18 January 2021

8 minute read

For example, in a recent Hoard’s Dairyman “DairyLivestream” webinar, two milk processors were asked what they would do differently today vs. pre-COVID-19. One said they would likely carry more inventory of inputs, challenging the “just in time” processes that businesses have adopted to save cost and free up capital. Having a two-month supply of key inputs would have allowed them to better maintain their processing capacity. The processors also indicated that they have learned the need to have more regular conversations with suppliers and customers, looking at the cost/benefit of every decision.

Have you used this COVID-19 experience to reassess your business and business practices? Where could processes and practices be changed or improved to set your business up for the future? Would a fresh perspective and a different skill set help you determine and make these changes? If you believe there are some key areas that your business needs to improve in, but you lack the personnel or the skill set to make the changes, the COVID-19 pandemic may have set the stage for some opportunities to arise.

Currently there are individuals out there, unemployed or underemployed, who have skill sets that you may be able to use. Here are just a few areas where a short term hire, or a special ability worker may be of assistance.

Supply Inventory Control

You may have noticed that machinery parts that have been sitting somewhere on the farm for a long time seem to go missing right when you need them. Depending on the size of your operation, this can cause you from a minor delay looking for it, to serious money loss. There are plenty of other examples when not having a clear idea of your inventory may lead you to overspend or lose income. Additionally, your inventory is part of your net worth, impacting the accuracy of the balance sheet that you share with your lender. Hiring someone, at least temporarily, to create an inventory tracking system for your farm may be a good financial investment and a first step to getting control over this cost center.

Field Labor

Very few farm tasks can wait. Fruit and vegetable crops ripen at especially narrow timeframes and usually require some degree of hand-labor. Cows need to be milked. A delay in farm practices can translate into livestock illness or loss of the whole harvest. Field labor is a qualified job; it requires specific skills. A slow harvest can lead to crops rotting in the fields, and when this happens the harvest process gets slowed down even further as, for example, workers have to remove old product so rot does not spread to healthy parts of the field.

Hence, it is fundamental to pay special attention to fostering relationships with your employees, even if they are temporary - training and mentoring them, and applying good labor management practices. Consider hiring someone with experience in human resources to help you re-think how to approach labor and make positive changes on your operation.

Workshop Labor - Custom Hire

If you are a row crop farmer you are probably a skilled mechanic. Have you considered turning this into an enterprise in and of itself? Could this translate into an alternative source of income for your family? Could you offset the cost of hiring somebody to help you branch out?

On another hand, you may be a smaller, beginning, or specialty crop farmer. For you, the above paragraph may not make sense… or maybe it does? Have you considered the amount of money in hand labor that you may be able to save by using mechanical practices? Crops with mechanized production are less subject to disruption in the event of a labor crisis such as COVID-19.

Every farm finds its own balance between owning every tractor and implement needed in the operation, and custom hiring for each field task. Both, or a combination of these, can be viable, cost-efficient alternatives. Doing a partial budget, including revenues and costs of the alternatives, can help you make the right choice for your farm. Remember to take into consideration cash flow, trade-in, and depreciation values, costs for other associated equipment, and restricted-use pesticide licenses. Hiring somebody who can analyze this for you may save you some dollars in the long run.

Farm Automation

There are most likely a lot of jobs on the farm that could be made more efficient through an automation upgrade. There are out-of-the-box solutions for most of these problems, but many might be cost prohibitive. There is lots of room in most operations for a re-think of where simple, affordable automation could help. Hiring someone familiar with microprocessors and mechanics may be able to improve your farm’s efficiency at a much lower cost than you might think. Cameras, sensors, and networking to add sensors to equipment are only a few examples of what can be accomplished by someone who thinks out of the box in terms of processes.

Marketing Channel Management

One thing that COVID-19 has made noticeable is the delicate situation of farms with one product, one buyer, and no storage capacity. Many farms are deciding to diversify their customer base, whether that means selling in the futures market, selling a part of their harvest directly to customers, or to several different processors, or at different marketplaces, depending on the case.

Others are looking into increasing their storage capacity, arguing that this drives their farm’s resilience up. Value-added dairy products like yogurt and cheese, or other products that can be stored like some fruit and vegetables and frozen meats, are seeing a huge increase in demand. Others have seen a ramp up in community-supported agriculture subscribers, and end-consumers demanding farm-canned, frozen, dried, or otherwise preserved or prepared products.

However, these are huge challenges if you don’t have the technological expertise, or systems savviness, or infrastructure to start storing and delivering product in a new way. If either the lack of storage capacity or the lack of marketing channels have proven to be a bottleneck for your farm during COVID-19, this is the time to bring in somebody who can show you some ways you can overcome these marketing challenges. For example, this could be a person who manages direct-customer online sales deliveries for you, or who manages your contracts with clients whether they are processors, elevators, restaurants, or grocery stores. Specialty food customers are usually willing and happy to drive to the farm to pick up food, so you may not need a large logistical investment.

Lobbying and Communications

Our food system is not like a chain—it’s like a mesh. If there are failings at one place, the rest of the network fills in. Besides all the parties in the food value chain, a food ecosystem also includes multiple other stakeholders, such as governments, NGOs, the healthcare sector, universities, and the financial sector. The more interaction there is among different members of the ecosystem, the healthier it is. The most geographically disperse a food network, the more resilient it is. This means that the wider your reach both for purchasing inputs, selling products, and discussing each other’s roles in this food network, the less risk your farm will be under.

Some people who may help you cover this area for your farm are those who speak more than one language, who are familiar with digital technology, and who may have access to bringing people together for a food network conversation.

Product Diversification

Traditional agriculture is highly dependent on export markets, and in some cases an excess stock of commodities has driven prices down. The agricultural industry has also historically been characterized by a low-margin business model where farms with the lowest costs have the advantage. Adding a product base that is marketed locally may protect you from sudden commodity or input price fluctuations. On the other hand, if you are a specialty crop farmer, you may benefit from policies and economic incentives that only apply to field crops if you incorporate them into your farming operation (for example, ARC/PLC programs).

Incorporating a new product on your farm is not something that will happen overnight, and it requires very careful consideration of costs, both in terms of time and money; and potential benefits. Somebody with a budgeting background could help you consider the pros and cons of a decision like this. A budgeting specialist would also save you money in your daily expenses, analyzing when and where it would be optimal to buy inputs. A budgeting specialist may also be able to save you some dollars during tax season. Forecasting your tax liability in November or early December may allow you to apply management practices to optimize your tax spending.

Data Analysis

With government programs becoming an increasingly important part of farm income, good record-keeping quickly becomes an essential part of the farm business. Good record-keeping is a requirement to take advantage of Small Business Administration, Farm Service Agency, and Ag lenders programs and loans.

Technology is available such that you could know your exact financial position at any given point in time, if you just keep track of your daily income, spending, inventories, and production. Knowing your financial position helps make careful decisions as you handle generations worth of farm capital in challenging times. We can not stress enough how a good use of your money would be to hire a good bookkeeper.

Conclusion

The COVID-19 pandemic has negatively impacted businesses and employees in many ways. Likely your farm business is no exception. Learning from these negative impacts and striving to make your business more resilient to future challenges is a mark of good leadership and management.

The availability of employees with specific skills that may be useful in moving your business forward is certainly unique at this time. Finding them will require you to move out of your traditional hiring strategies, and into broader networks. You may also need to adjust your expectations. Some of the tasks outlined above can be done entirely or partially remotely. COVID-19 has pushed people to move their skillset into the virtual space, and you can take advantage of that if you are open to it.