The difference between success and failure in business is how well that business is able to manage risk. This special issue of The Progressive Farmer provides ideas for managing risk in one of the most volatile times ever in agriculture.

Battle Risk One Field at a Time
These growers are fine-tuning management and production practices to offset rising costs.
By Des Keller

It's been said there are two things you can count on in life: death and taxes. But farmers may need to add a third: higher costs. The price tag for doing business keeps going up and up and up—and at an accelerating rate. That's not to say that farming is not profitable. But when the price of everything skyrockets, the risk is magnified.

Two years ago, nitrogen cost about 25 cents per pound to produce corn that sold for $2.50 per bushel. Now nitrogen costs around 60 cents per pound and corn is in the $3.50 range.

There's not much the average producer can do about surging input costs. But the following farmers are looking at a myriad of things to reduce their exposure as they spend more money to make money.

People skills. There is no head scratching when Eric Blad is asked about how he manages risk in his business near South Bend, Ind. He can tick off more than a dozen things he takes into account when considering how to make the best use of money, time and resources on 2,500 acres of corn, soybeans and mint.

"I know one thing that has helped me is to know personally the people running the local elevator and the local ethanol plant," says Blad, whose rapid-fire conversation and high energy level give the impression that networking is definitely a strong suit.

"They will call me if something happens that's important to me. And I can call them at home, meet them for lunch and know how their family is doing."

Needless to say, Blad is involved with numerous agriculture and community groups and tries to make sure he counts his neighbors as friends. In addition, he is working on a Masters of Agronomy with Iowa State University's distance learning program—which has him plowing through a 1,000-page soils textbook while also learning how hurricane weather patterns affect Midwest rainfall.

A lot of that information is coming in handy as Blad and a neighbor collaborate to conduct scientific seed test trials on their respective farms, taking turns each year and then sharing the results.

To ensure the best performance from whatever seeds they choose, Blad is also a big believer in irrigation in an area of the country not often associated with center pivots. Part of the orientation is due to their specialized mint crop. They can now irrigate up to 1,000 acres with the goal of being able to irrigate another 500 acres within the next three years.

"I feel you have to have a long-term irrigation plan to deal with the dry weather," says Blad. They've balked at the cost of subsurface irrigation, and they fear it would play havoc with their muck soils.

Blad can't attach a specific return on investment from irrigation, but he prefers that route to buying crop insurance. "If irrigation can save me 10 to 15 bushels per acre a year, the system might pay for itself in seven to eight years. Persistently dry conditions can significantly shorten the payback time. After the irrigation system is paid for, you will be making money on it every year for the life of the pivot," says Blad. "A pivot can last 40 years if maintained well."

Fewer field trips. Micah Lester has come nearly full circle when it comes to tillage. He once used conservation tillage on a large part of his operation but moved away from it several years ago to maintain high yields. But input costs have pushed the operation back to less tillage. He hopes to better utilize fertilizer in the process.

"We are looking at doing some no-till this year, in addition to perhaps reducing fertilizer costs," says Lester, whose family grows about 5,000 acres of corn, soybeans and wheat near Gracey, Ky. They are fortunate in that they already are able to use chicken litter (from area poultry houses) to fertilize 1,500 to 2,000 acres.