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Four tips for farm diversification

With lower prices and high disease pressure, farmers looking for new crops to fill in gaps in rotations or increase profits can use these tips to evaluate new opportunities

If you’re like most Canadian farmers 2014 was hard. Low commodity prices depressed incomes across all operations. For many younger farmers this will be their first experience of hardship. The last few years, when many began farming for the first time, have seen high prices and many may had planned growth and expansion for the next year. Many of those plans will have to be put on hold.

Though the year was hard that doesn’t mean this year needs to be. With some careful planning and hard work you can start to protect your farm to ride out this time of lower demand. One way to do so is to diversify your operation. This doesn’t just mean growing multiple crops — it can mean diversifying into livestock and producing food products right on your farm. With the aid of some free, simple decision making tools you’ll be able to find areas on your farm where you can change up your operation and bring in multiple streams of income. The tips on this list focus on choosing a new crop to diversify your farm.

1. Consider your options

There is a huge array of potential crops you can grow. The issue is picking the one that will produce the highest yields, at the best price, with the lowest inputs, and that takes best advantage of the qualities of your land. It’s no good to pick soybeans based just on high prices from last year, or the attractive futures contracts being offered this year.

The high price doesn’t mean anything if you need to acquire a lot of new equipment, herbicides, and pesticides that can eat up all your profits, or if your land isn’t suited for growing the crop.

2. Do your research

Try the interest for economic data about different crops and their performance. Provincial government agricultural ministries often provide a lot of information, and, no matter which crop you are considering, there is usually some information available. Look for information about what historically has grown best in what regions of the province.

Narrow your research by focusing on the crops that are producing the best return on investment, but don’t limit yourself too much — you may discover that your land is perfect for growing a less common grain, pulse, or herb which has strongly growing demand and is unrepresented in your region.

One excellent source for Alberta farmers is the AgriProfit$ program. This free service provides business management information for farm operators, including a detailed financial analysis of their farm, their current enterprises, and benchmark reports comparing them to other farms in their region.

3. Ask an expert

After doing some research and picking your most likely crop be sure to consult with an expert.

Each province maintains a staff of experts on each variety of crop, and know all about the performance of the crop in different regions. They’ll be able to give you advice that isn’t included in the reports on the government website because they’re knowledgeable about the latest research, including which varieties of the crop are most responsive to which inputs.

4. Budget for change

After you’ve made your decision, be sure to draw up a sound business plan and budget. According to Dale Kaliel, senior production economist, Alberta Agriculture and Rural Development, good planning is important to managing your farm operation. Your “plan” will deliver the rationale behind the economic choices you’re making about what will be produced, how it will be produced and why it will be produced.

If you’re growing the same crop you grew last year plus a new one, you’ll have to factor in how much less income you’ll bring in from the old crop (because you’ll be growing less of it) in relation to the projected income for the new one.

Don’t make the mistake of thinking that a budget is just about dollars and cents — your time is part of the budget too, and like money you only have a finite amount of it. Researching a new crop, learning about the inputs and variables that affect its yield, acquiring the materials, and planting the crop all take time. This is especially true if you’re growing multiple crops on your farm. Make sure you take account of how long you’ll need to implement your plan.

About the author

Columnist

Michael Flood is a business writer and columnist. You can reach him at [email protected]

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