What Does Your Business Do?

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What does your business do?  Who asks this question?  Who needs to know?  How do you communicate with them?  What should your business do?  What could your business do?  What is your vision and sense of direction for your business?  How do you gather insights into these questions from others and share your own insights with them? 

On January 12, 2021 during his webinar presentation to the International Agritourism Association, Steve Kluemper will help you answer these questions and walk you through a business plan tool that you can use to communicate your sense of direction regardless of your industry. You can sign up for the webinar at https://nafdma.com/event-4066299

How can AgriStrategies LLC help?

Steve Kluemper AgriStrategies

Why Are You In Business?

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Why are you in business?  There are returns that you want from being in business.  Some are personal.  Some are strategic.  Some are financial.  How do you measure these returns to set goals and assess your level of success?  What does success look like for you?  What are the competitive assets and strengths of your business that are going to generate these returns?  How do you maximize returns on these assets and strengths?

On December 8, 2020 during his webinar presentation to the International Agritourism Association, Steve Kluemper will help you answer these questions and walk you through a tool that you can use to measure and maximize your return on assets and as a framework for other returns regardless of your industry. You can sign up for the webinar at https://nafdma.com/event-4066299

How can AgriStrategies LLC help?

Steve Kluemper AgriStrategies

AgriStrategies LLC Indiana FFA Sponsorship and Introduction by Steve Kluemper

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Steve Kuemper AgriStrategies

Hello! My name is Steve Kluemper.  I’m glad you stopped by.  AgriStrategies LLC is proud to support the Indiana FFA in conjunction with our sponsorship of the Indiana Farm Equipment & Technology Expo. Click on this link to learn about this great farm show!

I grew up in Indiana agriculture and have a 30-year career working with farms, agribusinesses and agricultural lenders. I’m here because I’m an independent consultant who can help young or retiring farmers and agribusinesses, and all of the rest in between, with their financial management and decisions. I hope you will reach out to me for a free consultation so we can discuss how I can help.

In fact, if you click over to this CONTACT PAGE on my website and submit your contact information, AgriStrategies LLC will donate $1 to the Indiana FFA Foundation for every verified contact received. You can also learn about scheduling a free consultation and helping support the Indiana FFA Foundation even more below. 

Where will the money come from…

…to get your business started?

…to make your business better?

…to grow your business bigger?

…to retire from your business?

…to meet the goals for your business?

…to bring the next generation into your business?

…to pay the bills and the lender for your business?

…to find the right lender and capital for your business?

…to help your business support the Indiana FFA Foundation?

AgriStrategies LLC can help you answer these questions and more.

In addition to helping farmers of all ages with their financial management and decisions, if you are in ag retail, I can not only help your business, but I can help you help your farmer customers, to make them more successful down the road, so that you make more sales and most importantly, turn those sales into cash in your bank account.  The same goes if you are processing or marketing an agricultural product that you are receiving from your farmers.  I can help you and help your farmers strengthen and grow your supply chain with viable farm operations.

Examples of what I can help with by bringing my 30 years of, financial management and ag banking, experience and perspectives, to agricultural producers, processors and suppliers, include improving cash flow and profitability, managing their business and finances, bringing in the next generation, putting together a projection, communicating a business plan, facilitating stakeholder discussions, restructuring a balance sheet, getting an existing lender or a new lender or a credit manager comfortable with a credit request and analyzing decisions that need to be made, etc.

AgriStrategies LLC will make a donation to the Indiana FFA Foundation for each free consultation with me that is scheduled and accompanied by the information packet below. 

Anyone who wants to learn more about how AgriStrategies LLC can help producers, suppliers, processors and other partners in the agricultural industry, or just wants to support the Indiana FFA Foundation, should contact me to schedule a free consultation or at least submit their contact information. I look forward to our discussion!  Thank you!

Steve Kluemper

517-580-9070

Steve.Kluemper@AgriStrategiesLLC.com

https://agristrategiesllc.com/contact-me/

Resource Links:

AgriStrategies LLC Steve Kluemper Bio

What Questions Can AgriStrategies LLC Help Answer For Your Business? by Steve Kluemper

Why Do Your Lenders Want You To Work With AgriStrategies LLC? by Steve Kluemper

What Typical Steps Are Involved In Working With AgriStrategies LLC? by Steve Kluemper

How Can AgriStrategies LLC Help Agricultural Suppliers Grow Their Business? by Steve Kluemper

How Can AgriStrategies LLC Help Agricultural Suppliers Manage Their Credit Risk? by Steve Kluemper

How Can AgriStrategies LLC Help Agricultural Processors And Marketers Build A Stronger Supply Chain? by Steve Kluemper

AgriStrategies LLC 25 Question for Your Business by Steve Kluemper

How Can AgriStrategies LLC Help Your Business Assess What Happened In 2021 And Plan For 2022 And Beyond? by Steve Kluemper

How Can AgriStrategies LLC Help?

