Minding Ag's Business

Strategies for Farming Strong in 2017

Farmers are the ultimate examples of self-improvement, a necessary trait when today’s commodity prices are likely to cull operators with costs fixed in the $6 corn era. So when I asked several leading grain farmers at the DTN/The Progressive Farmer’s recent Ag Summit how they planned to “Farm Strong” in 2017, they weren’t resting on their laurels.

Ben Hendrix farms with his father in an all-irrigated operation spread over six counties near Wray, Colorado. A strong, 35-year relationship with the same lender helped them successfully hedge crops four years in advance, back in 2013 and expand their operations since. Looking ahead, futures markets aren’t likely to repeat that opportunity any time soon.

Now specialty contracts like kidney beans and popcorn are their focus. “Food trends actually create opportunity for us,” Hendrix says. Direct contracting gives processors the knowledge they’ll get a constant supply and growers the comfort of less volatile revenue. In fact, they started cultivating long-term relationships with end users in 2013, when buyers were still smarting from skyrocketing commodity prices. “We asked, couldn’t we take the peaks and valleys off, operate somewhere in between but where we could profit and they had a price that was attainable for them? That’s been a fruitful approach,” he says.

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Steve Hess, Bushnell, Illinois, partners with his son, a sixth-generation farmer who came back full-time after a successful career as a soybean options trader. They live in a fiercely competitive cash rent area, in the top 10 highest rate counties in Illinois last year.

Sharing actual costs with landowners has helped them achieve rent concessions, but they also have been testing new technology like hybrid planting on the go within fields. That required a $70,000 planter modification. Planting soybeans this way generated 3 bushels more per acre in 2016. Hess hopes hybrid corn will respond as they gather more knowledge in 2017. At this rate, the equipment should pay for itself in three years.

Josh Fiebiger is an eighth-generation farmer in business with his father in Fletcher, Ohio. They run a seed dealership and custom applicator business. They use nitrogen models to apply split applications of fertilizer, preventing unnecessary late season treatments under certain weather conditions. To be low-cost producers they have been in a buying group with 40 farmers, effectively sharing ownership of a dry fertilizer spreader and pooling purchases for seed, chemicals, fertilizer and equipment direct from manufacturers. For mid-size farms, collaboration offers an economy of scale they couldn’t achieve otherwise.

Another wave of farm exits will likely occur in this business cycle, with operators downsizing their high priced rents or established operators close to retirement opting to quit rather than lose equity. That can create opportunity for well-managed operations aiming to farm decades into the future.

One key lesson Hess says he gathered from another Summit speaker was this: “The greatest danger in times of turbulence is not turbulence, but to act with yesterday’s logic.”

Follow Marcia Taylor on Twitter@MarciaZTaylor

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