There are two ways to boost your profit margin during farming's inevitable cycles of low prices, says Farm Journal field agronomist Ken Ferrie: You can cut costs or raise your selling price.
Surveying his clients, Ferrie compiled a list of ways farmers have increased their profit margin, and gleaned tips to help those practices succeed.
"Through thinking outside the box, growers have found specialty crops that net higher prices than conventional corn and soybeans," he says.
Possibilities include popcorn; non-GMO corn and soybeans; seed corn and soybeans; food-grade corn and soybeans; and organic crops.
Seed Production Benefits
"Contracts are harder to get for corn than soybeans," Ferrie says. "But if you can get one, producing seed corn boosts profit several ways: You probably will net more per acre (based on a formula), and there is no cost for seed, drying or harvesting. You'll have a better chance to get, and keep, a seed corn contract if you have irrigation."
On the downside, field passes - planting the male and female rows and detasseling - must be made on schedule and not necessarily when soil conditions are ideal.
"That means you'll have compaction to deal with," Ferrie says. "You must maintain pollination buffers around the field edges, and you might have more weed pressure because more sunlight reaches the soil surface with short detasseled plants. All that said, I don't recall anyone I know giving up a seed corn contract once they get one."
Seed soybeans can net a premium of up to 70¢ per bushel for the crop, 30¢ to 50¢ per bushel for quality premiums and 15¢ per bushel for storage, Ferrie says. Non-GMO seed bean contract premiums can hit $2.50 per bushel.
Seed companies need growers who do a good job of cleaning combines, carts and augers to prevent contamination of the seed crop and store their crop and deliver it when needed.
"When companies decrease acres because of an overabundance of seed, they tend to hang onto their best growers and those with irrigated acres," Ferrie says.
Non-GMO Crop Premiums
Non-GMO conventional corn nets a premium of 20¢ to 35¢ per bushel, Ferrie reports. Non-GMO white waxy corn brings 40¢ to $1 per bushel more than genetically modified varieties. On top of that, you'll save $30 to $40 per acre on seed by not buying the GMO insecticide trait, and if you don't have a rootworm problem, you might not need an insecticide.
"Fall-delivery corn contracts are rare, so you need storage," Ferrie says. "Most growers work with a merchandiser, who contracts with farmers and grain buyers. When a barge arrives for corn, the merchandiser notifies his growers their time frame to deliver their grain."
Non-GMO soybeans net premiums of $1.85 to $2.50 per bushel, Ferrie says. Seed cost runs about 20% less than conventional soybeans.
Without GMO traits, weed control late in the season might be a challenge because of limited herbicide options. "It might help to narrow rows and push populations," Ferrie says.
Think twice about planting non-GMO beans behind a GMO variety, though.
"If volunteer GMO beans emerge in the growing non-GMO crop, there's no way to kill them, and they'll contaminate your sample," Ferrie says.
The non-GMO soybeans you deliver must be 99.5% pure.
"It's a good idea to test your seed for purity and save a sample," Ferrie says. "As with seed soybeans, equipment must be thoroughly cleaned."
Time to Go Organic?
Organic soybeans sell for $18 to $20 per bushel, and corn for $6 to $9.
"The drawback is that it takes three years to become organically certified," Ferrie says. "You're likely to see reduced return on investment during that period.
"With tight margins, it might not be a good time to work on getting certified. However, if you're already established in organic farming and have the know-how, equipment and a market, expanding organic acres might be an option.
"If you decide to enter organics, start small and find a successful local organic grower who's willing to serve as a mentor," Ferrie adds.
Wanted: On-Time Delivery
With specialty varieties, seed soybeans and non-GMO grain, reliable delivery to a terminal is vital, emphasizes Ken Ferrie, Farm Journal field agronomist. "That means despite winter weather or during planting season, so your bins must be located on roads that won't be posted with seasonal weight limits," he says.
"One grower I know got his non-GMO white waxy corn contract doubled just by proving he could deliver grain right after a blizzard, when no one else could get to the terminal in the allotted time," Ferrie adds.
