Risk specialist provides tips for making proactive drought decisions
“Everyone makes decisions, whether they are a producer or not,” says Jay Parsons, farm and ranch management specialist at University of Nebraska-Lincoln (UNL) during a UNL Beefwatch Drought Management webinar on March 3. “Making decisions is one of the most important things anyone can do.”
“Decisions are hard, especially when there’s a lot of choices and uncertainty,” Parsons explains. “They are the only way to make an impact in life.”
He adds, decisions are opportunities to shape the environment in which the choices are made in. They are not just solutions to problems needing to be solved.
Decisions give producers the opportunity to maximize the possibility of achieving their goals and objectives.
Characteristics of a good decision
There’s a science behind decision-making, says Parsons, who continues to explain the characteristics of good decisions set producers up for making proactive decisions.
First, decisions need appropriate time frames. According to Parsons, a solid time frame helps producers realize what they are trying to accomplish. Clear values are helpful to adhere to and help obtain objectives, he adds.
Additionally, creating a list of alternatives to choose from while making decisions can be helpful.
“Producers don’t want a limited selection of alternatives, so I encourage them to be creative and have a long list of options,” Parsons explains.
Next, Parsons adds, good information is another crucial characteristic in decision-making. Often, producers deal with uncertainty, especially when it comes to weather or markets.
“Clear tradeoffs and sound reasoning are also characteristics of good decision-making practices,” Parsons says. “Producers want to have choices aligning with their values and objectives.”
In fact, Parsons explains sometimes producers’ choices will not have anything to do with their objectives. Committed implementation with good alternatives to choose from also aids in the process of making decisions for operating.
The process behind making a proactive decision is quite lengthy, but it can pay off.
Parsons shares, “First, producers need to realize there is a decision to be made. After they start thinking about things they want to accomplish and create a corresponding list of alternatives, many producers find themselves creating decision opportunities instead of just identifying such opportunities when they happen.”
“We are trying to create value with these decisions, opposed to seeing a problem where producers feel forced to choose between two options,” he adds. “It has taken me five to six years to start using proactive decision making skills.”
Producers need to remember objectives come first and alternatives come second. Parsons explains an objective provides direction to improvements of one or more attributes, such as increasing profit or decreasing debt.
He also shares attributes are things producers value and measure such as profit, debt and happiness. Combining an attribute with an acceptable target level of achievement such as reducing debt to less than 20 percent of asset value is conseridered a goal.
Parsons explains there are two different types of objectives and goals – fundamental and means.
Fundamental objectives and goals capture necessary reasons behind a producer’s decisions. They can also help evaluate alternatives throughout the process.
Means objectives and goals lead producers toward accomplishing fundamental objectives and help identify the alternatives in decision-making according to Parsons.
When it comes to making decisions for drought, Parsons notes producers should identify decision opportunities which help to mitigate the effects of drought.
Producers can also identify all risks and uncertainties, such as reduced precipitation, in their plan.
Steps towards decisions
There is a list of steps producers can use when making proactive decisions, says Parsons.
During the first step, producers need to write down concerns they hope to address by making the decision as well as a wish list stating the best and worst outcomes.
Secondly, producers should convert concerns into short, clear statements describing what they will accomplish. Parsons provides the example, “If I run out of feed, I will sell cows.”
“Lastly, separate the ends from the means to establish fundamental objectives,” Parsons says. “Keep asking why. ‘If I run out of forage, I will have to buy some. Why? Prices will be higher. Why? It will affect my cost of production.’”
Parsons continues, “Clear objectives help identify choices, determine information needed, determine the importance of those decisions, speed up the evaluation of decisions made and explain choices made to others.”
Let objectives be the guide, he notes. A full, clear set of objectives is key to making good decisions more consistently.
Producers can establish context by determining the differences between internal and external, according to Parsons. Internal contexts include range conditions, fencing, cattle inventory, labor situations and finances within a ranch.
External contexts include nearby forage markets, cattle markets, weather forecasts, USDA disaster programs and insurance options.
Producers need to recognize risks and uncertainties. While creating plans, Parsons recommends producers consider major uncertainties, the worst and best case, the most likely scenarios and probability of each scenario.
Insurance for drought
The U.S. Department of Agriculture Risk Management Agency (RMA) includes Crop Insurance and Livestock Risk Protection. Parson shares insurance could be included in drought planning decisions. Other resources include the Rainfall Index Insurance for pasture, rangeland and forage as well as annual forage and the Whole Farm Revenue Protection Program.
Additionally, Parsons notes Farm Service Agency (FSA) programs include Noninsured Crop Disaster Assistance Program, Livestock Forage Disaster Program, Livestock Indemnity Program, Emergency Assistance for Livestock, Honey BEes and farm-raised fish and conservation programs through the Natural Resource Conservation Service.
Madi Slaymaker is the editor of the Wyoming Livestock Roundup. Send comments on this article to email@example.com.