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As costs continue to rise producer thinking out of the box

In his 15 years of farming, Arbyrd, Mo., cotton producer Lonnie Gibson hasn't seen anything like it - great prices for cotton, corn and soybeans all occurring at the same time. But just as unexpected has been the startling rise in input costs over the last few years, which has forced him to rethink the way he does business.

Gibson and his father, Lonnie Gibson, Sr., operate Gibson and Son Farms and Produce. They farm 1,800 acres of cotton, 60 acres of produce, 600 acres of corn, and 340 acres of soybeans. Gibson and his father own about 1,400 acres — the rest is rented. About 1,900 acres are irrigated.

While Gibson, a fifth generation farmer, is excited about good prices for cotton, corn and soybeans, he's going to need every bit of the good prices, plus strong yields, to cover production costs for seed, fertilizer and fuel.

“Everything is up. I priced some DAP the other day at $845 a ton. Potash is at $540 and urea is at $600. No. 2 diesel yesterday for a transport load was $3.34 a gallon. I could have bought some in December for $2.95, but I though it was too high. This is my 15th crop. I remember buying diesel one of the early years for 37 cents a gallon.

“I don't think many people outside of agriculture realize it, but I've gone from paying a $1,000 a ton for cottonseed to one bag with all the technology costing about $425. The price for cotton excluding this year isn't any different and in a lot of cases, it's less. My labor costs are going up. And it's hard finding people these days. You can't just find someone off the street to go drive a tractor.”

Gibson also shares the fear of every farmer who watches the commodity markets' daily defiance of the law of gravity. “If these high commodity prices ever go down, input costs are not going to follow suit as quickly.”

That's another reason why Gibson has introduced more grain into his mix. “You can farm soybeans for $125 an acre. Cotton just for inputs is up around $400 to $425. If you look at the rate of return, at 74-cent cotton, you're better off with beans or corn. And with corn, the next year in cotton, you're going to have the benefit of the rotation and the extra organic matter.

“When I was younger, other farmers kept telling me about exposure. I know what they meant today. If you farm 2,800 acres, you can produce soybeans for $350,000 in production costs versus cotton, which will cost you over $1 million. There's a lot of difference in exposure. My dad says these days, you need your own bank to farm cotton.”

To cut costs means thinking out of the box for the young farmer, even if it means cutting back on the crop he loves - cotton. “No matter how high grain gets, if I'm raising grain, I'm still a cotton farmer through and through. That's what I like. But my finances tell me I need to try the grain.”

However, Gibson isn't farming enough corn acres to cover the purchase of a combine, so he and fellow cotton farmer Dal Luther formed a company called Against the Grain, a custom harvesting and equipment-sharing enterprise.

Gibson and partner Jeff Todd, also started a wholesale-retail chemical business, called GT Ag, LLC. The business is run out of shop warehouses in Arbyrd, Mo., and Clarkton, Mo. “We don't have the doorfront shops. We're kind of at the crawling stage right now.”

The business grew out of an effort to try and save money through a buying cooperative, SEMO Farmers Group, which has turned into a low-cost buying alternative for growers. “We're taking out as many middlemen as we can. We're are driven to save money.”

Gibson says the customer base for the operation is spread out over several counties to minimize the impact it might have had on any local chemical dealers. “The connections I've made in the business have really helped too. When I need to buy equipment or check on chemical prices, my knowledge base spreads from Jonesboro to Bernie, Mo., and east to Dyersburg. By having all the contacts, I have better communications.”

To help cut rising costs for fertilizer, Gibson hired Chet Crook with Helena Chemical in Paragould to run a Veris rig (electrical soil conductivity mapping cart) to set up variable-rate applications of lime, and possibly other nutrients. “If variable-rate is ever going to pay off on fertilizer it could this year with the price of P and K. We may be able to save a significant amount of money.”

Gibson also uses marketing strategies to help lock in good prices for his crops or to add a few cents to his bottom line. For example, Gibson received 56 cents a pound for his 2007 crop cotton, then developed an option strategy purchasing out-of-the-money calls through Rosenthal Collins broker Pat McClatchy to protect his counter-cyclical payment. “We were able to get back some of the money we lost during the 2007 marketing year.”

During this spring's run-up on cotton prices, with the help of Charlie Lowrance, cotton advisor, CoMark, Gibson was able to fix some of his cotton at a futures price of 98.45 cents against a basis contract set at 350 points.

Gibson says success in farming would not be possible without the additional income from his wife's job, payments from the Conservation Security Program, watermelon sales, chemical sales and some custom harvesting. But a big disappointment for Gibson is how the reputation of the U.S. farmer continues to be attacked at the national level despite how difficult times are for farmers.

Recently, Gibson is seeing this animosity trickling down into his local community. “Agriculture keeps the local economy going, but the community just doesn't look up to the American farmer anymore. All the people in town think we're rich people on welfare, we don't care for the environment, and we're the ones responsible for their groceries going up. In many people's minds, farmers have gone from hero to zero.

“But whenever I need money for my softball team, (Gibson helps coach the local girls 10-and-under fast-pitch softball team) who do I call - equipment dealers, cotton gins, the banks, all the businesses that make money off farm income. And we're still the same people that give the local kids the summer jobs.”

Gibson and his wife, Lynette, have three children, Julia, 9, Jenna, 5, and Lonnie Gibson III (Trace), 1. Gibson's mother, Alice, is also a valuable part of the operation, running errands and keeping up with the Gibson children. And no matter what the town may think of farmers, the town of Arbyrd also calls Gibson its mayor, a job he has held since 2002. He's also been on the local school board since 1998.

Gibson has no ill feeling toward those who are negative toward the American farmer. “I thank God that I'm doing what I love to do in the country I love, and pray that all people could be so fortunate.”

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