Steve Kluemper AgriStrategies

AgriStrategies LLC Indiana Farm Expo and FFA Sponsorship Introduction by Steve Kluemper

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Steve Kuemper AgriStrategies

Hello! My name is Steve Kluemper.  I’m glad you stopped by.  AgriStrategies LLC is proud to support the Indiana FFA in conjunction with our sponsorship of the Indiana Farm Equipment & Technology Expo in December 2021. I grew up in Indiana agriculture and have a 30-year career working with farms, agribusinesses and agricultural lenders. I’m here because I’m an independent consultant who can help young or retiring farmers and agribusinesses, and all of the rest in between, with their financial management and decisions. I hope you will reach out to me for a free consultation so we can have this discussion and see how I can help.

You can learn about scheduling a free consultation and helping support the Indiana FFA Foundation below. 

Where will the money come from…

…to get your business started?

…to make your business better?

…to grow your business bigger?

…to retire from your business?

…to meet the goals for your business?

…to bring the next generation into your business?

…to pay the bills and the lender for your business?

…to find the right lender and capital for your business?

…to help your business support the Indiana FFA Foundation?

AgriStrategies LLC can help you answer these questions and more.

In addition to helping farmers of all ages with their financial management and decisions, if you are in ag retail, I can not only help your business, but I can help you help your farmer customers, to make them more successful down the road, so that you make more sales and most importantly, turn those sales into cash in your bank account.  The same goes if you are processing or marketing an agricultural product that you are receiving from your farmers.  I can help you and help your farmers strengthen and grow your supply chain with viable farm operations.

Steve Kluemper Corn Pile

Examples of what I can help with by bringing my 30 years of, financial management and ag banking, experience and perspectives, to agricultural producers, processors and suppliers, include improving cash flow and profitability, managing their business and finances, bringing in the next generation, putting together a projection, communicating a business plan, facilitating stakeholder discussions, restructuring a balance sheet, getting an existing lender or a new lender or a credit manager comfortable with a credit request and analyzing decisions that need to be made, etc.

AgriStrategies LLC will make a donation to the Indiana FFA Foundation for each free consultation with me that is scheduled and accompanied by the information packet below. 

Anyone who wants to learn more about how AgriStrategies LLC can help producers, suppliers, processors and other partners in the agricultural industry, or just wants to support the Indiana FFA Foundation, should contact me to schedule a free consultation. I look forward to our discussion!  Thank you!

Steve Kluemper

517-580-9070

Steve.Kluemper@AgriStrategiesLLC.com

https://agristrategiesllc.com/contact-me/

Resource Links:

AgriStrategies LLC Steve Kluemper Bio

What Questions Can AgriStrategies LLC Help Answer For Your Business? by Steve Kluemper

Why Do Your Lenders Want You To Work With AgriStrategies LLC? by Steve Kluemper

What Typical Steps Are Involved In Working With AgriStrategies LLC? by Steve Kluemper

How Can AgriStrategies LLC Help Agricultural Suppliers Grow Their Business? by Steve Kluemper

How Can AgriStrategies LLC Help Agricultural Suppliers Manage Their Credit Risk? by Steve Kluemper

How Can AgriStrategies LLC Help Agricultural Processors And Marketers Build A Stronger Supply Chain? by Steve Kluemper

AgriStrategies LLC 25 Question for Your Business by Steve Kluemper

How Can AgriStrategies LLC Help Your Business Assess What Happened In 2021 And Plan For 2022 And Beyond? by Steve Kluemper

How Can AgriStrategies LLC Help?

Steve Kluemper AgriStrategies

Measuring Financial Health by Steve Kluemper

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Analyzing the many factors contributing to a business’ financial health is much like analyzing the many factors contributing to a person’s overall health.

Financial Health - Steve Kluemper

A doctor may look at a patient’s temperature, weight, blood pressure, heart rate, blood tests, genetics, history, lifestyle, etc. to determine the individual’s overall health condition and the likelihood they may or may not have health issues in the future. Using just one of these items may be an indicator, but it won’t paint the whole picture.

Analyzing the “health” and future prognosis of a business is done much the same way. While some individual factors, like cash flow, may bear more immediate impact, to fully understand the financial health of the business, we need to look at many different factors. This is why we encourage managers to use historical and projected ratios to better assess their historical trends, current financial health and long-term outlook for their business. Understanding the trajectory of a particular ratio and the rate of change is important in determining the impact.

