Lean year forces agriculture to look at options

Direct marketing, value-added ideas are catching hold

When Allan Foutz talks about the agribusiness economy on Colorado’s Northeast Plains he speaks slowly, choosing his words carefully and trying to wax optimistic.

“Agriculture works in cycles,´ said the Washington County farmer who is also vice president of the Colorado Farm Bureau. “We’ve been in a bad cycle, but we’re going to come out. The last year has been particularly bad, but we’ll come out. We always do.”

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This year has been one of the toughest that many farmers in the state’s most northeast counties can remember. It was a year in which the agribusiness environment was matched only by nature in its austere climate. Drought hardened the soil and dried up crop yields for many of the region’s potentially profitable crops while farmers piled the wheat and corn that did grow into brimful grain elevators, adding to a growing national surplus. As this year’s harvest comes to a close, the Colorado Department of Agriculture predicts Northeast Plains farmers will receive 50 percent of their revenues from government aid programs.

Yet, despite the dour outlook for crops and sagging slaughter prices, Foutz may have a few good reasons for his positive attitude. A small number of Plains farmers did turn a profit out of the dusty soil, providing hope that farming can still pay the bills for the region, which remains firmly agriculture-dependent. But while agriculture is not dead, some traditional farming methods as well as mainstay slaughter- and harvest-time marketing techniques may be archaic, Foutz said.

“The people who are faring well are the people who are trying new things,” he said. “I think what we are going to have to see is a shift in how we market our products and how we view ourselves in the marketplace.”

Following in the speedy footsteps of the high-tech sprinters on the Front Range, some savvy Northeast Plains farmers are using the high-tech example to promote their own economic upswing by streamlining their business and turning to innovative marketing strategies to stay afloat.

“I don’t think there is any crop that we can grow in the fashion we’ve been doing and still realize a profit,´ said Logan County agronomist Randy Buhler. “Efficiency is the only place where (farmers) are gaining this year.”

In a year characterized by rock-bottom margins of return and increasing production costs, many Plains farmers moved to more efficient land-use practices including crop rotation, no-till techniques on dry land and sprinkler irrigation on irrigated plots. Some farmers who failed to adjust forfeited their land, Buhler said, adding to the steady consolidation of Plains agriculture.

While that decline means fewer farmers, it may also mean increased efficiency and extended prosperity, said Jim Miller, policy director for the Colorado Department of Agriculture.

“Clearly the trend in Northeast ag production is toward consolidation,” he said. “It is simply economics; there is a need to squeeze the last penny out of the land to try to make the scales work for you.”

Efficiency, while it may tame unwieldy input costs, will not remedy the Northeast counties’ economic woes, Miller said. So, while efficiency has become the key word for survival on the prairie this year, “marketing” and “value added” are taking hold as the catch phrases for future prosperity.

Marketing to Asia’s robust grain market may bode well for Plains farmers who already export more than 33 percent of their crops to the region, Foutz said. But low overhead and cheap labor in other parts of the world are still restraining Plains farmers from realizing the market’s full potential. To compete, Foutz said, farmers must turn to niche-marketed crops.

Case in point: Farmers who managed to grow millet in the drought were rewarded with record-high margins of return this year, garnering a deluge of unanticipated profits.

“Many of these specialized markets have been around and are consistently showing profits,´ said Perry Buck, the northeast business representative for the Governors Office of Economic Development.

“There are opportunities to really expand on assets,” she said. “We need to be working to find new markets.”

The sunflower is one of the most promising niche crops, Buck said. With Plains farmers already supplying more than 33 percent of China’s unquenched sunflower demand, facilities can’t produce seeds fast enough. But even that market isn’t showing profitability this year because both the oil and confection markets are providing returns lower than production costs.

To realize the full potential of the foreign markets, Foutz said, farmers are beginning to look beyond the crops they grow or the livestock they keep, watching futures closely and exploring direct marketing.

“I think the potential is there for a huge foreign market,” he said. “But that market doesn’t mean much to us if we continue to market our crops like we did in the past. We have to market more directly than we do now.”

Following in the lines of Foutz’s claims, many Plains farmers are forging links with distributors and manufacturers in an attempt to climb to a perch closer to the consumer. It’s a burgeoning trend that local experts call value added. And it may be Northeast Colorado’s best shot at agricultural success – while agronomy continued to slump in 2000, manufacturers like Morgan County-based Excel Beef penned multimillion-dollar expansion plans.

“Value added allows the county to build on the agricultural base it already has by teaming up farmers with successful manufacturers or by doing different things on the farm,´ said Lisa Nobel, director of the Morgan County Economic Development Corp.

Some farmers have taken big steps: Earlier this month the Rocky Mountain Sugar Growers Cooperative announced its intentions to buy Western Sugar. Most farmers, however, are taking more conservative strides, generally marketing directly to the manufacturers to develop contracts for the provision of feed or raw materials.

The hog industry, which took an upturn in 2000 despite slaughter returns that remain relatively poor, is starting to speed up the agricultural engine in many Plains communities by establishing feed contracts with local growers, Miller said.

“Feed lots have an incredible demand on local farmers,” he said. “Contracting with those operations can reduce volatility and risk factors for local farms.”

Value-added ventures in the dairy industry are also beginning to pour revenues into the Northeast Plains economy. Seeking refuge from encroaching Front Range development, many dairy farmers have found a comfortable home on the Eastern Plains, capitalizing on the close proximity to Morgan County-based Leprino Foods, one of the nation’s leading suppliers of pizza cheese.

“Leprino gives local dairies a much bigger market,´ said Marlin Eisenach, Morgan County’s Colorado State University livestock agent. “Local dairies are milking three times a day now. Value added is a big help; freight is cheaper and the dairies have a consistent market.”

For now, the future viability of agriculture on the Northeast Plains remains in question despite value-added revenues and innovative marketing potential. Still, for the cluster of counties in Colorado’s northeast corner, agriculture remains the lifeblood, providing the lion’s share – between 19 and 49 percent – of each county’s annual income.

“Agriculture will not disappear in Eastern Colorado,” Miller said. “But there are a number of communities that are engaged in a fight for their lives right now.”