One of my favorite songs is “The Farmer and the Cowman” from “Oklahoma.” Agriculture is one of the most diverse industries we have, and some of us have very strong opinions on which part of agriculture is the best. That’s why I love this song – it lightheartedly speaks the truth. While we all have an opinion on our different parts in agriculture, one thing we can agree on is they all have their place in the industry. And more and more, we are finding ourselves being involved personally in different aspects of agriculture as we diversify our operations.
One major reason we are seeing diversifying operations is risk management. Crop farmers including a feeder cattle operation are able to reduce risk on either side of the supply and demand equation by playing both sides. Lately, I’ve seen several cattle operations looking to add poultry barns to their farm. The poultry provides a steady income stream, as opposed to one big check a year, and with fertilizer costs still high, the litter reduces, or potentially eliminates, that cost to the cattle operation. Adding diversity to your operation in order to reduce risk can also benefit your relationship with your banker; less risk for you equates to less risk for him/her.
Another reason for diversification is growth. With land prices not getting any cheaper, including another type of operation can help a farmer/rancher continue to grow without necessarily needing additional acreage by using his/her land at its optimum. That wooded acreage the cattle use for shade? What about managing it for timber purposes? Especially in our area, some crop farmers have land that is either un-tillable or just doesn’t produce the yields. Turn that into pasture for a feeder calf or cow/calf operation.
As stated above, some land is better utilized one way than another but what about other assets? A third reason to diversify is efficient use of assets. Equipment is expensive. Why not look to using it as a second source of income – custom baling, custom combining, excavation, etc. If you have a cow/calf operation, you know quality is becoming more important every day. Instead of supplying the average brood cow, look into expanding part of the herd into AI (artificial insemination) or ET (embryo transfer) to improve your herd’s genetics and to provide yourself with a competitive edge.
There are many more scenarios than the few used here as examples: niche markets, alternative farming, public relations, to just name a few. Find what works for your specific operation. Discuss the options with family, friends, coworkers in agriculture, and your banker. Today, the farmer and the cowman are not just friends, but often one and the same.
Jessica Bailey is a Credit Analyst in the Agricultural Loan Division at Arvest Bank in Neosho, MO and was recently awarded the 2013 Crowder College Aggie Club Outstanding Agriculture Alumni Award.