Return on Assets - Steve Kluemper

For businesses that are asset-intensive, it’s important to get the most out of those assets, with return on assets (ROA) being a crucial overall ratio to monitor. ROA is a ratio that measures the profits of the business relative to the assets of the business. However, there are many factors that go into both the numerator and denominator of the ROA ratio.

Using other ratios to analyze the performance of a business can help managers determine where they can maximize profitability and minimize the amount of ineffective assets to generate a higher ROA. The other ratios can help identify areas where the business operates well and can be expanded and also areas that may be costing more than is realized in revenue. The following list of ratios are a good start towards understanding some of those factors.

Total Assets per Unit of Production

Total Assets per Unit of Production – How many dollars of assets does it take to produce a unit of production? Keeping this ratio low can lead to a higher return on assets. This ratio can be affected by the amount of outsourcing, leasing and other ways to use assets in the production process without owning them. It can also be affected by the value placed on the assets. Comparing this ratio over time and to other businesses should be done with consistent values to avoid skewing the results.

Total Debts to Total Assets Ratio

Debt to Asset Ratio – How much debt is being used to own the assets? Keeping this ratio low is preferred by lenders to the business and gives the business the ability to grow quickly, pay dividends to the owners and/or withstand losses. However, keeping this ratio higher is preferred by owners who don’t need to invest as much capital to earn the profits of the business. This ratio also needs a consistent valuation of the assets to make comparisons with trends and other businesses more informative.

Current Assets to Current Debts Ratio

Current Ratio – How many assets are available that will convert into cash within the next 12 months (current assets) compared to the debts that are due in the next 12 months (current liabilities)? Keeping this ratio high gives the company liquidity to withstand cash flow adversity and take advantage of opportunities that are presented. However, carrying excess current assets such as cash, receivables and inventories doesn’t contribute greatly to returns and could be risky if they lose value and aren’t collectible.

Cash Flow to Debt Payments Ratio

Debt Coverage Ratio – How much cash flow is being generated from operations compared to the debt payments that are due during the same period? The higher this ratio is, the better the business is doing in meeting its debt obligations. When a business can’t meet its debt obligations with normal cash flow, then they must tap into their liquidity to fund debt payments. Lending institutions put a lot of weight on this ratio as they classify their risk, set interest rate and fee levels and assess the overall attractiveness of the borrower.

Profits per Unit of Production

Profits per Unit of Production – How much profit is being generated on every unit being produced? This ratio is especially helpful when comparing against other producers and comparing against the amount of assets that were utilized to produce each unit. Different business models can skew the results and comparisons usually require further analysis to review the revenue, expense and production drivers that generate the profit for each unit of production.

Profits to Total Revenues Ratio

Operating Profit Margin Ratio – How much operating profit is being earned from every dollar of revenue? Businesses need to maximize revenues and minimize costs to maximize operating profit margins. Managers should think about every cost in their business as an investment just like they would with a large capital expenditure. What return are they getting on each cost they are incurring? Minimizing costs isn’t necessarily the focus. Maximizing profits within the risk appetite of the business should be the focus.

Total Revenues to Total Assets Ratio

Asset Turnover Ratio – How many dollars of revenue are being generated from the assets that are being utilized?  In general, businesses want to generate as much revenue from as few assets as possible.  Without revenue, businesses can’t create income.  Assets must be fully utilized to maximize their revenue potential over the full 12 months of the year.  Businesses should sell assets that aren’t fully utilized and use those sale proceeds to invest in assets that can be fully utilized to increase revenue and income.

Profits to Total Assets Ratio – ROA

Return on Assets – How much operating profit is being generated from the assets that are being utilized? Multiplying the Asset Turnover Ratio by the Operating Profit Margin Ratio results in the Return on Assets. While computing these ratios on the entire business can help managers see the overall results, to do a more thorough analysis, each segment of the business should be reviewed for its own impact on the entire business.

Managers can evaluate their business practices by using these ratios to take some of the emotion out of the decision making. This is especially true in cases where “we’ve always done it that way”. Identifying highly productive assets can help managers look for ways to maximize an area where they are doing well.  With this information they can improve or capture more profit on productive assets by pinpointing an area the business can use to break away from relying solely on low margin business.

Depending on the type of operation, areas that may have a low asset turnover ratio and low operating profit margin may involve machinery or equipment or buildings that are not as productive. For instance, if managers need to improve their return on assets on machinery, they may look at doing custom work or other services that better utilize the availability of their assets and talents. Or they may sell those assets, hire someone else do that work for them and redeploy that capital into a more productive asset.

