A recent young beginning farmer event featured a simple but thought-provoking exercise that brought together producers and lenders alike. The question on the table:
Fill in the blank. In 2035, the farmer who not only survives but truly thrives will absolutely need ________.
Here are some of the common nuggets we gleaned from this exercise.
Plan for succession
Many of the 1.9 million farms and ranches in the United States are family operations. With the baby boom generation steadily aging, the need for a proactive estate plan and a clear transfer of assets has never been more urgent. Passing along the management, control and decision-making is not just a financial event. It is a defining moment for the business.
Operations that thrive through this transition are the ones that honor institutional knowledge of the senior generation while embracing the fresh ideas and innovations the next generation brings to the table. That combination is a powerful recipe for taking a farm business to the next level. Unfortunately, procrastination or an unprepared next generation can quickly unravel decades of hard work and, in some cases, put both the business and the family at serious risk.
Manage risk
What is different today compared to the farm crisis years of the 1980s is the number and variety of risk management programs available and the opportunity to increase levels of coverage. Smart managers can use these to cushion some of the most extreme swings in economic volatility.
It is important to know your appetite for risk and pursue base hits in marketing rather than home runs.
Write a cash flow statement
A written cash flow is the foundation of any solid business plan and monitoring it monthly or quarterly against real numbers is a key to success. A projected cash flow requires critical thinking and honest assumptions across several areas: production, price, cost, debt service, family living and capital expenditures. Together these form your operational plan.
Most importantly, use that spreadsheet to test scenarios and possible changes so you can establish the guardrails that keep the business on track. Start simple. Don't let the pursuit of perfection keep you from getting started.
Diversify revenue streams
Diversifying revenue streams with on- or off-farm employment or business ventures is critical for business resiliency and agility. At the same time, those who focus on achieving the lowest breakeven in an increasingly competitive global export market will also find a path to success.
The two strategies are not in opposition. They are tools, and knowing which one fits your operation is the real advantage. The diversification strategy does require staying close to the customer and being able to look ahead and identify new opportunities and trends with the potential to shape profitability.
Employ new tech and practices
Embracing technology and innovation, with a focus on regenerative farming practices, is not a distant trend. It is already reshaping the industry.
Innovation does not always mean the latest gadget. Sometimes it means revisiting time-tested farming methods that bring transparency to production and distribution while aligning with consumer trends.
Activate discipline and grit
The discipline required to build working capital reserves in the profitable years, combined with grit in the tough times and good old-fashioned written goal setting, may be the most underrated edge a farm family can have. These are the qualities that separate those who simply survive from those who truly thrive.
The 2035 farmer is not a single profile. He or she may be a mix of diversified entrepreneur, lean specialist, tech adopter and regenerative pioneer. What they each will have is intentionality: a written plan, a clear understanding of risk, a family transition and long-term strategy, and the discipline to execute when conditions are far from perfect.
The future belongs to those who start preparing for it today.