Success in business is doing 5 percent better in a lot of different areas, Dr. David Kohl told an audience of MMPA members in April.
“Five percent better in production. Five percent better in marketing. Five percent better in finance. Five percent better in putting their systems together,” he continued, shedding light on how some 40 percent of producers continue to squeeze out a profit or minimize losses despite the agriculture industry’s current economic turbulence.
Kohl, a professor emeritus in the Agricultural and Applied Economics Department at Virginia Tech and president of AgriVisions, spoke at the MMPA Young Cooperators Conference on April 7 in Frankenmuth, Michigan, offering advice on how to position your dairy during the economic reset.
“Good times don’t last forever, and nor do bad times. You often make the worst mistakes during the good times. You know why? We get complacent. Complacency will kill you,” he asserted.
Kohl illustrated his “5 percent rule” by segmenting producers into the top 40 percent and bottom 30 percent, separated by the middle 30 percent of “tweeners.”
The top 40 percent is driving toward efficiency by continually working to improve across all areas of production. Kohl noted one producer who focuses on his cash flow throughout the year to make tweaks in his operation for the greatest success.
What separates the “tweeners” from the top 40 percent of producers is their method to managing their business, who know change is needed but don’t do anything to adjust. According to Kohl, the middle 30 percent take a reactive vs. proactive approach that can hold them back. The bottom 30 percent, meanwhile, is complacent and “in a state of trance.”
But outside influences continually have an impact on pricing and production of U.S. agriculture producers. “My whole role is to connect the dots. What I’m seeing around the world is coming back to influence your business,” he explained.
Kohl relayed the various factors he’s currently monitoring: international trade, fuel costs, the Federal Reserve and interest rates, and Mother Nature.
“International trade is the biggest risk across all of agriculture today,” he said, noting $1 of every $5 farm income dollars last year was from international trade. Further, actions and statements from Washington, D.C. that impact international relations can result in retaliation from other countries which hurts agriculture.
Fuel costs, meanwhile, are expected to be lower long term which indicates financial health. The Federal Reserve may also work to drive interest rates back to a “normal” of 6.5 percent. Kohl advised producers to consider rising interest rates when planning finances.
The last factor, Mother Nature, will increasingly be an issue for younger generations. “Plan on weather in extremes. When you have this abnormality in weather, you can expect volatility in costs and prices,” he explained. “What you’re going to see is volatility in extremes. Get ready for that. It’s going to create short run opportunities and you’re going to be on these roller coasters. Don’t let the highs get to high or the lows get too low.”
But how does Kohl advise producers to adapt to the many factors impacting their business? It comes down to focus. “In today’s world, we have all this clutter going on. Manage the things you can manage, manage around the other clutter. Maintain your focus.”
This focus can be achieved by goal setting and working within Kohls’ four cornerstones of success: plan, strategize, execute and monitor. Kohl advised everyone to write down their five year and 10 year goals and continually monitor actions taken toward reaching those goals.
And through the process, Kohl knows doing 5 percent better in a variety of areas will drive producers to success.
More about the 2017 YC Conference
The 2017 Young Cooperators (YC) Conference was held April 7 in Frankenmuth. In the morning, MMPA’s Ken Nobis and Joe Diglio led the program along with UDIM’s Sharon Toth. The leaders provided updates on the cooperative, the dairy industry and Michigan’s dairy checkoff. The keynote speaker was Dr. David Kohl. In the afternoon, YCs toured K&K Kern Farms a member farm with four robotic milkers in Bridgeport, Michigan. In the evening, YCs enjoyed dinner and entertainment with comedian/magician Cameron Zvara.
The YC Conference is a component of the Outstanding Young Dairy Cooperator (OYDC) program and is organized annually with assistance from the YC planning committee, made up of the 2015 and 2016 OYDC representatives and runners-up. The 2017 OYDC conference—where the upcoming representatives and runners-up are selected—will be held August 17-18 in Novi, Michigan.
This article was originally published in the May issue of the Michigan Milk Messenger.