Traveling Tobacco Road: Diversifying Risk in
a Post –Tobacco Era
Presented By:
Ben Beale
Extension Educator
St. Mary’s Co
Overview of Program
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Southern Maryland Farm Viability Grant Program
The purpose of the Southern Maryland Farm Viability Enhancement
Program ("Program") is to improve the economic bottom lines and
environmental integrity of participating farms through the development and
implementation of Farm Viability Plans ("Plans"). These comprehensive,
yet focused farm plans, which are to be developed by teams comprised of
farmers and other agricultural, economic and environmental consultants,
will be aimed at suggestion ways for farmers to increase their on-farm
income through such methods as improved management practices,
diversification direct marketing, value-added initiatives and agro-tourism.
Tri-County Council of Southern Maryland
The Process
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Administered by the Tri-County Council, with
grant funds from the tobacco buyout program
My Role: Provide leadership in development
of plans, provide information and education in
subject areas, identify other resources, and
work as a team in overall review of submitted
plans.
Why Plan?
Figure 1
Overall objective
-profit
Execution not good
Strength
of Plan
Plan not good
Success of Execution
Components of a Plan
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Executive Summary
Vision
Mission
Define objectives
Market and Competitive Analysis
SWOT analysis
Marketing plan
Production or operational plan
Financial plan
Supporting Data
First Step: Vision and Mission
VISION
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We are a family farm whose work is a reflection of ourselves. We are known for our practical
involvement in producing quality products for a demanding customer. Our farm provides food for a
growing community, income to support a growing family, and the values to enable the next growing
generation.
MISSION/OBJECTIVES
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The following goals are integral to achieving our mission:
Operational Goals:
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Increase our level of efficiency, especially with regard to grain and beef production through increased
economy of scale and management.
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To be completely transitional within the next five-year period, meaning the farm has a viable future
and each member has the opportunity to earn a fair income.
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To position greenhouse operations and management capacity to stand on its own. Aggressively
pursue relationship with Bell and look for opportunity to expand.
Financial Goals:
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Maintain low debt load, especially in reference to fixed assets. Maintain a debt-to-asset ratio of less
than .25.
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Aggressively expand new operations, with stability of income reaching the point existing before the
buyout.
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Produce average net income of $25,000 for each farm operator without reliance on tobacco buyout
funds within six years.
Market Analysis
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Identifying areas of competitive advantage that can be
exploited in order to meet objectives of the mission statement
Market research is thus critical to the process
Direct marketing requires target market segments, identify
key attributes of those segments and form strategy around the
needs of that segment
SWOT analysis:
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The SWOT analysis is simply a tool for organizing your thoughts and
determining areas of competitive advantage.
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Looks internally at:
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Strength
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Weaknesses
Looks externally at:
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Threats
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Opportunities
Internal Strengths:
 Strong local recognition of name
 Excellent internal efficiency with
management, communication and human
recourses
 Good communication skills and public
relations
 Very flexible horizontal structure
 Ability to specialize and customize each
product to customer needs
 Close to consumers
 Very good financial standing, low
debt/asset ratio
 Enjoys raising beef
 Internal production synergies through
feeding grain products through beef
Internal Weaknesses:
 Production inefficiencies compared to
larger farms
 Most expertise in area of tobacco
production
 Marketing culture of farm based on
wholesale, commodity markets
 Limited experience in marketing
management
 Facilities used for tobacco easily converted to beef
barns
External Opportunities
 Local Population base expanding offering
more customers
 Regional population base (within 4 hour
drive) represents 2/3 of total US population
 Disposable income very high in
surrounding area
 Large # of specialty restaurants and shops
in area
 Government subsidies and grant programs
for farmers direct marketing
 Tobacco conversion program provides
financial support for switching to other
enterprises
 Limited competition in direct sales of
differentiated beef products
 Consumer loyalty to local farm products
 Foreign disease scares increase value of
domestic beef
External Threats
 Local population base expanding-more
expensive land, large farm operations not
compatible with urban settings (noise,
odors)
 Traffic congestion prevents movement of
large equipment
 Unemployment low in area
 Farm industry very segmented and
specialized suited to large economy of
scale-leave little room in profits for small
producer
 Tobacco production not expected to last in
long term future
Strengths:
Facilities drastically increase throughput and efficiency
Able to increase efficiency through feeding own grain
Beginning of custom beef will add value to existing line
Good at finding high quality feeders at low cost
Use of silage and haylage, alternative feeds will further reduce costs
Use of ration consultant provides for accurate feed production
Existing reputation and brand value to Russell name
Capability to produce high quality animals
Weaknesses:
Limited to current production given local land base
Limited ability to harvest forage economically
Time constraints with focus on production limit time available marketing
Opportunities:
Local sale of beef to expanding metro customer base
Availability of dairy operations for potential alliances
Expanding beef production in area allows for alliances for reduced input cost
Proximity to feeder cow/calf operation reduces cost of feeders
Threats:
Traffic and population concerns over odor
Nutrient management regulations-CAFO potential
Profit margins require excellent management
Consolidation of industry
Areas of market differentiation:
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Price
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Product
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Promotion
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Distribution
Operation and Production Plan
Farm Execution Plan: Short and Long term Action Items
Beef:
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2003: Finish 230 head. Sell 220 through Truth and 10 as Freezer Beef. Begin to harvest more haylage and reduce feed cost.
Begin to play along with forward contracts.
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2005: Expand to 250 head--235 to Truth and 15 freezer beef. Look at another barn conversion. Begin to implement forward
contracting or futures market.
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2007: Complete herd expansion to 275 head with 255 to Truth and 20 to freezer beef. Seek alliance with other producers to
further reduce input cost.
Greenhouse:
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2003: Add hanging baskets and additional house.
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2005: Maintain production
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2007: Maintain production
Asparagus:
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2003: Begin first harvest and negotiate a constant market
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2005: Evaluate mature harvest and markets. Decide on acreage expansion and time commitments.
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2007: Maintain production
Grain:
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2003: Increase production to 1200 acres. Work on marketing program. initiate alliances with seed companies.
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2005: Maintain production at 1200 acres. Have defined marketing plans for entire crop.
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2007: Renew Lease for next cycle.
Hay/Straw:
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2003: Look to increase actual harvestable yield through haylage. Seek sales to dairies. Continue with sales to contractors.
Buy in straw if needed
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2005: Evaluate contractor market. Maintain production. Look for advantages in winter and summer annuals
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2007: Maintain production based upon demand
Financials
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Pro-forma income statement
Statement of Net Worth
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Planned cash flow statement
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any investments
show level of risk involved
show who has a stake in the business
determine the need for short- term operating loans
demonstrate long term cash flow-ex)vineyard and orchards
Financials should show different enterprises
Where and when money will be needed
So get ready, hold on and enjoy the ride. The trying is half
the fun.
And after all the hard work, you get to reap the benefit of your
efforts!
The End