Diversifying for New Sources of Farm Income
If you’re a farmer or rancher looking for additional sources of revenue, consider diversifying your operations. While Kansas is a leader in U.S. agriculture, many farms would benefit by having income during off seasons or when harvests are less than expected. In the past, you could find a variety of grazing animals and crops on U.S. farms. We’ll explore ways you can return to this type of diversity with alternative crops, livestock, and recreational activities.
Diversifying through alternative crop production provides an opportunity to earn additional income while making the most of your farmland throughout the year. This method of farming has many benefits. If one crop has a poor harvest, another one may be highly productive. Crop rotation has also been shown to have other positive effects such as breaking pest cycles and mitigating plant diseases, insects and weed infestations. As a result, this creates healthier soil and produces larger crop yields.
So, what are your alternative crop options? It depends on where your farm is located.
- Field peas – In northwest Kansas, growing field peas might not seem like a good idea due to the limited rainfall, but this alternative crop is beginning to take root in the area. Seeking to avoid summer fallow and maximize profits, farmers are realizing the value of adding field peas to their crop rotation. They are planted early spring, and harvested early summer. You’ll need a drill and combine for harvesting.
- Winter canola – While this crop doesn’t have a long history in Kansas, farmers in the southwest region are increasingly converting a few acres to winter canola. A study conducted by agronomists at the Southwest Research Extension Center showed that planting between August 25 and September 15 is “optimum for winter survival and grain production.”1 Canola is often grown in rotation with wheat and uses the same equipment for planting and harvesting.
- Soybeans – In southwest Kansas, soybeans can be considered an alternative crop, as it is difficult to grow elsewhere. Planting typically occurs from May to June and harvesting is in October. Soybeans have a multitude of uses including industrial products (engine oil), food products (cooking oil), and animal feed. In 2017, “the Kansas soybean crop was worth $1.7 billion, which was 29% of the state’s total principal-crops value.”2
- Cover crops – While cover crops don’t yield a profit directly, their main benefit is to keep the soil healthy year-round, which can promote a better harvest and make the soil more resilient to prolonged periods of drought, heavy rains, or pests. If you are interested in learning which cover crops would work best in your area, check out this interactive tool from the Midwest Cover Crop Council.
- Industrial hemp – Commercial production of this crop in Kansas is still in its infancy, but it is being recognized as an increasingly profitable investment. Industrial hemp can be used in a wide range of products such as paper, textiles, biodegradable plastics, construction, fuel, food and more. With the passage of the 2018 Farm Bill, federal restrictions surrounding commercial hemp programs were lifted, allowing individual states to develop a plan to license its production. And in April 2018, the Alternative Crop Research Act enabled “the Kansas Department of Agriculture to oversee the cultivation of industrial hemp in a research program.”3 Because hemp is grown under a highly-controlled environment with strict regulations, production is subject to government intervention. You can withstand the uncertainties of production and strict supervision with capital that helps reduce your financial exposure.
- Cotton – Currently being grown in various parts of the state and being explored in others, cotton is making a comeback in Kansas. Since it is water efficient, growing cotton can take about a third of the water as corn to produce the same amount of revenue in most years.4 But it should be noted that planting and harvesting requires specialized equipment, and cash flow is greater than a year so you’ll need the capital available to withstand slow inventory turn. And, while marketing options are available, they are more limited than mainstream crops.
The value of livestock
In addition to growing new crops, consider investing in livestock. While it might seem daunting to jump into several new business ventures, integrating crops and livestock has several synergistic values. Nutrient-rich animal manure can help reduce the need for chemical fertilizers and promote soil fertility and erosion control. Along with raising livestock for sale, you could also profit from animal by-products such as eggs and sheep’s wool.
Diversify with recreation and education
A range of commercial enterprises provide new ways to diversify your income stream and gain more value from your farm or ranch. These include:
- Outdoor recreation – hunting, fishing, hiking, horseback riding, wildlife photography,
- Entertainment – hay rides, petting zoo, corn maze, pumpkin patch, events, fairs
- Education – farm tours, garden tours, winery tours, historical exhibits
- Hospitality – lodging and meals, outfitter services
- Agricultural sales – crafts, produce sales, u-pick operations
As you explore the best options for your specific farming operation, there are resources to help you get started. One example is the presentations and worksheets developed for a webinar series by Mississippi State University.5 Another is an article by Kansas State University professors. It examines U.S. and Kansas agritourism, an umbrella term for recreational enterprises that supplement farm income.6
Flexible financing for your agribusiness
If you’re considering diversifying your farming operation with crops, livestock or recreational enterprises, you may want to explore financing solutions. Among the options we offer are livestock loans for the purchase, feeding, breeding, and care of livestock as well as equipment financing and leasing. Our ag bankers can explain these options to you. They understand the needs, challenges, and hard work involved in running a successful agribusiness.
Are you ready to start diversifying your farm income and need financing to get started? Let’s talk.