“Value-added production is that edge that allows us to always look for ways to do things better and more efficiently.” That motto has guided Matt and Connie Hughes in their 2,500-acre central Illinois corn/soybean operation.
It is an entirely no-till system with the help of some seasonal labor. Their soybean production focuses on value-added opportunities such as seed production and specialty contract production.
Hughes got interested in the value-added side of the business because of his area's competitive farming environment. “Crop shares and cash rent are prominent in this area. I work with many landlords, so value-added production capabilities provide us with an edge to compete with other farmers for land,” he says.
Matt channeled his passion for value-added production into the AgGuild of Illinois LLC, which he helped establish in the late 1990s. Today the AgGuild has more than 50 central Illinois farmer members from a nine-county region. They collaborate to tailor crop composition and agronomic production methods to the specific specialty soybean requirements of food manufacturers, soybeans processors and other end users.
“Most of our contracts have been some type of added premium for an identity-preserved, produced and delivered product. We negotiate for things like an added premium, basis, yield guarantees and input offsets for trucking, seed and other items,” he says.
The AgGuild hired a part-time executive coordinator to search for and sort through the initial premium offers available.
“One of our big contracts this year is for a conventional soybean variety. Half of our soybean production will be in that variety,” says Hughes. “But we also will plant Roundup Ready soybeans for seed production, and that helps us with our rotations.”
Hughes is Quick to point out that specialty contracts are not all profit. The premiums received are a tradeoff for greater labor and time. He says most soybean contracts offer a “true premium,” while corn contracts are no longer as appealing for their geographic location. The Hugheses no longer grow waxy, white or high-oil corn on contract.
“Specialty soybean production has just been more lucrative,” he says. “We see returns and have less risk. There is also some reduction in input and seed costs with the seed-production side,” he says. “The other benefit is that we get the chance to evaluate the latest soybean seed technology a year in advance of commercial release.”
To that end, Hughes says he is always receptive to learning experiences to advance his operation and fine-tune efficiencies. In addition to his work with the AgGuild and other local groups, Hughes serves on the Illinois Soybean Association board. He holds a master's degree in agricultural economics from the University of Illinois.
“Perhaps my education has strengthened my management skills and provided me with unique assets, but the things you learn in school are obsolete in five years,” he says. “You have to keep learning and finding new ways to look at things through whatever form of continuing education works for you. You can't live in a vacuum in agriculture anymore. You have to ask questions and be willing to change to survive.”
Hughes uses his experience and knowledge to negotiate his farming arrangements and production contracts, along with marketing and crop input purchases. He prefers a variable cash rent contract with his landlords, using crop-share values as a starting point for determining cash rent values. He anticipates values to settle down again after 2009.
He also believes the buy-low-sell-high concept still applies in agriculture. “Now may be the best time to get into farming, or try no-till or value-added production. As farmers, we have to take advantage when we can,” he says. “There is tremendous opportunity for good managers right now to take the risk. That is the American experience. Many have been reluctant to do that in agriculture, but we must to see any future prosperity.”
While profitability may be defined in dollars and cents, Matt and Connie Hughes find the long-term impact of their production decisions also plays a significant role in their success. And the Shirley, IL, farm couple has discovered that no-till — primarily specialty soybean production — is the economically sound route for their operation. “Profit and the environment go hand in hand,” Matt says.
He began experimenting with no-till systems in high school. After he and Connie married, they began farming land belonging to Connie's family, which was already in no-till. He found the system to be profitable.
“It has been a few years since I calculated the economic value of no-till. At the time, it was probably a savings of $25-50/acre. We see a savings in labor, have a better agronomic environment and use resources, like fuel, more efficiently,” he says. “We have documented the ability to cut nitrogen rates and still enhance yield.”
Hughes roughly estimates that today no-till provides a 25% savings on inputs, 30% reduction in equipment and labor costs and as much as 50% savings in fuel.
“We started to see some gray leaf spot problems back in the mid-1990s with no-till, but newer hybrids and fungicide practices have eliminated most of that problem. We have also seen a shift in our weeds toward a few more perennials, like poison hemlock. New chemistry has also helped address much of that,” he says. “We don't really have any unique problems that don't affect conventional tillage in the same way.”
Hughes continues, “When it comes to profitability, no-till is a unique system. But many farm-management styles and experiences will work. A farmer committed to no-till can be just as profitable as one committed to conventional. The key is to have faith in the system you choose. You have to find what works and be realistic about your objectives.”
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