Business - FarmBooks

Farming has always been a risky business. Markets shift, input costs climb, weather patterns change, and disease threats never fully go away. But the producers who manage risk well don’t just react—they prepare. And preparation starts with discipline. Risk management isn’t about avoiding risk altogether.

I like to give my dad a hard time that all he had to do was farm the ground and feed the livestock to make a sustainable profit. I say this jokingly, but he recognizes that there is some truth in that statement.

Ben Franklin is credited with saying, “An ounce of prevention is worth a pound of cure.” The proverb holds true today and is particularly relatable for pork producers. A disease event has the protentional to increase your production costs, reduce your production efficiency and increase your lost opportunity in the wean-to-finish phase of production.

“Is my business producing enough profit to be financially sustainable in the future?” is a question that I often receive when visiting with producers. “Show me the numbers,” kind of like “show me the money,” is often my initial response. When I say “numbers” I am really referring to the financial reports.

During periods of high commodity prices and profitability, farm business owners should be diligent to financially prepare for the next period of low prices. The following are strategies that could help you build working capital to be ready for the next cycle of low prices.

In commodity production, high prices are the result of more demand than supply. In the past 20 years, the pork industry has been fortunate to increase demand through exports. More demand than supply results in high prices and creates profitability that attracts financial capital.