What is in this article?:
- Diversity Helps Manage Margins | A Seed Enterprise Broadens Efficiencies, Revenues
- Focus on efficiencies
The Berns, Bladen, Neb., added Green Cover Seed cover-crop-seed production to their corn, soybean and rye/triticalethree years ago when they had trouble sourcing cover crop seed. They’ve doubled their on-farm storage, altered some rotations and expanded their marketing radius in the process. Employing more family members and diversified revenue streams have been pluses. One disadvantage is the lack of a federal revenue protection program for seed crops.
Focus on efficiencies
In order to gain maximum synergies between their two enterprises, the Berns have made several changes:
Rotation changes. On dryland acres, their rotation is corn-corn-beans-rye/triticale. “Our irrigated ground used to be traditional corn-bean rotation but we are switching to rye, double-cropped with corn, then beans,” says Keith, adding that they conduct cover-crop research to illustrate how the crops enhance soil biology. In their corn and soybean production, stubble remains in the field following harvest, and cover crops further prevent runoff when heavy rains strike.
Lock in inputs. Even though they closely manage inputs and marketing, they don’t necessarily match input purchases with crop sales. They use input costs to gauge marketing decisions. “We try to buy inputs far enough ahead that we have an idea what our cost of production will be so we can market at a profit,” Keith says.
“We usually lock in much of our fertilizer from six to nine months in advance. Because of (fertilizer price) volatility, we’ve already committed to a majority of our fertilizer needs for 2013. Chemicals don’t seem to be as volatile, so we don’t lock in as many early purchases.”
Double the storage. The brothers have added 85,000 bu. of storage capacity in the past two years to accommodate marketing opportunities and to store seed for their cover-crop business. “We doubled what we had,” Keith says. “At this point we can definitely hold all of the corn we produce and some of the beans.
More hedge-to-arrive (HTA) contracts are involved than in the past, and a consultant helps them pull the trigger on sales. “HTAs take advantage of our on-farm-storage capacity,” says Keith.
Most 2012 corn was marketed early last year, before the summer price run-up. “In December, we averaged about $6.20/bu. for our corn,” Keith says. “We made those sales before the market increased to over $7. But at the time, the HTAs were at a good price.”
Bolder on basis. Keith sees that $6.20 average increasing to about $6.50, thanks to stronger basis levels. “We’re more aggressive at selling beans for local delivery, but for corn, we’re finding better basis by hauling it farther. We make many corn sales within a 45-mile radius, catching three ethanol plants and a few feedlots.”
“While the local elevator basis may be 12¢ under (futures), one of the feedlots may be 12-15¢ over; a 24-27¢ difference.”
Backhaul bonuses. The Berns’ cover-crop seed business helps extend their commercial grain marketing capabilities. “On the cover-crop side, we purchase more bulk seed,” Keith says, “so we recently bought a convertible semi-trailer. That also gives us more flexibility in delivery points.
“If we drive to Oklahoma or Texas for sorghum sudan or pearl millet seed, we can take a load of corn to market there (where basis levels can reach 50¢ over or higher). Then we can stack pallets of bulk or bagged seed.”
Strong financial plan.The brothers obtain all of their operating capital from one bank, in Hastings, Neb. “The lender normally doesn’t work with farmers who are doing unique things like we are with the cover-crop business,” says Keith. “But as long as our numbers look reasonable and we can project profits enough to service our loans, he provides the financing.”
The Berns’ business illustrates how diversification can bolster a farming operation.
“Much of both operations overlap because of shared facilities and labor, as well as the farm marketing some production through the seed company,” he says. “Both businesses complement each other.”