Financial Analysis - Steve Kluemper

Often times many business practices are done based on tradition or routine, rather than financial efficiency. However, we are seeing more businesses taking a closer look at what they do really well and finding ways to create a niche for their business that solves a problem for another business or consumer. Because these types of decisions can have a large impact on the business, it is critical that careful financial analysis is done on each asset prior to making major decisions.

The answer to the best asset to invest in will be different for each business based on their own unique set of circumstances. Uncovering the next layer of profitability based on financial ratios may require the use of a consultant who has the expertise to calculate and evaluate the ratios and help managers make decisions based on the outcomes of the analysis.

How can AgriStrategies LLC help?

Steve Kluemper AgriStrategies

Agile Strategic Planning and Implementation – Managing Change By Being Resilient, Responsive and Resourceful by Steve Kluemper

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Tomorrow is not yesterday. Change is constant. Everyone manages change. Many are managing reactively for yesterday instead of proactively for tomorrow.  Covid-19 has increased the pace of change and the number of potential future scenarios.  Our ability to manage change must increase as well. 

Trying to manage increased change reactively isn’t nearly as effective and efficient as using proactive strategic planning to manage change.  Strategic planning is more about being prepared for the possibilities of potential future scenarios rather than trying to guess which particular future scenario will play out.  Not that a strategic plan is fully developed for each potential future scenario, but each scenario needs a plan. 

These are concepts that were presented by Dr. Allan Gray, the Land O’Lakes Chair in Food and Agribusiness at the Purdue University Center for Food and Agricultural Business, during a recent webinar hosted by Indiana Soybean Alliance and Indiana Corn Growers which was sponsored by Bayer, First Farmers Bank and Trust, Co-Alliance and Farm Credit Mid-America

Dr. Gray discussed big, broad drivers of change as well as important strategies to be resilient, responsive and resourceful.  I will review each of these later in this article. There was one slide that Dr. Gray included in his presentation but skipped over in the essence of time.  I think that slide (Slide 10) might have been the most important slide in the entire deck. 

Agile Implementation

Slide 10 presented an approach to change management that can help managers actually strategically plan for and most importantly implement change.  While understanding the drivers of change and the potential scenarios that they could create, as well as having strategies to deal with these potential scenarios, are important, they don’t create value if they aren’t implemented.  Implementation is crucial and is usually the hardest part.  Slide 10 introduces the concept of agile implementation.

Agile implementation is the process of having small self-organizing, cross-functional teams move fast delivering minimally viable results in short daily/weekly sprints which allow for continuous changes and improvements based on current needs and continuous collaboration with stakeholders that align with a broad, written vision. 

This allows the team to manage an implementation by breaking it up into several stages where earlier stages can be tested, implemented and evaluated while the next stages and continuous improvements are being designed and tested.  The goal is to deliver value to customers faster with fewer headaches by quickly responding to change with flexibility. 

Change Management Team Structures

Slide 10 presented the following team structures needed to blend strategic scenario thinking with agile implementation.

Transformation Team – Strategic Planning Scenario Development
  • Develop and analyze scenarios for multiple versions of the future – both positive and negative
  • Define trigger point thresholds for each scenario where the design teams will start their agile process to develop changes that are needed
  • Monitor environment to identify trigger points and add new or remove unneeded scenarios
  • This team needs to know the business well enough to know what could go wrong and what could go right due to any number of internal or external factors
  • This team can be a little larger since it needs to represent internal and external perspectives and won’t be meeting as frequently as the design team

Design Teams – Agile Design, Test, Pilot and Improve Process
  • Identify the design teams needed for the changes contemplated with each of the potential scenarios
  • Identify and prepare the internal and external resources needed for each team if they are triggered
  • Design, test, pilot and improve new concepts and ideas in a collaborative environment with agile sprints once a strategic planning scenario is triggered
  • These teams will favor action over research and testing over analysis to pilot concepts quickly when a scenario is triggered
  • Members of these teams will need to make the frequent meetings of the team a top priority when triggered
Implementation Team – Implement Changes and Share Results
  • Roll out changes to the entire organization that have already been piloted successfully in a part of the business by the design team
  • Document procedures and train employees to implement changes
  • Gather and evaluate results and feedback for the transformation and design teams
  • Set expectations for bold moves, “no regret” actions and changes that might not be the ultimate solution, but they are a start and are expected to be improved based on feedback, priorities and results.

