Farm Management Now and In the Future - Key Points

Structure of Farms and Ranches

  • Since 1940, the number of farms in the United States has been decreasing; land in farms has remained relatively constant; average production per farm has increased.

  • Drivers of change: labor-saving technology, employment opportunities outside agriculture, higher income aspirations, and new technology.

  • Alliances and partnerships: joint ownership of machinery/equipment, outsourcing tasks, and small closed cooperatives.

  • Four general business strategies:

    • Low-volume, high-value producers: focus on higher-valued commodities (e.g., organic produce); critical for promotion, quality, marketing, and intensive management.

    • High-volume, low-margin producers: steady demand for generic crops/livestock; thin profit margins; require price floors via insurance/marketing contracts.

    • Specialty product and service providers: specialize in 1–2 skills (e.g., agri-tourism, custom harvesting); maximize use of expensive, specialized equipment.

    • Part-time operators: about 52\% of producers; focus on limiting financial risk and balancing off-farm work.

  • New Technology:

    • Biotechnology offers potential gains (location-specific varieties, insect/herbicide resistance, enhanced composition).

    • New nonfood uses (e.g., biodiesel, ethanol) open markets.

    • GPS enables precise field location of equipment; adoption depends on costs vs. benefits (higher yields, better quality, reduced environmental impact).

  • The Information Age: rapid changes in data collection/analysis; managers must identify critical, useful, and irrelevant information.

  • Controlling Assets: access to capital is essential; traditional credit sources becoming more vertical; growth of nontraditional sources (input suppliers, processors); auditing may be required.

Controlling Assets and Financing

  • Controlling assets (not just owning them) becomes important: land rental, leasing machinery/buildings/livestock, custom farming, and contract livestock reduce ownership risk while enabling larger production.

Human Resources

  • Increased reliance on teams and partnerships for operation tasks.

  • Essential skills: motivation, communication, evaluation, training.

  • Focus on competitive wages/benefits; regulatory attention to worker safety; training for new technologies.

Producing To Meet Consumer Demand

  • Shift from undifferentiated commodities to differentiated/processed products; stricter product standards.

  • Biotechnology enables targeted plant traits; more products for industrial uses (e.g., biofuels, pharmaceuticals).

  • Emphasis on product quality, production segregation, record-keeping, and marketing contracts.

  • Growth of niche markets: organic produce, extra-lean meat, specialty fruits/vegetables, custom-grown products.

  • Global markets: falling trade barriers raise foreign demand; products may require special characteristics; producers pursue these markets to maximize returns.

Contracting and Vertical Integration

  • Producers may focus on specific phases or high-volume intermediate products (e.g., raising dairy replacement heifers, custom harvesting).

  • Marketing contracts with processors/distributors can guarantee supply and quality; buyers may supply inputs/management.

  • These arrangements constitute vertical integration in practice.

Environmental and Health Concerns

  • Food quality/safety and environmental stewardship (soil, water, air) receive high priority.

  • Off-farm and long-term environmental impacts of new production technologies need better quantification.

  • Regulatory and environmental conditions influence the value of agricultural assets.

Globalization

  • Global markets expand via international trade; governments use tariffs, quotas, and sanitary regulations.

  • Comparative advantage leads regions to specialize.

  • WTO efforts aim to reduce subsidies and prevent price distortions.

  • Globalization can be an opportunity or a threat depending on productivity and competitive position.

Structure of Farms and Ranches

  • Historical Trends Since 1940:

    • Number of farms: Decreasing.

    • Land in farms: Remained relatively constant.

    • Average production per farm: Increased.

  • Key Drivers of Change:

    • Labor-saving technology.

    • Employment opportunities outside agriculture.

    • Higher income aspirations.

    • New technology.

  • Alliances and Partnerships in Farming:

    • Joint ownership of machinery/equipment.

    • Outsourcing tasks.

    • Small closed cooperatives.

  • Four General Business Strategies for Producers:

    1. Low-volume, high-value producers:

      • Focus: Higher-valued commodities (e.g., organic produce).

