BEEF has been in crisis for the last two years, but now the downturn is widespread.

Milk prices continue to fall, sheep prices have collapsed since last year, pig prices are going in the same direction, grain prices are in real terms a third of what they were in the late 1970s, potatoes have had two bad years (though prices this year are improving).

What can we do if this is to be the pattern for the next few years?

1. Know your costs and margins and do a regular budget.

If you don't know your beef, milk or grain production costs and margins how can you make decisions about what to change, eg which enterprises to scale back, where costs are higher than average and where improvements can be made?

A whole farm budget (cashflow, P&L, balance sheet) is an invaluable and underestimated tool.

It allows you to work out rapidly the implications of changes (in prices, etc) and over time acts as a model of the business which can be used to investigate changes in policy.

The budget helps you understand how your costs and revenues are generated.

2. Sort out your strengths, weaknesses, and objectives.

What do you want to achieve? Get this sorted out at the start so that in difficult times you know where to concentrate your energies.

What are you and the farm best at? Concentrate on those areas.

Where are you weak? What can you do about it?

3. Technical improvement.

We tend to think we are as good at growing crops and livestock as we can get. However, many businesses have scope for improvements.

Get an adviser to draw up a list of 10 areas where you could improve performance.

The total financial benefit could be substantial.

4. Look at the whole farm system: The Culture of Self-sufficiency.

Our farm system differs from many others around the world in that we try to do everything in one unit, ie we are happiest when we have the machinery to do most operations by ourselves, the labour to do most of the work, buildings for all types of stock, crops, forage and machinery.

We also like to make all the feed we need for the winter on the farm so we have big silage pits and bins full of grain. This self- sufficiency approach was correct in the past but now it's often wrong.

Self-sufficiency means complexity because we have bits of everything and therefore a level of fixed costs (machinery, buildings, labour) which we can no longer afford.

We need simpler systems in which we concentrate on our strengths, in which we can handle much greater areas or numbers of stock per person, where we contract out some operations which can be done much more cheaply and professionally by contractors and where we have time to think and manage and have more flexibility to cash in on opportunities as they appear.

5. Don't forget the good old strategies.

Farming is caught in an eternal price squeeze. Output prices fall steadily in real terms and costs gradually increase.

How have we survived so far? By expanding, specialising, intensifying, and diversifying.

These strategies are still correct. Indeed, every business must expand in some way if it intends to support the same number of family members at a good standard of living in the future.

In this crisis, there is a very different answer for each business, but we do believe that with the correct strategy there is a future for most farm businesses.

q Peter Cook is head of Rural Business Development Unit at SAC, Aberdeen.