Learn to manage risks in tough times
Mar 16, 2001 12:00 PM, By Lamar James
In tough economic times such as these, farmers need to know where every penny goes, says Derrick Surrette, assistant risk management specialist with the Cooperative Extension Service, University of Arkansas.
Surrette is the newest addition to Extension's risk management program. He has degrees in agricultural business and agricultural economics from Mississippi State University. He is stationed at the Southeast Research and Extension Center in Monticello, Ark.
In the current agricultural climate, farmers are facing declining government assistance as the federal government shifts risks to individual family farms, Surrette said. Farmers are also facing several challenges, including increased global competition, which has driven commodity prices down. In Arkansas, farmers have also faced drought and lowered yields.
To help farmers deal with these challenges, Extension and Arkansas State University have created the Arkansas Risk Management Education Program. It helps producers in 27 eastern Arkansas row-crop counties evaluate their financial situation and identify strategies to improve farm finances.
Besides Surrette, the program has James Marshall at Extension headquarters in Little Rock and Scott Stiles at ASU in Jonesboro, Ark.
“Farmers need all the help they can get,” Marshall said. Farmers have no shortage of questions to ask the risk management specialists. They want to know if it's feasible for their son to take over the farm, if it's an economically sound practice to expand acreage, if they should buy or lease a center pivot irrigation or if they should level their land.
“Surprisingly, with commodity prices as low as they are, farmers are still thinking about the long term,” Marshall said.
Surrette said farmers are going to have to become more precise managers and gain more control over costs.
Since he was hired Sept. 1, Surrette said he has been busy answering questions from county agents and working one-on-one with farmers.
He has shown several farmers how to set up and use a computerized records keeping program. He said farmers used to keep receipts and other records on the dashboard of their truck or in a shoebox. With a computerized program such as Quicken, they can keep up with their finances better and use it to produce valuable reports.
He said he has also helped several limited resource farmers who are concerned about getting a production loan and assuring their lender that, even though times are tough, they can repay their production loan. “We can help by showing farmers how to create a customized budget to fit their farm.”
Much of Surrette's work has dealt with showing farmers how to keep better field records. Fuel and fertilizer costs are higher, and farmers want more detailed information on these inputs.
“There's also a lot of concern in determining which fields and which crop mixes are the most profitable,” Surrette said. Farmers also want to know how much their machines cost them on a per acre basis for each crop.
As spring approaches, Surrette has been spending an increasing amount of time helping prepare farmers to meet with loan officers and use financial statements and budgets to back their loan applications.
“That's pretty important, especially with the expected low commodity prices we expect farmers to receive and higher input costs. It's making cash flow more difficult. The loan process used to be just a handshake. A lot of it still goes on, but many loan officers are taking a closer look at statements because they know times are pretty tough.”
For more information or to talk to one of the risk management experts, call your county agent or call Surrette at (870) 460-1091, Marshall at (501) 671-2284 or Stiles at (870) 972-2087.
Lamar James is an Extension communications specialist with the University of Arkansas.
