Healthy Land. Healthy Food. Healthy Lives.
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JANUARY / FEBRUARY 2022
Do You Suffer from Investment-Deficit Disorder? BY ANN ADAMS
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n a recent New York Times web article, author David Leonhardt discussed the importance of the $1 T bi-partisan infrastructure bill. In the article, Mr. Leonhardt used the term “investment-deficit disorder” to describe what he perceived as a problematic lack by the recent (last 35 years) American government to invest in key infrastructure for America. Mr. Leonhardt has been banging this drum for the last decade and is excited about the potential improvements such investment could create in the economy and for the quality of life for Americans. The phrase “Investment-Deficit Disorder” made me think about the financial challenges that farmers and ranchers face on their farms. When I have taught classes through the Farm Service Agency’s (FSA) Borrower Financial Training Program, I’ve seen a lot of people struggling both to pay themselves a living
In Practice a publication of Holistic Management International
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wage and having a clear process to help them determine what is the best way to invest in their businesses. Leonhardt notes in his article that “The relatively decrepit state of American infrastructure acts like a tax on our economy and a drag on our well-being. It slows the movement of people and goods and reduces the quality of everyday life.” Does this sound like your farm or ranch? It sure sounds like a description of why it’s important to use the financial weak link test as well as explore if you have a logjam and any adverse factors. What I love about Holistic Financial Planning is how it helps you look at all aspects of your life when you are developing your financial plan for the year. When you look at the logjam you can consider all aspects of your holistic goal: social, environmental, and economic. Is there a blockage that is keeping you from making significant progress toward your holistic goal? If so, what resources—time and money—do you need to devote to removing that blockage? This is the most critical investment. I also really appreciate the way the financial weak link test helps you hone in on each enterprise and determine the weakest link in
2021 Program Review INSIDE THIS ISSUE HMI’s 2021 program offerings ended with a flurry in the fall of 2021. Go to page 13 to learn what people are getting from HMI’s training and all the work we have done with our incredible practitioners, Certified Educators, and collaborators—including the 2021 REGENERATE conference, workshops, and field days attended by 605 people.
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the value chain so you can more effectively invest in the weakest link and not just the part of the business that attracts your attention. I’ve seen producers really learn to shift their focus and make an investment in a critical area of enterprise improvement that takes their enterprise and their profit from it to the next level. Of course, the Gross Profit Analysis helps many producers figure out what their cost of production is and where there are opportunities for improving profit margins to help contribute to the overheads of the operation. I’ve seen many producers explore multiple gross profits and realize that an investment in a particular enterprise can make an enterprise more profitable even including the additional cost of the annual amortization of that investment over the lifetime of the asset. The Campbell family of the B-C Ranch in Saskatchewan, Canada have also used the Comparing Options test to consider the effect of various new production/marketing decisions on the overall financial plan. They have been able to see that just increasing the price/pound of their yearlings by even a penny would make a huge difference in their profit margin as well as being able to purchase their hay for $5/ton less given the amount of hay they purchase. In clarifying the value of these changes they can then prioritize their time invested in making those changes rather than being distracted by smaller changes that will not provide the same return on investment. I think the key reason that many farmers and ranchers may not be making effective investments is because they don’t have a holistic goal that provides their operations the “decision compass” necessary to make effective decisions. Many of them also don’t know their numbers at a sufficient level that would enable them to know where they are losing money and where there is opportunity to increase profit. Certainly having that kind of information and direction will help toward moving the average farm net to actual profit instead of loss and will go a long way toward attracting the next generation to agriculture.