How can you tilt the risk/reward tradeoff of early adoption in your favor? With the right information and a longer-term time horizon.
That's what works for one early adopter: Frank Hopkins, a 40-year-old diversified grower and livestock producer near Gilson, IL. A strategic thinker, the 2,700-acre Knox County corn and bean grower lays the groundwork for a successful operation 20 years from now. “If we grow, I keep thinking what I can do to make us the most efficient.”
When he read seed companies' forecasts about 300-bu. corn yields in the future, Hopkins asked himself what that meant for his operation. His conclusions:
More grain storage will be required. “In 2008, our corn yield averaged 214, and the year before it was 205,” Hopkins says. “At this rate, maybe I'll see 300-350 bu./acre in 10 years; 400 bu. sometime later. If you look at the logistics of 50 more bu. on 2,000 acres, that's another 100,000 bu. I need to handle. That's the same as renting another farm.
“When I look at the payback on storage and basis being what it is, you gain a lot with management. We built a 100,000-bu. bin in 2008 and oversized the grain leg and pit for future growth. It was harder to manage the drydown, but when the basis narrowed we moved a lot of corn to avoid spoilage risk,” he says. His total storage is now 350,000 bu.
More fertilizer and more efficient application will be needed. “One of the new traits coming is more efficient use of nitrogen (N). Will they do the same for P and K?” he wonders.
“A lot of questions are still unanswered. We got back into contract finishing hogs (instead of owning them) for the manure value, and to diversify our risk,” Hopkins says. “As yields go up, fertilizer demand will be huge, and costs will go up.
“Last year, when anhydrous ammonia was $1,000/ton and potash was $900-1,000, my two hog barns brought my fertility costs down $80-100/acre (1.5¢/gal.). Unfortunately our wet spring caused some N loss with the manure so we had to sidedress some additional N,” he says.
Electrical systems for grain handling need to be upgraded. “I applied for and got a government grant that pays for up to 25% of your energy audit and dryer upgrade (including electrical),” Hopkins says.
Fieldwork needs to be more automated (auto-steer, auto row shutoff and other precision-ag technologies that boost productivity). “If we pick up more acres over time, we need to cover them efficiently and save time,” Hopkins says.
“I'm a huge proponent of tiling and building up fertility on new acres that are run down. I spend as much as I can installing tile every year,” he says. “I strongly encourage my landlords to visit the NRCS office to design the conservation measures.
“Some of our land is gridded out, and this year we used the variable-rate seeding and point-row shutoffs. Using point-row clutches pays for itself in seed savings alone, given the rough ground we farm here,” Hopkins says. “We saw a huge difference this fall with the point-row clutches.”
Variable-rate inputs and plant populations have paid off across the many soil types he farms. “We have one 140-acre field with 17 soil types in it,” he says. “By using prescription planting (matching the planting populations to soil type using GPS), we can choose the amount of seed that gives the highest returns for that soil.”
Changing row width from 30 in. to 20 in. or to twin rows. “At first we were going to change to 20-in. rows, but research started leaning toward twin rows,” he says. “The plots look encouraging, but it will be more of a challenge to use starter fertilizer and sidedress.”
Using starter fertilizer and sidedressing N are two practices Hopkins uses that aren't common in his area.
Managing soil compaction is another thing Hopkins keeps in the back of his mind. “If we go to 400-bu. yields someday, eventually we will we go to tracks on the grain cart.” This fall created compaction issues.
Some things do not merit investment, like semis. “I don't own a semi like most of my neighbors do, because it's not feasible,” he says. “My ground is all within five to 10 miles of home, so that's one expense I can forego. It won't pencil out until we have 3,000 acres of corn and 25% of it is at least 10 miles away.”
Jeff Appel, Russell Consulting, Hopkins' risk-management consultant, says that “Frank is not afraid of change, and he always has his finger on the pulse of what's new. He uses information networks to see what works for others.”
Those networks include local farmers, college connections, Russell Consulting Associate Jeff Appel, Farm Business Farm Management field staff and sometimes just a phone call to someone who's tried something new.
Hopkins takes his profession seriously, Appel adds. “The key is to follow through on these ideas,”he says. “I know a lot of guys who think about the tactics but don't execute them. Frank has job descriptions, goal sheets and performance reviews for his employees to leverage his ideas and follow-through.”
This year each farm employee will have an annual performance review where they'll discuss goals for the year ahead.
One of these employees, Kevin Carlson, was instrumental in bringing prescription planting to light this year. He did a balancing act between fieldwork and computer work so the farm could benefit from the technology.
Each employee specializes in part of the operation to provide Hopkins “time to think and work on high-priority items,” he says. “My limiting resource is time. My wife works full-time off the farm and we have three children (including twins). I focus on what makes me the most money down the road. I ask myself what's the next big decision that needs to be made.”
In categorizing farmers' individual adoption styles, Russell Consulting's Appel says, “Frank's usually the second person to adopt an appropriate new practice, after he sees it work for the first person. Frank does his research to be sure something will work for him.”
Hopkins has shifted his priorities over the years. “Ten years ago if I allocated 25% of my time each to my hogs, cattle, corn and beans, it penciled out. But now the return has shifted toward the row crops.
“If we don't do something exactly right on cattle it won't kill us, but one mistake on the corn side could cost $20,000 simply by not having a hybrid in the right place, or not fixing tile. At 240-bu. corn, you make a mistake and there goes $30-50/acre in a heartbeat.”
“Whether they like it or not, American farmers' business is changing,” says Jeff Appel, risk-management consultant with Russell Consulting, Normal, IL. He advises Frank Hopkins along with other Illinois and Indiana farmers on staying competitive. “Those who identify these changes early, along with their impact, have the greatest chance of succeeding.
“One comment I often hear is, ‘How can so-and-so afford that high a cash rent?’ Some farmers use better marketing strategies, others better and more efficient production strategies; others do a better job of figuring out which new technologies work best and, finally, the best farmers do all the above. This is not easy and requires considerable research and planning on their part.
“Working with multiple growers, I can assure you no two farms are alike, and no two farms have the same breakeven,” Appel says. “You would be surprised to see some of the differences.
“As a business owner you have the right to choose whether or not you adopt new technologies on your farm. These technologies might include new hybrids and varieties, precision-ag equipment, data management and decision-making tools, marketing strategies or low-cost tillage systems.
“The choice you don't have is whether your neighbor will adopt them. Keep in mind that if your neighbor does choose to use new technology and is successful, your burden to compete just became tougher,” he says.