Farmers often search for ways to diversify the family farm to make more money. Terry W. Griffin, Ph.D. Assistant Professor of Agricultural Economics and Agribusiness at the University of Arkansas Community College in Morrilton is a specialist in production economics and row-crop farm management. Dr. Griffin offered these tips on branching out from the traditional way of farming into new areas of income-generating activities.
Focus on Feasible Opportunities
Farmers should focus on areas with the most opportunity for gain. An anecdotal example is a farmer who searched all morning for the best price on a bearing and saved $35, while the value of soybeans in the grain bin fell by $50,000 during that same time period.
Often, the difference between the most profitable and least profitable farmers is not in their marketing abilities, production abilities, use of inputs or what they spend on inputs; but the difference is in how much they spend on machinery, whether on payments, repairs, maintenance, etc.
Network
Networking with other farmers and either being mentored by or mentoring others is advantageous. Avoid people who ask “how much do I have to do?” Instead, associate yourself with those who ask “how much CAN I do?” All family members have an available network: Arkansas Women in Agriculture, 4-H, Farm Bureau and USDA. Farmers can compare business information with other farmers who directly compete for farmland.
Diversify Enterprises
that Make Sense
To successfully diversify means you’ve reduced risk. Adding an enterprise that is closely related to existing enterprises may not add the needed risk reduction if that enterprise has prices, costs and production that are closely related to the existing enterprise.
Utilize Available Technology
Wise adoption and use of technology can reduce risk. Being the first to adopt a new technology isn’t always the wisest, but waiting until everyone else is using the technology isn’t either.
Wisely Use Risk Management Techniques
Federal crop insurance, self insurance and options on futures are risk management techniques available for most farm enterprises. Choosing multiple varieties of crops can also reduce production and revenue risks.
Consider the Whole Farm
Common mistakes occur in attempting to maximize yields or returns for each given enterprise or alternatively for one enterprise while treating other enterprises as secondary. Diversified farms experience important interactions between enterprises. Overall farm income may require a given crop to not be planted in its best time so that the more profitable crop can be planted with the available equipment at that time.
Think of the Farm as a Manufacturer
Although there aren’t specific tasks involved with this recommendation, it does provide a different mindset than what is traditional of farms.
Balance Farm Life and Family Life
Farmers should evaluate priorities regularly by asking what matters most in their lives. Many cases exist where strong profitable farms are destroyed by divorce. Also, consider intergenerational transfer and adding younger family members to the operation.
Get Help, Sooner Rather Than Later
By the time many farmers ask for financial counseling, they’re in need of family counseling. Help is available in these areas: production, financial, family or marriage, mechanical and labor.
Have a Firm Knowledge Base
Do not fall behind on knowing what other farmers know, but be sure to search out sources of knowledge that aren’t readily available to everyone. You shouldn’t be the last person to know about an event, however, think about what gives you the competitive edge.
Keep Good Farm Records
Physical and financial records are both important to show how a farm performs day to day and how performance has changed over time.
For more resources on ways to diversify your farm click on the Extended Stories Link.
