Find additional farm revenue from new crops, outside employment
Travis Dagman grew up in southeastern North Dakota at a time when farming wasn’t popular. Knocked around by the treacherous ‘80s, many people including his parents discouraged their children from continuing in the family business.
The advice stuck. Dagman left the farm after college, only to return in 2008. Soon, he and his wife, Dana, began to farm 2,600 acres of corn, soybeans, wheat, winter wheat, barley and field peas full time with the elder Dagmans. Those specialty crops, along with off-farm employment from November through March, helped the family diversify its income and continue farming through tight margins.
“Growing up, both of my parents worked off the farm because their generation had to,” Dagman says. Today, his work as a tax preparer provides income in the winter months and gives the operation an edge on tax law and policies.
Diversifying income is essential in today’s volatile market, according to Minnesota-based farm business consultant Bret Oelke, owner of Innovus Agra. Producers need to start focusing on ways to make more money, he says. It’s not enough to just trim costs.
“Cutting family living expenses is BS,” he says. Instead, “you need to focus on finding more revenue. If you’re interested in livestock, explore specializing in a specific breed of livestock,” he says. “If you own your own trucks, consider starting a trucking company.”
Find Your Specialty. That’s exactly how Dagman got into tax preparation: He likes it. “Most importantly, doing taxes is something I enjoy and something that keeps my brain sharp,” he explains.
Additional examples of off-farm diversification Oelke recommends include seed businesses, livestock, custom farming and trucking. As budgets tighten, producers around the country will look for ways to increase and diversify farm income.
“Older generations used to be more diversified and less specialized,” he explains. “As farms began to scale, that changed.” Diversification through edible beans, lentils and other niche crops should be considered where appropriate.
That’s especially true in light of USDA data showing farm income will likely be $54.8 billion this year, down 3% from the year before and a 56% drop from the recent high of $123.3 billion in 2013.
Risks And Rewards. The major downside to crop specialization at the cost of diversification is it puts more of your revenue into fewer baskets, Oelke says. The Dagmans always have farmed a wide variety of specialty crops, partially because of their labor needs. “If we farmed all corn and soybeans, we wouldn’t have enough labor to do it,” Dagman says. “It’s also good agronomically and it stretches out our harvests, which is good for cash flow.”
The family’s commodities tend to track with one another in terms of price. Yet planting specialty crops means Dagman can get a cash infusion from harvests in early summer and November.
The biggest limiting factor for diversifying is on-farm storage.
“Generally, you can’t deliver to the market facility right after harvest, so you have to have enough bin storage for all of the specialty crops you grow,” Dagman explains.
As is the case for row crops, specialty crops will see falling cash receipts this year. Vegetables and melons stand to lose the most of all field crops at $1.4 billion, USDA’s Economic Research Service says.
3 steps to diversify your farm business
If you are interested in pursuing specialty crops or another new enterprise, experts say adding a few action items to your list will help you stay on track throughout the process.
1. Begin Doing Research. It’s a good idea for producers to do some soul-searching and consider how their passion for certain kinds of work or issues might translate into a revenue source, says consultant Bret Oelke of Innovus Agra. Farmers should also research where opportunities exist, says Lynn Kime, an Extension agent with Penn State University. It’s not advantageous to start providing a service for a need that doesn’t exist.
2. Conduct A SWOT Analysis. Identify strengths, weaknesses, opportunities and threats (SWOT). Kime recommends evaluating these categories from three angles: business, self and family.
3. Develop A Business Plan. Your new venture should have a rock-solid business plan out of the gate. The new business should help your overall balance sheet, not hinder your existing farm operation.