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ACRE vs. DCP in 2013

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The extension of the 2008 Farm Bill opens up the decision to participate in the Average Crop Revenue Election (ACRE) program or the Direct and Countercyclical Program (DCP). Under the earlier rules of the 2008 Farm Bill, if a farmer signed up for ACRE, they had to remain in ACRE through 2012. But the extension changes that requirement. Even if farmers signed up for ACRE before, the extension allows them to change their choice and sign up for DCP if they think that is a better choice for them in 2013. (Farmers do have the option to not sign up for either program, but this is not a sensible choice for 2013 in almost all cases.)

Farmers have until June 3, 2013, to sign up for the ACRE program and August 2, 2013, for the DCP program.

The 2013 decision to sign up for ACRE involves some uncertainty because the drought of 2012 has cast doubt on the potential yields for 2013 and thus the potential market prices. Plus, changes in the demand side for grains may have weakened the market's ability to absorb higher production at current price levels.

At this point in late April, the decision seems to tilt towards the sign up for the DCP in 2013. As we learn more about the planting season and potential production levels and price movements, this situation may change. So farmers need to pay attention to these changes and make their final choice between ACRE and DCP closer to the deadline of June 3.

Due to this uncertainty and their individual situations, every farmer needs to evaluate their own conditions and payment limits and decide whether the ACRE or DCP program is the best option for their farm in 2013. Even if they had signed up for ACRE previously, they can change their choice under the extension of the farm bill for 2013.

Farmers and their advisers can use this Excel worksheet to help them evaluate their situation for the 2013 decision.

Economics of Farm Management in a Global Setting

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A new book on farm management is available. I just published Economics of Farm Management in a Global Setting. As it says on the back cover of the book:

Advances in technology, communication, transportation, and policy are bringing farmers closer to the global market than they ever have been. To prepare for the future in the midst of these changes, farmers need an orderly process for developing strategic and operational plans and the ability to describe them in a structured business plan. Economics of Farm Management in a Global Setting provides the right blend of tools and knowledge for undergraduate Farm Management and Agricultural Economics students. It covers new and innovative topics needed for today's and tomorrow's farm managers while keeping the fundamental concepts at the forefront. New management tools and methods include:

• Strategic and operations management
• Quality management and control
• Production contract evaluation
• Farm Transfer and Succession Planning

Praise for Economics of Farm Management in a Global Setting

"Practical examples. Hands on. Clear text. Good breadth of material.
Michael Popp, University of Arkansas

Current, complete, concise."
Wayne A. Knoblauch, Cornell University

"Three strengths [of Economics of Farm Management are]: The strong focus on strategy (four chapters) generally lacking in most other texts. ... The integration of lessons from microeconomics and particularly macroeconomics ... [and] its practical orientation by incorporating very practical issues such as operations, quality management, land use and control, contract evaluation, etc. often forgotten by others."
Erik Mathijs, Catholic University of Leuven, Belgium

"As a teacher of Farm Management courses, I find this text very appealing... This text is well balanced and the material covered is up-to-date. It will certainly enrich the existing literature on Farm Management... It not only covers the current topics in the subject, but it also takes into consideration the global nature and competitiveness of today's farming."
Pierre Boumtje, Southern Arkansas University

The complete list of chapters is:
1 Managing the Farm in an Integrated World Economy
2 Management
3 Business Plans
4 Lessons from Microeconomics
5 Lessons from Macroeconomics
6 Government Policies Affecting Farming around the World
7 Strategic Management: Planning
8 Strategic Management: External and Internal Analysis
9 Crafting Strategy
10 Strategy Execution and Control
11 Marketing Basics
12 Financial Statements
13 Financial Analysis
14 Financial Management
15 Enterprise Budgets: Uses and Development
16 Partial Budgets
17 Whole-Farm Planning
18 Operations Management for the Farm
19 Quality Management and Control
20 Investment Analysis
21 Land Ownership and Use
22 Risk Management
23 Production Contract Evaluation
24 Human Resource Management
25 Business Organization
26 Farm Transfer and Succession Planning
27 Farming in the Future

Managing in Turbulent Times

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Given all the uncertainty of the future in the macroeconomic, politics, and the world in general, I decided to re-read "Managing in Turbulent Times," Peter Drucker's classic book from 1980. Even though Drucker was writing for a time period different in many ways from ours today, he still writes a core set of ideas that are pertinent to today's manager.

1. First task is survival. Do what needs to be done to survive today in order to be in business tomorrow.

2. Manage the fundamentals. Pay attention to the traditional measures and do what needs to be done to maintain liquidity and financial strength. Drucker adds, "Liquidity by itself is not an objective. But in turbulent times, it becomes a restraint. It becomes a survival need."

3. Manage productivity. Make the right choices to maintain and increase productivity of all resources: capital, physical assets, time, and knowledge. The productivity of each of these is managed separately with overall productivity being the ultimate goal.

4. "Tomorrow is being made today." In turbulent times, earnings made today should be used to pay the costs of staying in business tomorrow. This phrase is also the recognition that the changes that are part of today's turbulence are creating the business environment of tomorrow. So paying close attention to all the changes today will enable a manager to understand the foundations of tomorrow's market.

5. Concentrate resources on results. This means having to say, "No." Evaluate the business and the market to determine what is making money and/or establishing a base for tomorrow. If part of the business is not producing the needed results, start to let go of it. Drucker says, "Feed opportunities, starve problems."

6. Slough off yesterday. Drucker says the manager should ask, "If we weren't in this already, would we go into it knowing what we know now?" Tradition is a strong force, but if the foundations are changing, what was profitable and successful when it was started may not hold the key to success in the future. If the answer to Drucker's question is, "No," a manager should start looking at how to get out of that activity or at least asking how to stop putting additional resources into it.

7. Growth shifts to new foundations. Managers need to identify where the growth areas are that match their strengths and to start shifting resources to where the new opportunities can be found. Drucker's analogy is that business needs to distinguish between "muscle, fat, and cancer." He adds, "The rules are simple: Any growth which, within a short period of time, results in an overall increase in the total productivities of the enterprise's resources is healthy growth. It should be fed and supported. But growth that results only in volume and does not, within a fairly short period of time, produce higher overall productivities is fat. A certain amount of fat may be needed; but few businesses suffer from too little fat. Any increase in volume that does not lead to higher overall productivity should be sweated off again. Finally, any increase in volume that leads to reduced productivities, except for the shortest of start-up periods, is degenerative if not pre-cancerous. It should be eliminated by radical surgery - fast."

Even though they are 30 years old, Drucker's points are still valid today.

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