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Our exclusive research shows profitable farms found the formula for financial efficiency

Bryce Knorr, Ben Potterand 1 more

September 3, 2019

7 Slides

Sometimes the secret to success is as simple as being in the right place at the right time.

That’s certainly true in agriculture, an industry where weather and markets are often beyond the control of an individual producer.

So it’s not surprising the latest iteration of Best Places To Farm followed trends that gave them a natural advantage over other parts of the country. Of course, many of these winners added to their cause by making conscious efforts to push enterprises with higher odds of achievement.

We produced our selection of bragging rights and crying towels from the recently released Census of Agriculture, a snapshot of the farm economy done every five years. The latest treasure trove of data comes from 2017. Yes, that’s already nearly two years old. But the lessons learned are still relevant today. Here are some to chew over.

Push those assets

Look at the map of rankings for nearly 3,000 U.S. counties, and you’ll probably guess the strengths of those near the top: They’re livestock intensive, from the Barbeque Belt of the Southeast to the Chicken Kings of the Delta and Mid-South, to Cattle Country in the Plains and Southwest.

That focus had a double payoff in 2017. While crop revenue languished two years ago, the livestock sector enjoyed better times – thanks in part to cheap feed – helping overall net farm income rise to its highest level since 2015. Times weren’t great compared to the boom days, but they were better than what followed.

Livestock has another benefit that aids financial performance, the metric we use to measure what makes a place the best. Animal agriculture tends to generate more sales per dollar of assets owned, the so-called asset turnover ratio, one of the ways we analyzed counties from one coast to the other.

Some of the best places to farm in 2017 amplified gains with diversified animal agriculture, too. The southwest Plains from Kansas to northern Texas is known for beef. But the region also added hogs to the mix. And when environmental restrictions stopped growth in North Carolina’s hog industry, producers turned to poultry.

Corn Belt farmers may notice their area didn’t rank as high as in the past. But some areas were an exception. Top-rated counties in Iowa, for example, added both hogs and cattle over the past 15 years, providing not only revenue but a source of fertilizer and feed grain demand.

Mercer and Darke counties in Ohio and Jay County in Indiana were among the fastest growing counties in poultry production over the same time. The area also ranked high in cattle and hog gains.

Rack up the margins

Our list of best places shared another characteristic: They’re associated with high-value crops. This helped operations in the salad bowl of Arizona and California, and also aided those near-urban areas benefiting from the farm-to-table movement and agritourism.

But you don’t have to grow Belgium endive to get high revenues per acre. Two traditional crops did that in 2017, benefiting counties in the South. Average revenues from peanuts in Alabama and Georgia topped $950 an acre, according to USDA’s Economic Research Service, grossing more than $850 in the Carolinas and Virginia.

Rice did the same in Arkansas and other Delta states, with revenues in California topping $1,300 an acre.

To be sure, these crops are expensive to grow. But peanuts netted $80 an acre in Alabama and Georgia, and rice overall also turned a profit in the U.S.

Southern states also had an advantage over Midwest farmers in their rotations. Delta farms plant more soybeans than corn, a plus in 2017. Soybeans were profitable that year, thanks to Chinese buying before the trade war erupted. Corn losses topped $50 an acre in the Midwest that year, according to ERS.

Although profit margins for crops were lower than livestock producers enjoyed, even a modest gain is something. In 2017, 14.4% of counties had negative net cash farm income – they lost money. In 2012, 17.3% of counties ended up in the red.

Let the profits roll

Multiply profit margin times asset turnover, and what do you get? Return on assets, or how much income a dollar of assets generates. We weighted this factor the highest in our rankings because, after all, profits are the name of the game for businesses.

Farming is an asset-rich business and typically generates lower returns than other industries. Average ag ROA for 2017 was less than 4%. But counties at the top of our rankings typically were 25% or more.

Corn Belt counties fought this battle with one hand tied behind their backs, especially in 2017. Land values are down from their peak but not nearly as much as revenues. In central Illinois, livestock is scarce, and land can make up 95% or more of a county’s ag value. Land is cheaper in many of the high-ranking counties, another factor boosting returns.

Still, few Corn Belt counties ended 2017 in the red. The counties losing ground were concentrated in areas where bad weather intensified losses, including eastern Oklahoma and much of central Texas and southern Missouri. Debt could also be anchor in those areas, where interest as a percent of revenues was 15% or more. In the top 100 counties it was generally 1% or less.

What will the Best Places look like five years from now? Consider these examples of profitable farming from around the country.

Empire of agriculture

Do a Google image search for “New York,” and top results showcase the sprawling tangle of Manhattan skyscrapers and cityscapes. But anyone venturing upstate will find much different scenery – rolling hills featuring dairies, hay production and other agricultural enterprises.

