operation and their future. A thorough analysis must be taken of both the business environment as well as the internal dynamics of the operation. Using those facts, farmers can prepare for a dynamic change in agriculture which integrates inputs and markets and creates supply chains of products with specific traits demanded by the market. Replacing the mentality of “today” with the opportunities of “tomorrow” can give a producer opportunities to create his own success.