By preparing ahead of time for potential scenarios (transformation team) and having resources identified and ready when needed to create and test new concepts (design team), the implementation team has a better chance of delivering a successful, quick and valuable change solution to the customer.  The keys to success for this process include obtaining stakeholder buy-in, starting with small projects, focusing on tactical actions that can be accomplished over short periods, empowering and motivating the teams, assessing what is and isn’t working, being open to improvements and changes, collaborating and communicating frequently, and making changes as needed. 

Important Strategies to be

Resilient, Responsive and Resourceful

  1. Start-up mindset
    • Action over research and testing over analysis
    • Efficiency, cost and value creation focus
  2. Human at the core
    • Operate based on how people work best
    • Maximize people engaging with each other
  3. Acceleration of digital, tech and analytics
    • Combine new sources of data
    • Make better and faster decisions
    • Strengthen customer relationships
  4. Purpose-driven customer playbook
    • Understand what customers will value
    • Develop new use cases and tailored experiences
  5. Ecosystems and adaptability
    • Non-traditional collaborations within the supply chain

Big Broad Drivers of Change

1. Deglobalization
  • Protectionism and restrictive attitudes
  • 3 of 7 billion people are in closed-border countries
  • Local > Global
  • Supply chains sourcing closer to end markets
  • Smaller production capacity and less efficient plants
  • Increased costs will not be affordable for those at the margin
2. Resilience versus Efficiency
  • Resilience:  Ability to absorb a shock and come out of it better than the competition
  • Anti-fragile: Ability to absorb a shock and come out of it better than before
  • Preparation: Must be able to decrease cost per unit of production – increase production and decrease costs
  • Is government aid reducing the drive to decrease costs?
  • May need to restructure supply chain while balancing costs, sales and risks
  • Resiliency is just as important to strategic thinking as cost and efficiency
3. Contact-Free Economy
  • Digital commerce – buying and selling on-line
  • Videomedicine, Videoselling, Videolearning, Videomanaging
  • Automation developed for one industry and adapted for others
4. More Government Intervention
  • During times of great crisis citizens have proved willing to accept greater government control of the economy
  • As interventions are more common, the implications for the role of the state will materially affect the way business is conducted – strings attached to the money
  • Continuous support from the government is limiting improvements in cost of production due to businesses not seeing the downside risk necessary for investment in new technologies
5. More Business Scrutiny
  • Shareholder value is not the only corporate value
  • People, planet, profit
  • Social features, environmental stewardship, labor relations, financial responsibility and accountability
  • With public money, scrutiny will intensify
6. Industry Structure Shifts
  • Which supply chain is your business a part of
  • What happens when there is a major shift in demand
  • How can you switch and be more flexible
  • Vulnerability where labor is most involved
  • Increased automation, employment shifts
7. Employment Shifts
  • Dramatic unemployment – what will be the long-term impacts
  • Enormous increases in the generosity of the welfare state
  • Large supply of workers may lower average wages
  • Unemployment problematic for less-educated essential workers
  • Might be easier to find skilled workers
  • Immigration issues if we need jobs for US citizens
  • Labor mobility to certain jobs doesn’t exist
8. Silver Linings
  • Individuals, communities, businesses and governments alike are all learning new ways to connect
  • Better management and more flexible workforces
  • Pace and scale of innovation is increasing
  • Virtual learning and productivity

How can AgriStrategies LLC help?

Steve Kluemper AgriStrategies

AgriStrategies LLC Michigan FFA Sponsorship Introduction by Steve Kluemper

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Steve Kuemper AgriStrategies

Hello! My name is Steve Kluemper.  I’m glad you stopped by.  AgriStrategies LLC is proud to sponsor the Michigan FFA in conjunction with our sponsorship of the Michigan Corn Growers Association golf outings in July and August, 2021. I’m here because I can help young or retiring farmers and agribusinesses and all of the rest in between with their financial management and decisions. I hope you will reach out to me for a free consultation so we can have this discussion and see how I can help.

You can learn about scheduling a free consultation and helping support the Michigan FFA Foundation below. 

In addition to helping farmers of all ages with their financial management and decisions, if you are in ag retail, I can not only help your business, but I can help you help your farmer customers, to make them more successful down the road, so that you make more sales and most importantly, turn those sales into cash in your bank account.  The same goes if you are processing or marketing an agricultural product that you are receiving from your farmers.  I can help you and help your farmers strengthen and grow your supply chain with viable farm operations.

Steve Kluemper Corn Pile

Examples of what I can help with by bringing my 30 years of, financial management and ag banking, experience and perspectives, to agricultural producers, processors and suppliers, include improving cash flow and profitability, managing their business and finances, bringing in the next generation, putting together a projection, communicating a business plan, facilitating stakeholder discussions, restructuring a balance sheet, getting an existing lender or a new lender or a credit manager comfortable with a credit request and analyzing decisions that need to be made, etc.

