Farmers everywhere are adjusting to tighter margins, but the Johnsons of Redkey, Ind., began ramping up efficiencies long before ag’s downcycle began two years ago.
“In agriculture there are highs and lows, which we ride up and down,” says Matt Johnson, the principal manager, along with son Zach and father Tom, who is moving toward retirement. “We have to scrutinize and justify every move we make, emotionally and economically.”
Efficiency starts with production costs, Matt says. “We feel first you must know your production costs, so that you can manage those costs to make cash flow and to be able to work your marketing plan.”
The farm’s strategy today is to produce fewer acres of commodity crops and more items that wind up, basically, in a bag. This diversification includes popcorn, seed soybeans, seed wheat and sweet corn.
Efficiency isn’t about luck. The Johnsons use Quickbooks for bookkeeping and Apex for data. “Data can help you manage almost every area on the farm,” says Matt. “From machinery use and repair to fertilizer and other inputs, we keep track of everything we do and use that data to make decisions on everything we do. Once you get Apex set up, it can track everything and instantly updates profitability for each field.”
This works for the Johnsons — not only because they’re detail-oriented, but also because all those specialty crops demand good recordkeeping. The Johnsons have grown specialty crops for a number of years and review the contracts yearly to determine if the extra management is worth it. Each year the family focuses on three questions:
1. Is this crop making money?
2. What kind of people do we work with and are they supportive?
3. If the family cannot reach a consensus, “we need to decide a different way to go,” says Zach.
Their approach has been to add value instead of work toward low cost. That is, in part, because the farm is “acre-limited” and competition is fierce.
“Over a long period of time, popcorn looked profitable, but we still have to be a low-cost producer, or we will be out of business just like anyone else would be,” says Matt.
Like a good marketing plan, production efficiency is all about doing lots of little things right, and using technology to reduce waste. They intensely soil-test by soil type, since there are so many types on their farm base, and fertilizer prescriptions are generated by outside soil consultants to avoid a conflict of interest. Using those prescription maps, they apply variable-rate lime and fertilizer, and keep machine costs low with no-till. They also use swath control and autosteer on the sprayer to lower hours of service and repair, and avoid overlaps.
The Johnsons apply a fall fertilizer base rate and then apply 28% N as starter during planting. Around mid-June they will sidedress 28% N with another prescription rate based on organic matter and soil maps.
“We’re just trying to be as efficient as possible,” says Zach.
The farm owns its equipment and seldom borrows money for capital purchases. “If there’s technology out there that will pay for itself, then we consider a change,” adds Matt.
They use crop insurance to manage risk, but popcorn has few options. “Since we don’t borrow, we need to use crop insurance as a floor, like buying a put,” says Tom.
Most management decisions are also discussed with Matt’s mother and wife.
“We all have input, even if one of us does not have a stake in what may be looked at. We still work together as a team. One may not always see things the same, but that is what has worked best for us. I do all the data work and number-crunching; then we talk and decide where to go from there,” says Tom.
In the end, boosting efficiency is all about keeping the business profitable and building for the future, concludes Zach. “My goal is to keep this business growing and leave a legacy as great as my grandpa did.”
Adds Matt: “Right now we’re just living a dream.”