To kick off one of our sessions at a recent young and beginning farmer leadership program, one producer asked, “How would you recommend we prepare for an uncertain marketplace locally and globally?” Well, let’s take a look at some of the best practices to keep your business competitive even with uncertainty.

First, I recommend a good old-fashioned business plan. If this seems intimidating, consider a “business plan lite.” This includes business, family and personal goals. Outline goals for one to five years and make sure that they are each in writing.

Next, follow your goal development with a projected cash flow. This step requires one to estimate production and consider the harvesting schedule while placing numbers on yields, prices, revenues, margins and outcomes. Additionally, in uncertain markets, whether local or global, the logical next step is scenario planning. Critically think through possibilities such as changes in export markets, various border taxes, or the strength of the dollar. This process forces you to consider different possible outcomes, but also minimizes the potential shock from rapidly changing markets and economic conditions. Similar to what an athlete may do for a game, scenario planning pushes one to visualize different outcomes. In short, it is the proactive approach to uncertain markets. 

Another recommendation is to always have a good handle on your finances. Uncertainty in markets necessitates the financial leverage of working capital, defined as the current assets that can be quickly turned into cash. An additional defense tactic is a good line of operating credit. Of course, both operating credit and working capital should be in place to mitigate the need for higher levels of debt in case of negative outcomes. 

Finally, in uncertain economic environments, businesses should have a backup plan, or maybe two or three. As a producer, think of yourself as the team quarterback. There will be times when you have to change the plan based upon game conditions. At other times, your job will be to execute the plan even when it is tempting to deviate. Your game strategy should be based on staying competitive with your business’ particular resources and strengths.

Many producers of all ages are concerned about the uncertainty in markets, especially as factors including trade policy, consumer demands, commodity prices and farm incomes are considered. Today’s economic environment requires a bit of stretch in the financial marketing and risk management waistband. However, flexibility is helpful only if one knows the limits of the business as determined by the above practices. Remember that resiliency is the ability to bend but not break!