Diversify Your Crop Portfolio?

These farmers are hunting profits in unusual places, and each has potential.

Annette and Bruce Wiles are some of the first producers in Nebraska to grow hemp. They also produce hops for regional brewers. (Progressive Farmer image courtesy of Annette Wiles)

When commodity prices are stuck in the little-to-no-profit zone, it just makes sense to search for new crops with higher return potential.

Five years ago, Annette and Bruce Wiles chose to be among the first Nebraskans to try growing hops. This year, they also planted hemp.

The decision to plant specialty crops came after a long career in which Bruce and his brothers grew 11,000 acres of corn and soybeans. Annette had worked in product development in the financial/credit card industry. Each was ready to try something new.

"I had a hard time understanding why people grow certain crops when they have no control over the price," Annette says. So, taking on specialty crops was a logical step, and their original research led them to hops.

How do hops and hemp stack up to more traditional commodities for profits? It's probably too early to tell.

The couple's sales of hops to brewers in Iowa, Missouri and Nebraska have increased each year. These are brewers who value regionally sourced hops and the distinct flavors they impart. Working in conjunction with the University of Nebraska, the Wiles also are breeding new varieties of hops they intend to sell as plants to other farmers wanting to give the crop a try.

The Midwest market for hops is strong, especially in this era of booming local and home breweries, Annette says. The main obstacle is cost of production.

Hops are "very labor-intensive," and expensive equipment adds to startup costs, she says. Economies of scale indicate it takes 30 to 50 or more acres to be profitable. She and Bruce currently have 32 acres of hops in the ground.

Another obstacle is time. Hops plants take up to four years to reach full production. In their first year, the Wiles' hops produced 20 to 25% of their potential.

Washington State University says average dry-matter production in mature plants in the Pacific Northwest can vary from 1,800 to 2,800 pounds per acre, depending on variety. Prices also vary by variety and by year. A 2015 Michigan State University study predicted the first four years of hops production would yield losses for a 20-acre farm. In the fifth year, the study showed a $13,000 profit.

HEMP LICENSES

Growing hemp has been a similar -- but different -- experience for the Wiles.

First, they had to obtain one of only 10 licenses from the state of Nebraska to grow hemp. That tells you that Nebraska (like many other states) is just now exploring the crop.

Hemp, grown for CBD (cannabidiol) oil extracted from seeds and for fiber from the plants, is a crop with a fraught history based on confusion with its cannabinoid cousin, marijuana. Entrepreneurial farmers like the Wiles will have to contend with regulations that, in many states, are just now being written and interpreted.

The Wileses have four varieties of hemp, 72 plants of each in two greenhouses. They are experimenting to learn the best varieties to produce CBD oil.

Like everyone else in this new cropping frontier, they are unsure of the profit potential. One University of Nebraska researcher estimated net income of as much as $100,000 per acre. A study in Pennsylvania suggested the profit potential at only $l,200 per acre. In other words, who knows?

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All of which leads Annette to say of both hops and hemp: "There are opportunities for farmers. But, if you don't have the infrastructures and markets lined up for what you grow, farmers can spend a lot of money on the front end" ... and not be rewarded.

GIANT MISCANTHUS TRIAL

When John Atkinson, Kingdom City, Missouri, first started growing the tall grassy plant named Giant Miscanthus six years ago, it was part of an experiment.

MFA Inc., a Midwest farm and marketing cooperative, wanted contract growers because it planned to pelletize dried Giant Miscanthus fiber to burn in steam generators as an energy alternative to coal and oil. A few years into the experiment, MFA sold its interest in the operation to Renew Biomass, a southwest Missouri company that processes Giant Miscanthus fiber (branded M-Fiber) for pet food and supplement manufacturers.

Atkinson's Giant Miscanthus contract passed from MFA to Renew Biomass.

"Your next question is: 'Are you glad you're in it?'" Atkinson asks. "And, I am."

Here are his reasons:

> He had to buy no new planting or harvesting machinery. MFA planted 60 acres of Giant Miscanthus on marginal ground that Atkinson had slated for brome hay. The crop has a life expectancy of 15 to 30 years. Come harvest in late winter, Renew Biomass sends a crew, which harvests and bales the crop.

> Giant Miscanthus is low maintenance. It took a couple of years to get established and grew 8 to 10 feet tall. "Now, it's doing well ... All I have to do is fertilize occasionally -- every two to three years -- and keep a border cleared around it," Atkinson says.