In fact, there are more than 33,000 farmers operating across 6.9 million acres and producing $5.369 billion in goods annually, according to the latest state census data. The top counties in upstate New York are capturing return on assets that measure between 9% and 11%, with profit margins approaching 30% or more, according to our analysis.

One such enterprise is Whey Street Dairy, which raises 700 dairy cows, 650 heifers and several hundred acres of corn silage, grass and alfalfa hay near Cuyler, N.Y.

Consistency has been the bulwark for agricultural production in upstate New York, notes owner Martin Young.

“This part of the state has been farmed since the 1790s,” he says. “And there’s not a lot of turnover. Farms tend to have deep roots here.”

Young definitely fits that trend, with a family farm that has been operating for more than 200 years. Not all of the farm’s succession planning details have been settled, but with one daughter already working as the operation’s herd manager and another interested (but interning across the country in Idaho for now), Whey Street Dairy is likely to endure for at least another generation.

Farming operations near the state’s major metropolitan areas – New York, Albany, Buffalo – find themselves facing a double-edged sword. The upside is high land values and access to big markets. The downside is pressure to sell and high taxes.

“It would shock a lot of Midwesterners to see our tax rates,” Young says.

Labor shortages, a tough dairy economy and environmental regulations present two other major challenges for the state, says Cornell economist Jenny Ifft. But there have been efforts to keep farmland in production instead of being converted to residential or commercial properties.

“We have a very active land trust community in the state to help keep land in farming rather than go into development,” she says.

Ifft describes agricultural production in the Empire State as “dynamic,” noting the diversity of row crops, dairy, cattle, fruit, vegetables and even vineyards scattered across the state. Indeed, a look at New York’s highest value agricultural commodities is like walking through the grocery store, with a list that includes apples, sweet corn, cabbage, potatoes, eggs, strawberries, squash and even maple syrup.

And smart farming is the engine that drives it all, Ifft says.

“We have a lot of really well-managed, forward-looking farms all across the state,” she says. “We don’t necessarily have the best soils in New York, and the state is fairy regulated, but we still have a lot of opportunities.”

More than amber waves

Kansas is synonymous with wheat – and make no mistake, it has earned that right by being the nation’s top producer for years. But travel across the state and you’ll see much more than amber waves of grain, according to Kansas Department of Agriculture economist Peter Oppelt. In addition to crops and livestock, the Kansas agricultural sector includes renewable energy, food processing, research and education, agribusiness, technology, and many value-added enterprises, he says.

Aside from being the country’s No. 1 wheat producer, Kansas also ranks in the top five for sorghum, cattle, hay and sunflower. In fact, most of the land in Kansas is used for agricultural production – a whopping 87% of all acres, including more than 21 million acres for crop production and another 14 million in pastureland.

Cattle, in particular, helped drive a lot of southwest Kansas counties, along with neighboring counties in the Oklahoma panhandle and North Texas onto the top of our list by generating solid return on assets and profit margins.

Logistics tend to work in the state’s favor as well, Oppelt adds.

“Kansas transportation systems, including high quality roads and rail systems, provide easy access to markets and make moving people and goods in the state simple and reasonable,” he says.

Innovation and diversity drive the bus, according to Amy France, who farms 4,000 acres of pasture and 6,000 acres of crops in southwest Kansas with her husband.

“What does thinking outside the box look like?” she ponders. “It’s a complete necessity for us to focus on that.”

For France, that has meant anything from incorporating cover crops to transitioning some of the farm’s acres to organic. They have even explored smaller enterprises like helping their children grow pumpkins to sell to their community.

“Making ends meet doesn’t always have to be large-scale,” she points out.

France enjoys the country life but is still acutely aware of the challenges living in an extremely rural part of the country. Some of it is merely a matter of convenience – like the one-hour drive to the nearest Walmart. But other factors, including poor cell and internet connectivity, can be a detriment to business success and could even create safety concerns. What if there were an accident in an area where there was no cell service, for example?

Despite the challenges, France wouldn’t trade farm life in southwest Kansas for anything.

“The quality of people here is bar-none,” she says. “They’re good-hearted people. We’re so good about taking care of each other.”

Oppelt readily agrees with that sentiment.

“Kansans embody the pioneer spirit that brought their forefathers to an uninhabited prairie to seek their fortunes in a new land,” he says. “The values of hard work, family, faith, community, perseverance, entrepreneurship and achievement have stood the test of time in Kansas.”

Will North Dakota’s soybean expansion get derailed?

In the past two decades, North Dakota farmers have boosted return on assets by replacing thousands of acres of wheat and barley with row crops like corn and soybeans.

Statistics show the state’s soybean production has grown nearly 1,800% since 1980, making it the number four largest soybean state by acres planted and harvested.

