Competition for land can be fierce, and no one knows that better than corn, wheat, soybean and cattle farmer Tracy Jones. His family farms in DeKalb County, 60 miles west of Chicago. Urban pressure, good land and expansion-minded farmers keep him nimble. Last year Jones lost a lease worth several hundred acres, then worked a deal with a retiring neighbor that more than made up the difference. He went from 2,500 to 2,100 to 3,100 acres in two years.
We caught up with Jones to learn about some of the challenges he faces farming in this region.
Farm Futures: What’s behind some of the land competition in your area?
Jones: For one thing, organic farmers are outbidding me for rentals. They’re willing to pay more because they’re making more, and they don’t care about the three-year waiting period (time USDA mandates to transition from conventional to organic). They are willing to do one-year leases because they know they will still win the lease the next two years.
Can farmers still be profitable with today’s prices?
Jones: You can make money in this environment, but you have to have extremely good yields. Unfortunately, we were on the short end in 2018 thanks to tar spot, a tropical corn fungal disease that hurts standability. One of my agronomists said it cut as much as 50 bu. per acre.
We ended up not applying fungicide last year and missed the boat on that decision. What I learned was, even though we need to reduce and watch costs, you can’t just curl up in a ball and not spend money; you have to spend money smartly to get the best return.
How does urban pressure and competition for land impact the farm’s cost structure here?
Jones: Our average corn yield in 2018 was 196 bu./acre. I have a friend in southern Wisconsin who would be thrilled with 196, but to me, that’s a disaster. In southern Wisconsin they pay half what we pay for cash rent. We need 220 bu./a to make money. The year before we had 226, and the year before that we got 247 all-farm yield. If you can raise 247 bu./a you’re doing okay.
With corn and soybean in global surplus, have you considered new enterprises?
Jones: You do what you do well, and the markets will generally take care of themselves. We’ve been in the cattle business all our lives. There’s a lot of days when I think that business stinks, but you can’t look at just one day – you have to look at the big picture, and in the long run the cattle business has been pretty darn good to me and my family.
I get depressed when I look at the markets and financial markets, but I have to look at the big picture – look at what we’ve built over a lifetime. We’re still the envy of most of the world. You got to be careful not to be too focused on today. But you do have to think about how to stay competitive.
A lot of farmers say they worry about finding and retaining good help. What works for you?
Jones: You have to pay a fair wage and be a good person to work for. People need to enjoy their day. Keeping employees happy is a matter of giving them a role, responsibility, training, and letting them have ownership of their role. I don’t micro-manage; I’m gone 75 days a year for my job as a national board member for CHS. I have to have people who can think. The decisions we make are collaborative; ultimately the final decision is mine, sure, but over the years, buying equipment, land, building bins - I keep them in the loop. It’s not like I have a bunch of secrets. When the financials are bad, they know it, so they understand we’re not buying equipment like we used to, and they understand why.
Mark Neff has been with me 25 years and lives around the corner in a house I provide for him. I feel I treat him well and in exchange he treats me well – he puts in great hours and is my age. We have a great relationship. I can walk away and he could handle everything. Chris Paulsen, our other full-time person, I give him the opportunity to sell seed corn; he uses my shop and I give him time to do that; we work together so he can make money.
You gotta build a team – it’s not about me, it’s us. I don’t do anything, but “we” do a lot. It takes everybody.
What is your capital purchasing plan for 2019?
Jones: We’re not buying anything – not this year. We have good equipment and we’re going to have to make it run longer. It’s time to trade feed wagons and I’ll decide by July, when I know how things look financially.
The old rule of thumb was, the longer you run it the cheaper per hour it costs you, that is still pretty much true.
Until not long ago we had an old four-wheel drive John Deere loader. It was a great piece of equipment. We paid $72K, a lot of money when we bought it new in 1982. We kept that loader for 35 years, put 10,000 hours on it. We knew it was time to trade when every day became an adventure – breaking stuff, hoses – it just finally had to go. It’s hard to know when to make that call, but eventually we had no choice. We traded for a new loader, another beautiful piece of equipment.
What’s your biggest concern other than cash flow or working capital?
Jones: When it comes to marketing I try to be brutally honest with myself. I don’t like to pretend I have all the answers. I have a series of advisers, and my banker is my closest adviser. I have spreadsheets built now that helps keep my documentation in line.
I’m growing mainly corn and less beans this year – we made investments in dryer and storage; so I know I’m good at corn-on-corn. On 280 acres of soybeans we had 80-bu. yields, sold them early, and with the Market Facilitation Payment, did pretty well. Some of this was luck and some of it was management. We’ll be growing 500 acres of beans this year.
We’re not always on the cutting edge of technology but we are usually near the front. We’ve done variable rate P and K for years. We’re not doing variable rate planting because frankly most of our ground is uniform, so we haven’t seen the need.
We missed the boat on fungicides last year. A neighbor who always uses fungicide told me, 7 out of 10 years it will just pay for itself, 1 year out of 10 you might lose money, and 2 years out of 10 you’ll knock it out of the park -- that’s how it was last year for people who used fungicide.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.