AgriStrategies LLC will make a donation to the Michigan FFA Foundation for each free consultation with me that is scheduled in August and September 2021 and accompanied by the information packet below. 

Anyone who wants to learn more about how AgriStrategies LLC can help producers, suppliers, processors and other partners in the agricultural industry, or just wants to support the Michigan FFA Foundation, should contact me to schedule a free consultation. I look forward to our discussion!  Thank you!

Steve Kluemper

517-580-9070

Steve.Kluemper@AgriStrategiesLLC.com

https://agristrategiesllc.com/contact-me/

Resource Links:

AgriStrategies LLC Steve Kluemper Bio

What Questions Can AgriStrategies LLC Help Answer For Your Business? by Steve Kluemper

Why Do Your Lenders Want You To Work With AgriStrategies LLC? by Steve Kluemper

What Typical Steps Are Involved In Working With AgriStrategies LLC? by Steve Kluemper

How Can AgriStrategies LLC Help Agricultural Suppliers Grow Their Business? by Steve Kluemper

How Can AgriStrategies LLC Help Agricultural Suppliers Manage Their Credit Risk? by Steve Kluemper

How Can AgriStrategies LLC Help Agricultural Processors And Marketers Build A Stronger Supply Chain? by Steve Kluemper

AgriStrategies LLC 25 Question for Your Business by Steve Kluemper

How Can AgriStrategies LLC Help Your Business Assess What Happened In 2021 And Plan For 2022 And Beyond? by Steve Kluemper

How Can AgriStrategies LLC Help?

Steve Kluemper AgriStrategies

Cows Can Cool the Climate and other Crucial Consumer Communications by Steve Kluemper

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Steve Kluemper Curious Cows

Care – Tomorrow’s consumer wants to have a deeper relationship with their food and how it’s produced.  They want to know how farmers and ranchers care for plant, animal, labor, land and environmental resources to produce safe food.  They are demanding this all across the supply chain from farm to fork. 

Commit – Producers should show society that they are serious about knowing and further reducing their environmental impacts and addressing important societal issues.  If farmers and ranchers don’t commit to consumers about the stewardship they practice to create sustainable systems, who will? 

Communicate – Since no one knows more about what is happening on farms and ranches or has more at stake than the owners, these farmers and ranchers need to embrace and communicate their role and desire to be sustainable stewards of the resources they use. 

I captured these ideas of Dr. Frank Mitloehner, a professor at University of California, Davis , from a recent webinar he participated in as part of the Dairy Signal webinar series presented by the Professional Dairy Producers of Wisconsin led by Shelly Mayer.  The Dairy Signal webinars have provided timely information about the dairy industry. 

Dr. Mitloehner’s focus for this episode was helping beef and dairy producers explain the environmental impact of cows with a special emphasis on greenhouse gases and biodiversity as interpreted and summarized by my following non-scientific perspectives. 

Curriculum concerning cows needs context

I think the reason this episode really hit home for me was because of an assignment that I was helping my 6th grader with during the Covid-19 school shut down and parent teaching experiment.  The correct answer for his assignment according to the materials was that cows create a significant amount of greenhouse gases and are bad for biodiversity and the environment. 

This is a common message and one that isn’t usually fully discussed, especially if the presenter has an anti-animal agriculture agenda.  However, I didn’t have the facts to help explain the rest of the story to my son.  I’d like to summarize the following takeaways from Dr. Mitloehner’s presentation that help frame up the environmental impacts of cows and would have been helpful to have when I was working with my son. 

Cows and other ruminants create biogenic methane

Beef and dairy cows, as well as buffalo, antelope, sheep, goats, moose, deer, bison and giraffes are ruminant animals, meaning that they have the unique ability to ferment plant-based food in their stomachs prior to digestion which allows them to obtain nutrients from grasses, hay, corn stalks and other plants that humans and other animals can’t digest.  A by-product of this fermentation process in the stomach is the production of biogenic methane which eventually ends up in the atmosphere as a greenhouse gas and decomposes over 10 years. 

The ruminant herd hasn’t increased over time

According to Dr. Mitloehner, before European settlement of North America, there were approximately 60 – 80 million bison and 40 million pronghorn antelopes for a total of approximately 100 – 110 million large ruminants roaming what is now the United States.  Today the U.S. has 90 million beef cattle, 9 million dairy cows and only 1 million or so bison and antelope combined for a total of approximately 100 million large ruminants.  The U.S. has merely replaced the wild ruminants in this country with domesticated ruminants and the ruminant herd hasn’t increased over time. 

