Young Farmers Bring New Ideas To Farming Business Models

Specialized Farm Equipment Supports Diversified Agriculture

To stay specialized or diversify? In agriculture, it’s a question analyzed on spreadsheets and formatted into graphs to understand profitability and feasibility in a given industry. But it is also talked about in barns, at the diner table, and in bank offices by farm families making cash flow decisions. To buy the new piece of equipment, test out a new crop rotation method, graze livestock; or not?

The future of farming in the U.S. might not be dependent on choosing between diversified business models or specialized plans, but how farmers perceive these options will shape American agriculture.

The Pros and Cons of Diversified Agriculture

In a study published by the USDA polling farm families the majority believe diversification practices are the most valuable to environmental goals, but that specialized models are better equipped to produce enough food for a growing population. When it comes to stabilizing local economies, producing jobs and enhancing the quality of life for farm families, those polled believe both diversification and specialized farming can support these goals.

Obstacles when shifting farm practices in either direction are similar. Securing capital for land purchases or equipment is difficult. Farmers have been hesitant to spend on diversification since the short term return on investments are minimal even if the long term benefits are lucrative. Most farmers don’t have wide enough margins to accommodate multiple years of equipment payments without profit increases, especially with higher interest rates. Those profit increases are largely tied to market development and distance to buyers. If they spend the money, do they stand to make more money?

Whether farms are producing corn and soybeans for the fourth generation in a row or attempting to branch into a specialized variety, hyper focusing on one crop and one production method can have just as many obstacles as working to diversify. Access to affordable land is still a barrier to scaling operations. Specialized equipment still comes with a hefty price tag and no guarantee of markets or prompt return on investment.

Any change on the farm requires a learning period and whether the goal is diversification or specialization time to spend researching best practices is elusive to most farmers. In fact, the USDA study data revealed that knowing where to find information and having the time to sift through what is findable is a top challenge for farm families who are interested in making operational changes.

No matter what gets planted or how the farm is cared for, most farm incomes are somewhat diversified. Land is rented, one spouse also has a job in town, or extra cash is earned plowing, hauling or trading services. Making sure there is cash when you need it is a common challenge.  However, the USDA study suggests only 18% of American farms would consider themselves diversified, meaning they use horticulture, row crops, agroforesting, perennials and extended crop rotation methods in various combinations. Other studies put that number higher when considering farms growing herbs alongside multiple vegetable varieties.  

Change itself could be the biggest profit disrupter. Farmers want to know that the changes they make will keep paying the bills. Anything that slows operations down is often viewed as a risk. Not only is time needed to learn and research, but in farming, a two year trail run is typical when testing out new methods or seed varieties. 

Would We Benefit from More Collaboration in Agriculture?

Perhaps there is a middle ground. A place where specialized crops and equipment support diversification goals and visa-versa.  What if collaboration among farmers could build a new business model?

Young farmers are already testing the theory with specialized farm equipment and a willingness to travel to support operations that want to reap the environmental and long term benefits of diversification but avoid the upfront costs of shifting. They are filling a gap in agriculture with their collaborative model. Farmers who want to try before they buy can test out a strip-tillage method on their land or cover cropping by hiring someone with the specialized equipment to do it. In fact, this farmer may never have to buy the equipment himself.

As for the custom equipment owner, his equipment payments are met by renting himself and his machine out to neighboring farms. He’s created cashflow through his own farm diversification and scaled it by helping his neighbors diversify when it otherwise would have been unfeasible. It is no longer one machine on one farm, but one specialized piece of equipment serving ten farms. 

Beyond the balance sheet, this type of model stands to help agricultural regions achieve a multitude of goals from environmental stability, healthy farm incomes, and increased crop yields. It’s the kind of collaborative spirit we might expect from the ag community and could influence regional food production and market development for custom farming products while continuing to support family farms contributing to industrial food production.