There is no magic formula that guarantees success in farming year after year, but farming diversification is one option for helping ensure that crops are always growing the farm’s bottom line. However, choosing to diversify is a big decision. AgAmerica Lending recently conducted a survey on diversification to see the trends in diversification and nail down the ‘best practices’ that lead to success in crop diversification. You can read the full white paper with the survey’s results after reading the highlights below.
Reasons to Diversify
It’s helpful to first identify why a farm needs to diversify. Has the price for the farm’s usual crops dropped too low? Is demand not high enough for the farm’s single crop? These were the top two reasons survey respondents said they chose to diversify. Additional reasons included that growing a particular crop had become too labor intensive, and that the input costs for a crop had become too high. Once the problem has been identified, farmers can look for additional or replacement crops that don’t have the same issues.
Choosing a new crop or additional crops should be done with great care, but there are a few features farmers should look for. For instance, farmers should choose crops that complement the current crops being grown or look for crops that have a strong market demand for the area; these were the two most commonly cited reasons behind choosing a particular new crop. Furthermore, farmers could also look at crops that are unique for the area or that have a simpler production process.
Farmers should check in with their local Extension offices to find crops that are a good match and to get farm diversification ideas. With an ear to the market, a savvy farmer could identify new or unique crops to stay ahead of local markets. It’s also always a good idea to see what other farmers in the region are doing. For instance, farmers in the Southeast are leaving squash, soybeans and grains/sorghum (among others) and planting potatoes, Muscadine grapes and persimmons. Southern farmers are stopping cotton, corn and milo and switching to corn, alfalfa, and pumpkins. See the white paper for the most common crop swaps in the country’s five regions.
Bryce Philpot, SVP of Operations and Finance, and a co-owner of AgAmerica Lending, maintains that farms that are moderately diversified operators are stronger lending candidates than those farms that do not diversify. As the land lending specialists, we’re committed to helping the nation’s farmers and ranchers improve the financial strength of their agricultural operations through our low interest rates, long amortizations, and an outstanding 10-year line of credit.