NDSU Specialist suggest ways to help manage trends

By Dorinda Anderson

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Prairie Grains is the official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain Growers Association,
South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.

That’s was the goal of a series of meetings held across ND this winter, focusing on "changing the way you farm." The meetings were sponsored by the ND Commission on the Future of Agriculture, and the North Dakota State University Extension Service.

Program leaders prescribed no quick, easy fixes. What they did provide, however, were suggestions to help manage ag trends and farm change.

"Change is inevitable. We need to recognize it, but it isn’t bad. We need to use things to our advantage," says Dwight Aakre, NDSU extension farm management specialist. The falling number of farms in the state is a concern. But Aakre points out that farm numbers have been declining since the 1930s and 1940s, and the declines have occurred at other times than just bad years. In the mid 1980s there were a lot of difficulties in agriculture, but the region didn’t lose a significant number of farmers during that time.

"The main reason people leave the farm is to find something better somewhere else. Often it is a choice they are willing to make," he says. Technology has been a key player in why people leave the farm; it opened up opportunities elsewhere, Aakre says, and created less need for farm labor. But the biggest factor is profitability.

"You can show a net profit on paper and not have enough money to pay the bills. … If your overhead is too large it is unreasonable to expect your variable costs to pay for it. You need to make cuts," he says.

If a farmer has a year where the bills exceed the profits, what will his plan of action be? "You could go to your lender and refinance, but you can only do that so long before there is no equity left," Aakre says. "You need to look at a different plan."

Doing things differently

An off-farm job may be considered. But it is important to look at how that may affect family. An off-farm job can also provide health insurance, which can then be deducted from the farms’ expenses.

Instead of taking an off-farm job, higher profits could be obtained by learning to capture more of the market or expand into different enterprises, Aakre says. "Or you can figure out what you’re doing and not spend as much on the process." It might be possible to reduce overhead payments, which is not always easy to do especially if there are financial commitments that were made in the past like machinery payments.

Another option is to keep the operation the same and change to a share rent, at a 70/30 split. However, the downside is that this arrangement can magnify a crop loss: instead of losing $9,000, the deficit is $12,419 when the landlord receives his portion of the crop. "Anything that transfers risk to someone else will cost you. You are $3,000 worse off because you gave up a portion of the rent."

Aakre also points out that too often, farmers get on the wrong side of the cycle.

They get into sunflower or cattle too late such as when the price is on the downward side of the price curve.

One major problem is productivity that has fallen short. Sometimes it’s weather-related, but other times it’s management. "Don’t try to cut corners so much that you cut yields. We need to pay attention to those management practices that optimize yields that don’t necessarily increase input costs."

For example, he says, "How many times have you heard, ‘If it’s too late to get a crop in I’ll put flax in.’ Isn’t it obvious if you get a crop in on time it will boost your yield. Use production practices that don’t require a large investment."

Deficits are sometimes due to individual management practices and sometimes things might be out of your control. "But, in the years when you come up short, you had better have a plan to deal with those years other than refinancing. Refinancing has its place and can be used but it won’t be the answer all of the time," Aakre says.

"Have a destination"

Dave Kraenzel, NDSU extension agri-business development specialist, says that "the bottom line to take advantage of change is to have a destination. In today’s consumer-driven market that destinationis a market. How do we approach that market?" he asks.

He suggests seeking value-added markets, which can increase your profit margin. It is important to plan your future so you take the volatility out of prices and supply and demand. Having a three-to-five-year contract is not all bad because it forces a farmer to look to the future.

For the future he says he sees more technology, designer, specialty crops, team-based operations and partnerships. "I see someone sitting in a tractor working on a laptop computer, talking on a cell phone to the computer company trying to make a program work," Kraenzel says. "How we used to do it doesn’t make us money anymore. We’re so busy doing what we’ve always done we’re not sure why it’s not working."

He adds, "The key is farm business planning. The key to managing change is to have a destination."

Currently, Nebraska has a program called Families in Transitions and Decisions, Kraenzel says. It is a change in the mindset of producers. "It is a rekindling of the spirit in agriculture," he adds. "I like this Freedom to Farm. We will take chances and some lessons will be hard learned, but we need a plan."

Sean Brotherson, NDSU extension family science specialist, says that decisions farmers make will determine their financial security and their family’s well being in the future. Understanding values, setting goals, resources, costs and benefits and decision-making styles can all contribute to the success of any decision-making effort.

In actual decision making, and dealing with change successfully, communication is vital, Brotherson says. "To clarify values and goals, determine what you want for your family," he says. "Ask yourself, ‘What are the most important things for myself and my family,’ then create a shared value. Then set short- and long-term goals. Be sure to evaluate the costs and benefits to the family."

Julie Hudson-Schenfisch, interim family economics specialist at NDSU, stresses the importance of asking for help in managing change. "(We) can learn a lot from children: they are not afraid to ask for help and they teach us to be specific in our communication."

There are many programs available offering help, such as adult vocational agriculture, the ND Department of Agriculture’s ag mediation program, loan programs from the Bank of North Dakota, and others. County extension offices are a good place to start for contact information.

Ag revolution has begun

Duane Berglund, NDSU extension agronomist, sees more focus on genetically-modified crops for specialty end use during the next decade. "In the next two to five years there will be a tremendous change in agriculture. The ag biotechnology and GMO (genetically-modified organisms) revolution has begun," he says.

Currently there are Roundup ready soybeans and Liberty Link corn. By the year 2000 there will be Roundup ready alfalfa. Other crops, including wheat, will follow.

Commodities will change and they won’t be like they were in the past, Berglund says. Production doesn’t have to be on a large scale, it could be a niche market or just grown on fewer acres, he says. "We have to think value-added for a specific end use and high value crops for economic survival. They asked for leaner pork and we way over-produced and saturated the market. Producers have to think quality, quality, quality."

Any crop seed can be altered genetically. Oil is the easiest to change genetically, Berglund says. A high oil corn, for example, creates a high-energy feed; combine that with better amino acids and a better quality feed can be created to build better muscle for meat.

In addition to genetically-modified crops, producers need to continue looking at other conventional alternatives. For example, hard white wheat is a growing industry, although the infrastructure is not ready for it yet on a commercial scale. "I see another niche market: the noodle market. If there is a hard white spring wheat for noodles you can sell to Asia."

Another example is the Paul oat variety, a lower-yielding but high-energy dense feed with 12 % oil. Regular oats has 7 to 8 % oil. "We should capitalize on it" Berglund says. "There are places that will take two semi loads a day to process and sell it; it is in big demand."