The question that many financial managers are asking these days, "What business am I really in?" appeared to strike many beekeepers attending as something of an absurdity. But it is perhaps more relevant today than ever before. With the honey market in a shambles, can beekeepers ignore the fact that they must first and foremost be honey marketers and promoters, not simply producers? A classic example of this kind of "tunnel vision" can be found in a best-selling book sometime back, which analyzed the current conditions of the railroads. As super highways were constructed and more and more transportation was being done by truck and aircraft, the railroaders failed to ask themselves what business they were in. So, instead of stepping back and diversifying their real business, transportation, they continued to roll down their steel tracks, railroading themselves into some difficult times and leading a few into bankruptcy.
Some who had experience in other branches of agriculture, considered discussions about the troubles of beekeeping industry more than just intriguing. They'd heard much of it before in poultry, hog and other livestock producer meetings. It is a too familiar song, rooted in the fact that no longer is agriculture a favored son in an increasingly urban oriented society.
Just how important is financial record keeping becoming for agriculture in this decade? Some statistics, as reported in the July issue of the Farm Finance Newsletter, published by the Florida Cooperative Extension Service, might provide a clue:
"Not many farms are making money today. It is those farms grossing between $40,000 and $200,000 annually that face severe financial problems. They are often too big to get a meaningful off farm income and too small to obtain the economies of scale that the super farms enjoy. The recent low commodity prices, plus servicing debts based on an over optimistic assessment of the future, makes this group particularly vulnerable."Most, if not all, large sideliner and full-time beekeepers fit the above description. Perhaps more revealing are the ratios below:
Production Expenses Prod. Expenses per Cash Receipts per
Year per $1 Cash Receipts $1 Net Farm Income $1 Net Farm Income
1975 0.65 1.61 2.47
1978 0.64 1.60 2.49
1979 0.69 1.82 2.64
1980 0.73 2.08 2.87
1981 0.71 2.13 2.98
1982 0.75 2.28 3.05
Again, the Newsletter states:
"All the ratios show a gradually worsening trend for Florida farmers. Some $.75 in every dollar of cash receipts now go in production expenses, compared with $.64 in 1978. And for every dollar of net farm income, $2.28 must be spent on production or $.68 more than in 1978. Finally, it takes more cash receipts to produce a dollar of net farm income. Every $2.49 in sales provided a dollar of net farm income in 1978 compared with $3.05 today."The profit margin in agriculture is steadily declining. The line between a gain and a loss becomes ever sharper and less and less room for error exists. This is especially true for those actively borrowing funds or contemplating going to the bank. Truly the agriculturalist, as one pundit put it, must, "Squeeze the eagle on a dollar bill until it grins." This is only possible through financial management.
A first step in managing finances is to develop a monthly cash flow statement. This is nothing more than a listing of sources of cash income and outgo. If there's more income than outgo, cash flow is said to be positive, a profit it made. If there's more outgo than income cash flow is negative, a loss is realized. This is routinely done by most folks at the end of the year, but is recommended on a monthly basis to financially fine tune an operation. Some larger concerns may even do this on a weekly or daily basis. Remember, this tracks the flow of cash and only cash transactions should be recorded. Even if a business has a great many assets, they often cannot easily be converted into cash, the necessary fuel needed to run a business on a day to day basis. If cash is short, it can be borrowed short-term to aid during times when income is short.
Agriculture is a prime example of an operation requiring cash flow analysis because it is seasonal in nature. Setting the cash flow statement down on paper is of utmost importance; it cannot be effectively done otherwise. Optimistic feelings about the business or intuition that things are going well can be extremely deceptive. The Florida Cooperative Extension Service publishes Circular 448, Cash Flow Analysis. Contact your County Agent for Availability of this pubication and others dealing with finanacial analysis.
There are several major ways to juggle finances, including: reducing costs, increasing income and restructuring debt. The following are common sense ideas beekeepers might take advantage of in each category:
REDUCING COSTS:
The state of Georgia has taken measures to protect its beekeepers and large package bee and queen industry. On August 6, 1984 the Georgia Commisioner of Agriculture placed an emergency embargo into effect. It prohibits any movement of colonies of honey bees, nuclei, queens or combless packages either into or through the state. The embargo will be in effect until October 31. This has already affected many Florida beekeepers attempting to bring bees back from the midwest; most have done an end run through Alabama. The situation seems to change daily, but as of now a beekeeper must have in hand a mite certificate from an originating state to enter Georgia or be ready to wait at the border until the Georgia apiary inspection service tests samples. It is extremely advisable, therfore, to contact Mr. Jim Harron, Georgia Chief Apiarist, before trucking bees toward the Georgia line.
[This article is for historical purposes only--Much has happened since then]
Sincerely,
Malcolm T. Sanford
Bldg 970, Box 110620
University of Florida
Gainesville, FL 32611-0620
Phone (352) 392-1801, Ext. 143 FAX: (352)-392-0190
http://www.ifas.ufl.edu/~entweb/apis/apis.htm
INTERNET Address: MTS@GNV.IFAS.UFL.EDU
©1984 M.T. Sanford "All Rights Reserved