“The explosion in soybean production really began in the 1997-98 seasons due to some changes in the farm bill and the availability of roundup ready soybeans,” says Nancy Johnson, North Dakota Soybean Growers Association executive director.

Infrastructure investment has helped move beans to China faster and more efficiently. BNSF Railway, the dominant railroad here, invested over $60 billion since 2000 to maintain and expand their network, mainly through double tracking, switches and avalanche mitigation, Johnson says. Before the trade war with China 72% of the state’s soybeans were exported to Asian countries via the Pacific Northwest (PNW). Nearly a fourth of the crop was shipped to other states and just 5% was used in state.

Since trade tensions began, basis widened, sales requests from the PNW dried up, and in some cases elevators just stopped taking beans, leaving farmers without a market.

“Corn and wheat continue to move through the PNW and so there is some optimism, but it’s pretty guarded,” Johnson says. “The MFP (Market Facilitation Program) is the most obvious way for government to help offset export losses.”

Soybeans overtook wheat as the leading crop by acres and farmgate value around four years ago. But North Dakota agriculture is more than just soybean exports, say farmers.

“Corn has a better story than soybeans, mainly because ethanol has been great for the state of North Dakota,” says Carson Klosterman, who grows corn, soybeans and sugar beets near Wyndmere, ND. Corn is king in this corner of the state, not far from the South Dakota and Minnesota state borders. Ethanol, along with sugar beet processing, helps drive profits.

Besides the trade war, other factors could hurt North Dakota’s ag growth, such as an anti-corporate farming law that discourages large-scale livestock production, and a lack of processing infrastructure.

The state has a large canola crushing facility, but “We don’t have any soybean crushing plants in state, at least, nothing of size,” Klosterman says. “For North Dakota farms to stay profitable, some sort of end-use processing for soybeans would be great.”

And an end to the trade war would help as well, says Johnson.

“The reality we are facing is, we would need to have a 92% market share in every other potential market to make up for what we’re no longer selling to China.”

Drought, regulations take bite out of west coast profits

West coast agriculture remains profitable despite a seven-year drought that just ended in March. While rains replenished reservoirs and eased pressure to pump more groundwater, a 2018 study by Agronomy predicts climate change will continue to play havoc on agriculture in this high-margin, high-demand, high cost region.

California, and to a smaller degree, Yuma, Arizona, grows a third of the nation’s vegetables and nearly two-thirds of the nation’s fruits and nuts, with almost all irrigated. Weather aside, the greater threat to profitability may be from an onslaught of regulations that another study says escalated farm costs nearly 800% from 2008 to 2018.

“Each time we get another layer of regulation it adds to farm costs,” says Norm Groot, Monterey County, Calif. Farm Bureau executive director. “We’re facing challenges in a combination of areas – water, labor, an escalating minimum wage, and it all eats away at the bottom line.”

Groot says surveys show consumers aren’t willing to pay for environmental changes, particularly in water quality. Some farmers have decided to farm elsewhere. “Strawberries are declining in acreage in Monterey County and a lot of that is moving to Mexico,” he says.

Even so, with good management, water and global markets, west coast agriculture is still dynamic.

“In terms of agriculture I wouldn’t trade it for anywhere in the country,” says Steve Alameda, co-owner at Topflavor Farms with operations in Yuma and San Juan Bautista, CA. “Maybe the San Joaquin Valley was affected by drought, but we saw an uptick in business because other areas were struggling with water issues. We’ve done pretty well. It’s kind of an evil business that way, looking for a problem to take advantage of.”

Topflavor grows 25 commodities for several shippers, 95% of which is sold fresh. “We can change crops quickly when we see an opportunity,” Alameda says. When Kale got cool, Alameda was happy to grow more of it; USDA data show a 60% jump in kale production from 2007 to 2012. This spring, after a self-proclaimed health guru extolled the benefits of celery juicing in the mainstream media, the market went through the roof. After years of breakeven prices, celery prices tripled.

“We can react to that market,” Alameda says. “In this part of the world, farming is a trend-oriented business, and if you can spot those trends it can really pay.”

Southeast sizzles with poultry

The southeastern U.S. is arguably one of the most diverse production areas in the nation, boasting a bounty of row crops, cattle, poultry, hogs and specialty crops.

And it’s poultry that may be proving to be an underappreciated powerhouse in the region, pushing many counties in North Carolina, South Carolina and Georgia to the top of our list.

“It all goes back to poultry,” according to Georgia farmer Russ Moon, whose nearly 1,500-acre farm also includes 11 broiler houses. “It’s made a lot of people a good living in this part of the state.” (Moon farms in Madison County, just northeast of Athens.)