Ruminants are part of the biogenic methane carbon cycle

Cows and other ruminants are part of the biogenic methane carbon cycle where plants take carbon dioxide from the air and use water, sunlight and nutrients to create oxygen and carbohydrates including cellulose.  Then ruminants take cellulose and oxygen and nutrients from the plants along with water to create human food, milk, nutrients, organic fertilizer, carbon dioxide, biogenic methane and other byproducts.  The biogenic methane is released into the air and converts to carbon dioxide through a process called hydroxyl oxidation over 10 years to start the cycle all over again. 

Biogenic methane is decomposing as it’s being produced

According to Dr. Mitloehner’s research, the biogenic methane carbon cycle is currently so sustainable that the amount of biogenic methane in the atmosphere from cows that is converted to carbon dioxide each year for use by plants is equal to the amount of biogenic methane that is produced by cows each year. 

Greenhouse gases from oil continue to build

While methane is a greenhouse gas that causes global warming, it’s important to differentiate between different greenhouse gases.  When greenhouse gases are produced from the burning of fossil fuels such as coal and oil for our transportation and energy needs, those gases go up in the atmosphere and don’t decompose for thousands of years.  They call this process of mining carbon from below the earth’s surface, burning it and releasing it into the atmosphere stock gas since it only stocks the greenhouse gases that don’t go away.  So far, the world has used around 50% of the carbon that’s underground on this planet according to Dr. Mitloehner. 

Herd numbers and biogenic methane levels aren’t increasing

The current cow herd is not adding additional methane to the atmosphere because the biogenic carbon cycle is in balance where the methane produced by cows is converted to CO2 and used by the plants to feed the cows in a sustainable cycle.  Biogenic methane is a flow gas which is being produced and destroyed at an equal rate unless the industry produces less methane which leads to a net cooling effect on the environment. 

Cows can cool the climate while feeding the world

If you decrease methane emissions by decreasing cow numbers or by using anerobic digesters, feed additives, or manure separators, then you are actively pulling carbon out of the atmosphere which creates global cooling.  Cattle producers can be a solution to global warming. 

In fact, California is subsidizing the livestock industry’s cost of capturing methane that is then converted into renewable natural gas and used by vehicle fleets to replace diesel fuel while lowering methane emissions.  This is the new gold rush in California according to Dr. Mitloehner and can be a model for other states and nations that want to subsidize practices that reduce greenhouse gases. 

Cows don’t need to compete with humans for food

The need to increase production to feed the world has been met with concerns about reducing biodiversity and bringing marginal lands into production in the U.S. and around the globe.  Cows are actually well positioned to show their sustainability and promote biodiversity while increasing production since they don’t need to compete with humans for food because of their ruminant stomachs. 

Only cows can produce food from 70% of all agricultural land

Dr. Mitloehner stated that 70% of all agricultural land in the world and United States is marginal land that can only produce grass pastures.  This land can only be used to take carbon from the atmosphere to grow grasses which aren’t digestible by humans or non-ruminant animals.  In California, 20% of agricultural byproducts such as almond hulls, cotton seeds and human inedible products end up in cows. 

Cows step in to convert these plant products to human food as only they can without needing to bring additional acres into production.  This process then releases carbon back to the atmosphere in the form of methane from the cows which is oxidized for plants to use again in this sustainable cycle. 

Each cow is producing more milk

In 1867, the U.S. had 9 million dairy cows producing enough food for 30 million people.  By 1950, the U.S. had 25 million dairy cows.  Today, the U.S. is back to 9 million dairy cows producing food for 330 million people, an 11x increase from 1867 with the same number of cows and 60% more milk produced with 9 million cows today than the 25 million cows producing U.S. milk in 1950, according to Dr. Mitloehner’s research. Since the U.S. dairy herd has decreased since 1950, this has created a cooling effect since then.

Each cow is producing more meat relative to greenhouse gases

Dr. Mitloehner stated that the U.S. produces 18% of the global beef with 8% of the global beef cattle.  The Food and Agriculture Organization of the United Nations states that the North American beef supply chain is already more than 35% more efficient from a greenhouse gas perspective than the global average due to production efficiencies. 

Cows are producing more milk and beef with less emissions

Better genetics, nutrition and vet care for the cows have driven efficiency improvements and a net cooling effect on the environment given the oxidation of the methane.  Just like getting more miles from every gallon of gas is important for providing needed transportation and reducing emissions at the same time, getting more milk and beef from every cow is also important for providing needed nutrition and reducing emissions. 