      • Critical aspects: Promotion, quality, marketing, and intensive management.

    2. High-volume, low-margin producers:

      • Focus: Steady demand for generic crops/livestock.

      • Characteristics: Thin profit margins.

      • Requirements: Price floors via insurance/marketing contracts.

    3. Specialty product and service providers:

      • Specialization: 1–2 skills (e.g., agri-tourism, custom harvesting).

      • Goal: Maximize use of expensive, specialized equipment.

    4. Part-time operators:

      • Prevalence: About 52\% of producers.

      • Focus: Limiting financial risk and balancing off-farm work.

  • Impact of New Technology:

    • Biotechnology:

      • Potential gains: Location-specific varieties, insect/herbicide resistance, enhanced composition.

    • New nonfood uses:

      • Examples: Biodiesel, ethanol.

      • Effect: Open new markets.

    • GPS (Global Positioning System):

      • Function: Enables precise field location of equipment.

      • Adoption factors: Depends on costs vs. benefits (higher yields, better quality, reduced environmental impact).

  • The Information Age and Management:

    • Characteristic: Rapid changes in data collection/analysis.

    • Managerial task: Identify critical, useful, and irrelevant information.

  • Controlling Assets (Financial Aspects):

    • Importance: Access to capital is essential.

    • Credit sources: Traditional becoming more vertical; growth of nontraditional sources (input suppliers, processors).

    • Requirements: Auditing may be required.

Controlling Assets and Financing

  • Key Concept: Controlling assets (not just owning them) is crucial.

  • Methods to Reduce Ownership Risk and Enable Larger Production:

    • Land rental.

    • Leasing machinery/buildings/livestock.

    • Custom farming.

    • Contract livestock.

Human Resources

  • Operational Trend: Increased reliance on teams and partnerships for operation tasks.

  • Essential Skills for Human Resources Management:

    • Motivation.

    • Communication.

    • Evaluation.

    • Training.

  • Focus Areas:

    • Competitive wages/benefits.

    • Regulatory attention to worker safety.

    • Training for new technologies.

Producing To Meet Consumer Demand

  • Market Shift: From undifferentiated commodities to differentiated/processed products; stricter product standards.

  • Role of Biotechnology: Enables targeted plant traits; more products for industrial uses (e.g., biofuels, pharmaceuticals).

  • Key Emphases in Production:

    • Product quality.

    • Production segregation.

    • Record-keeping.

    • Marketing contracts.

  • Growth of Niche Markets (Examples):

    • Organic produce.

    • Extra-lean meat.

    • Specialty fruits/vegetables.

    • Custom-grown products.

  • Global Markets Implications:

    • Driver: Falling trade barriers raise foreign demand.

    • Product requirements: Products may require special characteristics.

    • Producer strategy: Pursue these markets to maximize returns.

Contracting and Vertical Integration

  • Producer Focus: May concentrate on specific phases or high-volume intermediate products (e.g., raising dairy replacement heifers, custom harvesting).

  • Marketing Contracts:

    • Purpose: Can guarantee supply and quality.

    • Buyer involvement: Buyers may supply inputs/management.

  • Definition: Vertical integration is constituted by these arrangements in practice.

Environmental and Health Concerns

  • High Priority Areas:

    • Food quality/safety.

    • Environmental stewardship (soil, water, air).

  • Challenges: Off-farm and long-term environmental impacts of new production technologies need better quantification.

  • Influence on Asset Value: Regulatory and environmental conditions affect the value of agricultural assets.

Globalization

  • Market Expansion: Global markets expand via international trade.

  • Government Tools in Trade:

    • Tariffs.

    • Quotas.

    • Sanitary regulations.

  • Economic Principle: Comparative advantage leads regions to specialize.

  • WTO (World Trade Organization) Efforts:

    • Aim to reduce subsidies.

    • Aim to prevent price distortions.

  • Dual Nature: Globalization can be an opportunity or a threat depending on productivity and competitive position.

In class notes

sources of risk 1. production. 2. rech 3. market/price 4. finical 5. legal 6.personnel