Moon says the poultry side of his farm is good, steady income in and of itself, going so far as to call it the backbone of his operation. Beyond that, it is also synergistic with his row-crop production because the litter supplies a large portion of his nitrogen needs. What he can’t supply himself he buys from neighboring farms, often at half the price of traditional N.

Here’s the real icing on the cake: The poultry industry’s grain needs have created significantly positive basis levels.

“It’s been that way for many years,” Moon says. “We can get 80 cents out of the fields and as much as $1.20 if we store grain until December.”

Poultry may be the tip of the spear for southeastern agriculture, but the region has plenty of other opportunities at the ready, too. Consider Midwestern staples like corn and soybeans, add in southern row crops like cotton and peanuts, fold in some high-value specialty crops such as blueberries and peaches, and the picture begins to reveal itself.

That diversity has kept the region’s farmers on their toes, according to University of Georgia economist Adam Rabinowitz.

“It can be a challenge to grow so many crops,” he says. “It keeps our farmers versed in so many practices and marketing skills.”

Farmers here also tend to be tough, Rabinowitz adds. They often don’t have a choice, with Mother Nature hurling curveballs that include extreme heat, drought and even the occasional hurricane.

“There’s a lot of resiliency in this area,” he says. “They get back up, clean up and plant again.”

In Georgia, Rabinowitz says the county-based cooperative Extension model has worked out great for farmers, offering helping hands that are always in close proximity.

“This offers our farmers science-based research and education to help them get better,” he says. “We also have strong commodity groups that are heavily involved in supporting the best available information to our farmers.”

Overcoming adversity in the Mid-South

Make no mistake – low commodity prices over the past five years have been a drag on farms across the country. But operations across the Mid-South have risen to the challenge, with eight of the top 10 counties in our latest analysis coming from Arkansas, Mississippi and Louisiana. Return on assets in these counties are routinely above 30%, with profit margins as high as 50% in some cases.

An abundance of two natural resources in particular gives the region’s agricultural industry a fighting chance every year, according to David Wildy, who farms 12,500 acres of cotton, corn and peanuts near Manila, Ark.

“We have a lot of potential,” he says. “Our soils are easy to work and conducive to growing many types of crops. And a good water supply is another big advantage for us.”

Proximity to the Mississippi River is another plus, which helps tremendously with basis levels, according to Mississippi State ag economist Josh Maples.

“We can get anything to the Gulf of Mexico very quickly, which creates a very strong basis environment,” he says.

That’s not to say Mid-South farmers are living on easy street, Wildy adds. His own operation has tapped into different ways to turn a profit, including the addition of non-GMO acres to sell to nearby poultry operations.

“If the market will pay for it, we’ll take advantage of it,” he notes.

Another persistent challenge is access to quality labor. Wildy is acutely reminded of this anytime he drives by one of the three local steel mills, which offer competitive pay and health benefits.

But in the end, the Delta’s rich soils will keep agriculture an immovable force in the Delta for many years to come, Maples says.

“You can grow pretty much anything you want, which makes farming operations here flexible year in and year out,” he says.

As it is in the Southeast, poultry production is an underappreciated wildcard across the Mid-South, Maples adds. Even though Mississippi is probably better known for its southern row crop production, poultry was the state’s No. 1 commodity in 2018 – worth a whopping $3 billion – with forestry and soybeans vying for the next two spots on the podium.

Moving beyond the Delta, the state’s Hill Country and coastal region boasts some of the best grassland and livestock production in the nation, with a bevy of specialty crops also in the mix.

“The Delta really is some of the best cropland in the world, but other parts of the state have great opportunities, too,” Maples says. “It makes my job more fun to do because there are so many aspects to agriculture here.”

Attached is a pdf with the complete results.

About the Author(s)

Bryce Knorr

Contributing market analyst, Farm Futures

Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and Commodity Trading Advisor. A journalist with more than 45 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.

Ben Potter

Senior editor, Farm Futures

Senior Editor Ben Potter brings two decades of professional agricultural communications and journalism experience to Farm Futures. He began working in the industry in the highly specific world of southern row crop production. Since that time, he has expanded his knowledge to cover a broad range of topics relevant to agriculture, including agronomy, machinery, technology, business, marketing, politics and weather. He has won several writing awards from the American Agricultural Editors Association, most recently on two features about drones and farmers who operate distilleries as a side business. Ben is a graduate of the University of Missouri School of Journalism.

Mike Wilson

Senior Executive Editor, Farm Progress

Mike Wilson is the senior executive editor for Farm Progress. He grew up on a grain and livestock farm in Ogle County, Ill., and earned a bachelor's degree in agricultural journalism from the University of Illinois. He was twice named Writer of the Year by the American Agricultural Editors’ Association and is a past president of the organization. He is also past president of the International Federation of Agricultural Journalists, a global association of communicators specializing in agriculture. He has covered agriculture in 35 countries.

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