With the current state of the farm economy, many farmers and ranchers are looking for opportunities to reduce risk or improve farm income.
At the annual Career Exploration and Field Day at the University of Missouri Southwest Research Center near Mount Vernon, producers and FFA members had the opportunity to learn about a diverse range of topics including diversifying farms.
“Diversification involves a producer adding some sort of new enterprise to his or her farm to reduce risk, improve earning potential or enhance the farm’s sustainability,” said Alice Roach, senior research associate for MU.
By adding a new business activity that differs from what is already being done on the farm, producers hope to capture at least one of those three benefits.
“Diversification allows us to reduce risk because we are less reliant on any one enterprise in fueling our whole farm business,” Roach explained.
For example, row-crop producers who add beef cattle production to the farm can more fully sustain their business because they are no longer solely reliant on the row-crop operation.
“You can insulate yourself somewhat from production and market-related challenges that are specific to just one enterprise,” she added.
Improving earning potential comes from hopefully growing revenue with the added enterprise to the farm operation as long as the other business enterprises are kept at the same level.
“If you can manage your costs for your new enterprise, you can potentially improve your profitability,” Roach said. “So the cost-management piece is what’s important for you to actually be able to earn a greater return when you add a new enterprise.”
Enhancing farm sustainability may appeal to farm operations with multiple-generation involvement.
“If you are a next generation and you’re looking for ways to return to the farm, adding some sort of new enterprise to your farm may create a job opportunity for you,” Roach explained. “Rather than seeking off-farm employment, you may have something to do on-farm to contribute to your family’s farm experience.”
Diversification can manifest itself in farm operations in many ways. Roach explained adopting a new crop or animal species — such as adding beef cattle production to a row-crop operation — is just one example.
“A second example is you can choose a new variety or breed to serve a new market,” Roach said. “Let’s assume you are a sunflower producer, and you are raising sunflowers to harvest those sunflowers and sell the seed to a bird food manufacturer. By adopting an oil-crop sunflower variety, you’re still a sunflower producer at the end of the day but you have a different market to serve because those oil-crop sunflower varieties will produce a seed that has the right characteristics to be crushed into oil that the specialty food sector could use. It’s a way of adopting a new variety but creating a new enterprise for your farm.”
Adding value to a commodity to capture more of the food dollar is another option.
“For the average food product, the farm only captured about 9 percent of that food product’s value,” Roach explained. “A lot of downstream value chain actors — like food processors, food service companies, retailers, wholesalers, packagers, those who transport products — they’re capturing basically 90 percent of the food dollar, or the food’s value. By diversifying into some of these downstream value chain activities, you can capture more of that food dollar for your farm’s use.”
Roach gave an example that an apple producer may decide to process some apples into apple butter in order to capture some of the processing share of the food dollar.
Agritourism also provides opportunities for farm diversification, especially with pumpkin patches and fall farm activities.
“It’s a way people can invite consumers onto their farms and consumers can have that farm experience through agritourism,” she said.
“Direct marketing is another example,” she continued. “If you sell at a farmers market, that’s an example of how you can transact directly with the consumer. Instead of selling to a wholesaler or retailer, you as the producer have a direct interaction with the consumer.”
Custom farm services, such as harvesting, can also contribute to the farm’s overall business. Another opportunity is finding new uses for by-products.
“Manure is a good example of a by-product,” Roach said. “If you have a livestock operation and the manure that your animals produce is more than what you could use to apply to your fields, you may compost that manure into a product that you could sell to other producers or that you could market to homeowners who have gardens.”
With a great number of opportunities for diversifying, Roach also gave seven tips for identifying which options would best fit an operation:
Recognize a need or market.
Learn about the product, its uses and its production.
Talk to other producers about problems, solutions and costs.
Secure adequate capital.
Be prepared to work.
Be prepared for errors.
Hope for a bit of luck.
Roach also explained producers can use the “Agriculture Opportunities in Missouri” tools available online at agintel.missouri.edu. These tools can help producers narrow down what crops to grow, determine how suitable a crop is for a farm’s environment and resources, evaluate the market, assess their management capabilities, and also find information on production practices, required equipment and other information.
Other topics at the field day included food safety, high tunnel productivity, small ruminant health and management, electrical safety, beef cattle reproduction, and many other farm-related subjects.