When it comes to the evolution of farming, it’s been said that the pace of change has never been so fast and change will never be this slow again. The pairing of the rapid advancement of ag technology with the generational goals of growers is creating economic opportunities along with transitional challenges.
Two strip-tillers discuss how the lessons of 2020 will help shape future on-farm decisions along with some of the technological trends that will define their future business strategies.
Joining the discussion were Brian Watkins, who manages a 7,000-acre corn and soybean operation near Kenton, Ind. and Trent Sanderson, a seventh generation farmer raising corn, soybeans and wheat with a cattle finishing business in Clare, Ill.
Making Money Pay
The last few years have forced some farmers into difficult decisions, but at the same time, some have said challenges brought about new opportunities. Here’s what the strip-
tillers shared on what the last year taught them about how they need to evolve their farm in the future to remain relevant, competitive and profitable.
Trent Sanderson: I am a numbers guy, and I track everything that we spend on the farm. I’ve done so on conventional farm practices for a long time. In our neighborhood, the challenge is the land expense is very expensive.
Tracking all of our inputs and trying to come up with the best marketing plan for the commodities that we raise — it’s a really big challenge to have a net profit per acre without any farm subsidy. We’re just exhausted relying on that for any grocery money, if you will, and wondering how much is coming this year?
What has got frustrating is the cashflow perspective of it. The industry has done such a good job of being so efficient, both on the marketing side and the crop raising side, that it’s made a challenge to make a buck on the farm. I know everyone’s situation is different, but in my case, that’s just become really exhausting.
We pride ourselves on being really efficient with the products we use and even just nitrogen (N), for example, on a corn and soybean rotation. We’re down to 100 units of applied N, split-applied to yield 200-bushel corn. I don’t know how to trim any more expense out of the production side just from N usage standpoint, for example, to try to net more dollars per acre.
I’m constantly doing trials with more and less applied N, on different soil types in different crop rotations. We’ve reached a plateau.
The fast and simple answer for us in our location is to switch some acres to organic. I see more opportunity to have more acres certified organic. I don’t know if we’ll ever take the farm as a whole to it, that’s going to come with time. The challenge to marketing organic crops is different than just commodity corn and soybeans, the contracting and delivery and quality and quantity of those organic crops.
On the conventional side, we’ve got to be aware of what our cost of production is, because at least in my short career, there is a limited amount of opportunity to reach up and grab enough net profit to put groceries on the table. So we need to be well aware of what we’ve got invested in our crop. On the organic side, it’s still all the same because it’s not as easy to sell that commodity.
Brian Watkins: There has been a movement to more business-oriented farms. That’s going to be a segment of the production landscape in that farms that are growing, using not just their own capital — but borrowed money — and will have to hold themselves to a higher standard.
Some countervailing trends to this idea of totally managing by financials are the fact number one, a lot of farms are pretty strong right now, financially. If they have a land base of any size, they’ve got a big cushion or they feel that they have a cushion. There’s not this overwhelming daily pressure to get their numbers better, right? They can continue to go along, use their intuition and get by. That’s reality.
The Data-Driven Farm CFO
For the next generation of farmer to really embrace that economic evaluation aspect of their operation, and drill down to that ROI piece vs. just a casual understanding of the operational profit and loss, more of a CFO mentality will be needed. But this shift may be more out of necessity than desire.
“We just can’t assume that the next generation of farmer is going to suddenly become these MBA-CFO-type managers…” – Brian Watkins
Watkins: If I look at the millennial farmers — which would be my children’s generation — everybody is unique. But if I look at the many, many of them who I have interacted with, most of them did not start farming because of a strong business orientation. They’re farming because they have a connection to the land.
It’s about the agronomy. It’s about the work. It’s about the independence. It’s about raising a family. The tight business skills, it’s not that they don’t have them, but that’s not their reason for being. There’s a small segment that have those skills, but we just can’t assume that they’re going to suddenly become these MBA-CFO-type managers. As a matter of fact, they’re probably going to be open to outside help with that from their suppliers. I think there’s an opportunity for equipment dealers around the equipment decision-making and planning to provide some help there and to help them optimize their fleet.
Ultimately though, people who use data are going to be the winners. And if you don’t want to control that for your farm, then somebody else is going to do it. As much as there’s been a ton of data there, it’s also been disappointing. We believed in the ‘90s when we first got yield monitors that by now, we would be fine-tuning things. We’d know the top 10, 20, 30 or 40 variables that affect yield and we would just pinpoint them because we had all these measurements, right? It didn’t work out because Mother Nature is a lot more complicated than we thought.
We’re right on the edge of a much more data-oriented equipment management regime, where we start keeping data on our equipment in terms of exactly how we’re using it. At the end of the year, we’ll be able to crunch numbers and get pretty precise in the terms of our asset utilization and our costs to operate these things, and then dial that into our capacity needs. If we need to plan everything in seven days, we’re going to take this data from our operations and we’re going to say, “What needs to change?” Those who are able to handle that and adapt that are going to be ahead.
But I don’t think farmers themselves are just going to suddenly become hugely data-oriented on this stuff. But if you can bring this to them and show them, “Hey, here’s an analysis of your operation. Here’s how we can make you $30 an acre because there’s a lot of money involved in your operational expenses,” I think that is coming.
