With all due respect to Sonny Perdue, there’s more to farming than size.
The U.S. agriculture secretary last week told folks at the World Dairy Expo in Madison, Wisconsin, that some farms may have to get larger to survive.
“Now what we see, obviously, is economies of scale having happened in America — big get bigger and small go out,” he said, according to the Milwaukee Journal Sentinel. “It’s very difficult on economies of scale with the capital needs and all the environmental regulations and everything else today to survive milking 40, 50, 60 or even 100 cows, and that’s what we’ve seen.”
While that may be seen by many as a fact of agricultural life these days, we disagree.
Farms producing commodities such as milk must be efficient, no doubt about it. Most often, those efficiencies are to be found in larger operations.
That much is true.
However, there is much more to farming — or any other business, for that matter — than producing the maximum amount of a commodity at the minimum cost.
Efficiency is important, but other factors also come into play.
For example, the market is critical. A farmer producing a commodity such as milk will receive a certain price. As a price taker, he or she makes money by being efficient, minimizing debt, keeping input costs down and hoping for the best.
Niche marketers, however, find a segment that they can target. For example, some dairies market organic milk. In addition to being efficient, minimizing debt, keeping input costs down and hoping for the best, farmers might be able to market their organic milk for a price premium. That could in turn increase the odds of a farmer clearing a profit.
Another consideration is value-added products. Suppose that organic dairy farmer makes artisan cheese, ice cream or yogurt with his milk. That would potentially open the door to more income. Assuming those products can be made efficiently — there’s that word again — more income is possible.
Choosing the right crops to grow is also a major factor. For example, instead of growing forage for his cows, a farmer might be able to grow another crop such as hemp, which in many instances is bringing much higher prices. Yet there’s a possibility that, at some point, the hemp market could become saturated, forcing those prices down.
It’s a matter of putting the resources a farmer has at his, or her, disposal to the highest use.
Still other factors include side products. Some dairies make money turning cow manure into compost, electricity or natural gas and selling it. Others lease land for wind turbines that produce electricity. Others do custom field work on the side or grow feed instead of buying it.
Still others sell rights-of-way or development rights to help them pay down debt and increase cash flow.
Farmers need to know how to raise livestock and grow crops, but they also need to be entrepreneurs, marketers and innovators.
Yes, Mr. Secretary, there’s more to farming profitably than size in the 21st century. A lot more.