Cows produce natural organic fertilizers

When consumers want plant-based foods instead of beef and milk, those plants are usually fertilized with products creating a larger negative environmental impact due to the use of resources extracted from the earth to produce those nutrients.  Even when consumers want organic food, a sustainable animal production system is still needed to provide the organic fertilizers for the organic crops.  According to Dr. Mitloehner, dairy manure fertilizer components of nitrogen, phosphorus and potassium are in a sustainable ratio similar to what the plants that produce the dairy feed need. 

Less efficient food systems have an environmental cost

When consumers want food from less efficient food production systems such as natural, organic, etc. that use more land and animals for each unit of production, the production inefficiencies and mitigation costs of the environmental impacts compared to conventional production practices are factored into the price to compensate for these inefficiencies and mitigation efforts.  This aligns the costs of these extra food attributes with those who want them and can afford them. 

Communicate the positive impact cows have on the environment

Groups like the Food and Agriculture Organization of the United Nations and the World Wildlife Fund understand the need to balance food production and biodiversity and see the way cows can meet both objectives.  The World Wildlife Fund has recently teamed up with Cargill and Burger King and ranchers in the Northern Great Plains to launch a grassland restoration program where they will take 8,000 acres of marginal crop land and convert it back to ecologically diverse grasslands with beef cattle as the primary grazers in the ecosystem to maintain it.  This is just one more example of the way cows can have a positive impact on the environment, a story that needs to be communicated.

How can AgriStrategies LLC help?

Steve Kluemper AgriStrategies

How Can AgriStrategies LLC Help Agricultural Processors And Marketers Build A Stronger Supply Chain? by Steve Kluemper

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Steve Kuemper AgriStrategies

Agricultural processors and marketers need to grow with a supply chain of financially viable farmers that focus on their strengths and grow with the supply chain. 

AgriStrategies LLC can work with agricultural processors and marketers to help farmer suppliers improve their financial management, vision, growth and viability.

Farmers don’t always have the time, experiences, skills, tools, visions, contacts, knowledge, passions, perspectives, aptitudes, or priorities to accomplish all of the crucial tasks on their farms.

AgriStrategies LLC can work with agricultural processors and marketers to help farmers improve their funding, cash flow, profitability and financial management.

Agricultural processors and marketers provide services to help farmers complete crucial operational, technical, planning, analysis, management and decision-making tasks.

AgriStrategies LLC can work with agricultural processors and marketers to help farmers communicate their needs and honor their supply chain commitments.

Farmers often outsource legal, tax, accounting, regulatory, environmental, risk management, marketing, technology and financial tasks to experts that help them complete these crucial tasks.

AgriStrategies LLC can work with agricultural processors and marketers to secure funding for farmers to finance supply chain requirements and improvements. 

Agricultural processors and marketers can build loyalty, trust and their own business by investing in their farmer supply chain and providing services that help farmers manage their business. 

AgriStrategies LLC can work with agricultural processors and marketers to build supply chain value by delivering financial skills to new and experienced farmers. 

How Can AgriStrategies LLC Help?

Steve Kluemper AgriStrategies

How Can AgriStrategies LLC Help Agricultural Suppliers Manage Their Credit Risk? by Steve Kluemper

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Steve Kuemper AgriStrategies

As the size, complexity and credit risk of farms increase, agricultural suppliers need to require better information from farmers to plan for and manage increasing credit exposure. 

AgriStrategies LLC can work with agricultural suppliers to help farmers better communicate their needs and how they will meet all of their obligations. 

When farmers request high levels of credit or extended terms, they should be expected to present a cash flow plan that shows how and when they will repay their debts within the requested terms. 

AgriStrategies LLC can work with agricultural suppliers to help farmer customers improve and support their financial management, vision and credit worthiness. 

Agricultural suppliers need to have a written credit policy approved by the board, management, sales and credit and insist that farmers obtain their credit elsewhere if they don’t meet the policy.

AgriStrategies LLC can work with agricultural suppliers to establish credit policies and support and secure funding for farmers to finance necessary purchases.

Farmers don’t always have the time, experiences, skills, tools, visions, contacts, knowledge, passions, perspectives, aptitudes, or priorities to accomplish all of the crucial tasks on their farms.

AgriStrategies LLC can work with agricultural suppliers to build customer value by delivering financial management expertise to beginning and experienced farmers. 

Agricultural suppliers need to increase sales without increasing credit risk as much so that they actually collect and profit from the increased sales. 

AgriStrategies LLC can work with agricultural suppliers to increase sales by helping farmers improve their funding, cash flow, profitability and financial management.

How Can AgriStrategies LLC Help?

Steve Kluemper AgriStrategies