Managing the Manager: The Professional Farm Manager

Farm managers must be experts in production, disease and insect control, financial planning, marketing, and a host of other areas. Yet even if a person has the ability and knowledge to be a farm manager, he or she may not have the time to manage. "Managing the manager" is a critical task. Some landowners choose to hire a professional farm manager to manage the farm. Professional farm managers can provide a wide range of farm planning and managerial services. (See Part VII, Chapter 2 for more information on professional farm managers.)

The Scenario

Jon J. Jones farms 700 acres in the cornbelt. Of this, he owns 160 acres purchased from his father and mother. He rents an additional 300 acres from his aunts and uncles and 240 acres from George Smith. George inherited his place from his father, who had employed Ray Albert, an Accredited Farm Manager (AFM) of Central Farm Management, Inc., to manage the farm. George Smith is now confined to a local nursing home, where the monthly charges are nearly $2,000 per month. After his Social Security pension, George needs $1,400 per month to meet his expenses without dipping into his limited savings. Ray Albert is aware of George's needs. To ensure these needs are met, Ray began planning with a basic plan that he refined into a strategic plan, from which he developed an accompanying working plan.

The Basic Plan

Ray's basic management plan for the Smith farm included an inventory of the resources of the farm, plus short-, intermediate-, and long-range plans for managing the farm.

Ray's inventory showed 240 acres of level, highly productive land without buildings or grain storage. However, the nearby co-op elevator had grain storage and drying facilities at a reasonable cost.

Ray's plan suggested a method of leasing the farm to a neighbor, Jon Jones, who was starting to farm in partnership with his father. Ray's selection of Jon as a prospective tenant involved considerable time and research. When he interviewed Jon, he found that Jon not only had good practical farming knowledge, but also had excellent technical knowledge. Jon had kept the family's farm record books before going into military service. Along with keeping the record books, he and his father had gone over them many times to analyze their farm business. Jon had some savings, a good credit reputation, and the financial backing of his father. Ray reviewed Jon's history with George, who readily accepted Jon Jones as the new farm tenant.

A 50-50 crop share lease was recommended by Ray and accepted by Jon and George. The farm produces corn and soybeans. Generally, there is compliance with the USDA feedgrain program, with Jon sharing equally in the proceeds. Jon supplies the machinery and labor; George provides the land and pays the taxes. Jon and George share the other crop inputs equally and share the crop equally.

The Strategic Plan

Ray communicates frequently with his clients. When George entered the nursing home, Ray visited George and his family to determine the extent of financial needs which would have to be met by income from the farm. Ray knew he would have to plan for the farm to produce a minimum annual net income of $16,800. George wanted the farm kept in a high state of fertility since he hoped his two grandchildren would inherit and keep the family farm.

Ray made a farm planning visit each year in August. During the visit, he and Jon would discuss the prospective feed-grain program, weed and insect problems, fertility needs, crop varieties, crop rotation, and tillage. This gave Jon plenty of time to arrange for fall fertilizer application to take advantage of favorable weather as harvest was completed. As amended from time to time, this plan was the basis for ordering seed and other inputs early to insure varieties desired and secure early pay discounts. Jon appreciated having this information as soon as possible, and he liked to know exactly what Ray expected of him.

In order to make the planning session go as quickly and smoothly as possible, Jon kept a planning file for the Smith farm. This file contained the current year's farm plan, most recent soil test results, Agricultural Stabilization and Conservation Service information on crop bases and established yields, seed and fertilizer availability, and expected prices.

Ray also keeps a similar planning file, which contains the basic farm plan as amended over time, copies of recent soil tests, the current year crop plan, and his notes on crop progress and problems during the year. Since there was an anticipated change in the feedgrain program for the upcoming year, Ray had made computer runs of several scenarios showing the net income effect of compliance or noncompliance with the feedgrain program using different crop yields and prices.

As Jon and Ray sat around Jon's breakfast table, each with his planning file, blank farm plat, and calculator, they discussed the current crop season and problems. Ray shared with Jon his computer analysis of the expected feedgrain program provisions. From their calculations and discussions, a new plan for the upcoming year evolved. Both made notes on their blank plat.

Fertilizer needs were discussed based on soil tests and anticipated plant food removal. Weed problems were discussed, and a preliminary weed control plan was developed. Insects had not been a problem, so use of insecticides was not planned. The condition of each crop variety was reviewed. Recent variety yield information was also reviewed. A preliminary decision on crop varieties was made pending final review and selection after harvest. Planting dates were discussed and decided upon; a plan for tillage also was developed.

Because Ray kept a planning file and analyzed his farm business records, he provided valuable input to the formal farm planning sessions. Through these sessions, which involved an exchange of information, Jon and Ray also developed good communications.

Ray prepared a typed, detailed version of the new crop plan. A copy was sent to Jon. Ray now had most of the information he needed to prepare a budget for George.

Ray reviewed the real estate taxes and timing of grain sales for George's farm. Next he reviewed his crop price outlook information and recent average crop yields for the farm. Now, Ray could develop the anticipated quarterly farm budget. George was very interested in this type of planning information. (See table.)

Making the Plan Work

In addition to planning, Ray inspects George's farm frequently and consults with Jon on the farm's needs. Ray pays the farm bills on behalf of George and reports the income and expenses to George quarterly. Farm progress reports are also made to George.

To develop a sound formal plan, informal planning must go on continuously. Jon and Ray are always collecting information for their planning files. Their ongoing planning helps them to efficiently develop an effective formal plan. Concise, well-written plans are typically carried out, while incomplete plans are frequently ignored and not properly executed.

It is easy to find time to plan if planning is on your mind and you know it must be done in a formal manner. Planning provides a road map for reaching your goals.

Eldon Greenwood, Vice President, Illinois National Bank of Springfield, Springfield, IL, and J. R. Hutchinson, President, Hutchinson Farm Management, Inc., Geneseo, IL Both authors are past presidents of the American Society of Farm Managers and Rural Appraisers.