> It produces twice as much biomass per acre as switchgrass or corn.

> Giant Miscanthus -- which arrived here from Asia 100 years ago -- seems to have few natural enemies, so pest control is minimal to none. What's more, since it propagates from rhizomes, not seeds, it is noninvasive.

> It has deep roots to hold soil in place. It is heaven on earth for wildlife, and it traps more carbon than most crops.

> The income is steady. Atkinson recently signed a seven-year contract with Renew Biomass for $40 per ton. He doesn't have exact yield numbers for his fields, but nationwide averages are 7 to 10 tons per acre.

Like anything, there are some downsides to Giant Miscanthus. Most notably, markets for the niche crop are spotty and not well-established.

Emily Heaton, associate professor of agronomy, biomass specialist, biomass crops production at Iowa State University, has studied the plant for most of a decade and at first thought the crop would thrive as a source for cellulosic ethanol plants.

"No company was able to figure out how to do that in today's energy and policy environment," she says.

Even so, the biomass content of Giant Miscanthus is enticing other potential users. Its biggest current Iowa market is bedding for poultry growers, Heaton says. Construction companies in Iowa and Wisconsin use Giant Miscanthus straw to hold soil in place during road and work site projects.

Heaton estimates 15,000 to 20,000 acres of Giant Miscanthus already have found markets in hot spots such as Georgia, Illinois, Iowa, Maryland, Mississippi, Missouri, North Carolina, Ohio, Pennsylvania and Wisconsin. She advises interested farmers to keep their antennae up.

"If there is a market you hear about, I would check it out," she says. "It [Giant Miscanthus] is not going to make you a ton of money the way row crops did from 2010 to 2013. But, it can be stable and provide income for you in a steady way while protecting your soil and water."

THE NON-GMO ROUTE

It didn't take much to convince Gary Hughes to plant non-GMO soybeans for the Japanese tofu market.

Specialty crops are Hughes' thing. The Rosendale, Missouri, corn and soybean producer has long planted his 2,500 acres to both waxy corn and non-GMO soybeans. Five years ago, when a company named Lathrop Feed and Grain (now Lathrop FSG) told him he could get a premium on the variety of non-GMO soybeans he was already planting, it was kind of a no-brainer. "It all comes down to profit," Hughes says.

He had long been a believer in non-GMO beans, which do well on his "average" soils. Two years ago, he switched all of his bean acres to non-GMO because he questioned the cost efficiency of GMO beans now that weed resistance is rampant.

"Do the math," Hughes says. With extra applications and expensive chemistry, "I'm paying the same for weed control with non-GMO beans [as with GMO beans]." Besides, he asserts, non-GMO seed is less expensive.

Hughes is the type of grower Stacey Evans loves. Evans is the general manager of Lathrop FSG (based in Lathrop, Missouri), which started cleaning non-GMO soybeans in 2008 for sale to Japanese tofu manufacturers. The first couple of years, the company shipped 50,000 to 100,000 bushels in containers that were backhauls from Japanese shipments to Kansas City of electronics, toys and other goods. Today, Lathrop FSG ships 400,000 to 500,000 bushels to Japan in those same kinds of containers. To attract growers, Lathrop FSG offers a $2-per-bushel premium over local commodity prices. By contract, a grower can lock in the price whenever he feels the market is right.

The catch is that the Japanese are extremely particular about bean quality. "What we look at as commodity, they view as their food," Evans explains. His company and his growers have to make that mental transition when dealing with the Japanese. "You go from being a handler of commodities to being a food manufacturer."

So, special care is needed with tofu beans. At harvest, for example, farmers shouldn't cut non-GMO beans if their hulls are wet with dew or rain. Dust from harvesting can leave speckles on the beans, and tofu makers do not like dirty-looking beans.

Hughes employs special procedures when he harvests non-GMO beans. "I run them like seed beans," he says. "You want very high quality and a low number of splits. It makes you fine-tune your combine. I also handle them with conveyors rather than augers" to prevent damage to the beans.

Would he recommend a non-GMO contract to others? "I would, but not without reservations," Hughes says. "It is not for everyone."

Weed-control timing is key. "If you miss, you're done. There is not an effective rescue treatment," Hughes says. There is also the matter of non-GMO varieties typically having lower yields than some of the hot GMO varieties.

But, in Hughes' world, the lower costs of non-GMOs -- and $2 premiums -- outweigh lower yields. "It's just a matter of knowing the genetics of what you are planting."

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