How To Deal Effectively With Risks & Uncertainties To Ensure More Consistency In Your Farm's Performance

By Tayo Solagbade

Among other benefits, adopting the type of best practice scientific farm business management approach that we recommend on this site - called BOPMS™ - will equip owners to VERY competently handle the many RISKS and UNCERTAINTIES that plague our socioeconomic environments in Nigeria/Africa, which can lead to the demise of ill-prepared businesses. This articles discusses specific pro-active steps you can take to minimise the impact of sudden and unexpected occurrences that frequently occur in our prevailing socioeconomic environment, so that your farm business can maintain reasonable consistency in output - and profitability.

Your Farm Is Prone To Risks & Uncertainties

A farm enterprise, like any other business is prone to risks and uncertainties occasioned by changes that may occur in the socio-economic environment it operates. Price fluctuations for example occur/affect all businesses but are more difficult to manage or accommodate in farm business planning and management.

Similarly, increases in wages "approved" via government policy/announcement cannot be easily absorbed in agricultural ventures. This is because the farmer will rarely - if ever - be able to increase his/her price to match the increase in labour so as to maintain his/her profit margin.

Some Examples Of Risks & Uncertainties That Can Affect A Farm Biz

1. Production Uncertainties: Weather changes and disease outbreaks can negatively impact on a farm's performance. The problem is that the farmer typically may not be able to directly control them. For instance a disease outbreak from another farm may eventually spread to his/her farm. If s/he has taken precautionary steps (e.g. vaccination etc) the damage can be minimised. Weather changes are less easy to plan for however.

2. Price Changes: Sudden or unexpected changes in farm input and output prices tend to occur often in our economy. And they are particularly difficult to manage. This make farm planning more difficult to practice. Examples are wage increases, transport fare hikes, fuel price changes etc.

3. Government Actions & Policies: The farmer may not get notified early enough of a new government regulation that directly affects his/her farm business BEFORE he enters and commences a new season's production run! Examples of such policies include guaranteed minimum prices, ban on import of certain essential inputs (e.g. feeds or feed materials) etc.

The farm owner will need to take crucial farm planning and management decisions within the framework of all these actions and policies by government - a very challenging task I dare say, especially in these parts!

4. Actions of Other People: Agriculture is practised by a growing proportion of Nigerians - even now in urban areas. Most of them however operate on small holdings - which are shared amongst a few. The challenge is that if a farmer diligently plans and manages various aspects of the farm and his/her neighbours do not, s/he would effectively be wasting his/her time.

5. Other Risks & Uncertainties: Water shortages, power failure, and other limitations especially caused by poor utilities/infrastructure as is common out here introduce another dimension of risks and uncertainties for the farm business owner to contend with.

The above listing though not exhaustive underscores the need for every farm business owner to take special care to set up SYSTEMS to deal effectively with risks and uncertainties if the farm's performance is to be profitable and sustainable.

Steps You Can Take To Deal With Risks & Uncertainties

1. Set definite objectives for your farm business. Decide what exactly you want the farm's output to be and identify any of the above mentioned "obstacles" that could prevent attainment of that goal.

2. Draw up plans to pursue the objectives. You could for instance decide to start with a hatchery and two grow out ponds and then gradually add more ponds over time till the full capacity of 10 grow out ponds is achieved. This will allow you to gradually build your material and human resources to manage the enterprise in the face of various risks and uncertainties.

3. Implement your plans. There is no point setting objectives and drawing up plans if you do not decisively IMPLEMENT and follow them up to achieve the intended results. A farm business owner needs to make up his/her mind to follow through with whatever plan is decided upon - making needed changes/adjustments as the need arises.

4. Introduce Checks & balances. In our environment, pilfering and deaths resulting from disease outbreaks or accidents occur with some regularity if no checks and balances are put in place. That's why you will need to entrench diligent record keeping of mortalities (deaths), wastes and losses that occur DAILY and analyse/trend those records to get a 'feel" for what is "normal",so that you can promptly detect unusual signs that could point to naughty practices by farm hands or even outsiders who break in.

5. Forecast likely price and output for the future. You will find it useful to periodically do "what if" analyses to determine how price or output changes you anticipate in the future will IMPACT your farm's performance. This activity is often enhanced when an automated forecasting software tool is available. Click here to learn how I can build a custom software to do something like this for you.

Summary

You as the farm business owner must ensure your mind is finely tuned to market trends. You need to stay alert to price changes in the market - know when they are lowest and when they are highest and use this knowledge to guide your farm planning and decision making. For instance it makes sense to plan for your broilers to be ready for sale towards a festive occasion when people usually buy such birds in large numbers, otherwise you may find yourself left with unsold stocks which keep getting fed - very expensively!

That's why it is said that the EDUCATED farmer is the one who knows the DIFFERENCE between January and July as it pertains to making income.

This article is an educational commercial about an aspect of the Best Operating Process Management System (BOPMS™) that SDAc's CB Solutions can help you setup for your farm business.

In the BOPMS™, major emphasis is placed on the need to streamline operations(via best practice initiatives) in a manner that allows easy integration of PC automation to reduce time, effort and resources needed PLUS increase output and accuracy in the entire farming process,so that the business becomes MORE profitable. Click here to learn more.