Extension specialist urges producers to run analyses in considering alternative crops
Worland – With a variety of options for diversifying farms and ranches in Wyoming to add income potential, John Hewlett of University of Wyoming (UW) Extension encourages producers to ask whether the option might work financially.
“If we find an option for diversification we think is good, the next question to ask is if it might work financially,” Hewlett said. “There are a series of tools that can help us walk through to determine if a different crop or enterprise might help our operation.”
Hewlett cited RightRisk.org as a website with a series of tools that provide decision-making frameworks to explore the profitability of enterprise alternatives.
Hewlett continued, “We need to think about what we are trying to accomplish. Some people cite the idea that they want to increase profitability, but we need to make sure it can work first.”
The first step in determining whether an alternative crop is an option for the operation is feasible, Hewlett said.
“We need to look at if something would actually work,” he said.
In general, an enterprise is an activity one engages in to generate one or more products for sale. An enterprise could be corn or sugarbeet production or sheep production.
“One way to diversify is to think about what we can be doing that has more than one output to sell,” Hewlett explained. “Those products should be considered economically as they stand on their own.”
Within the operation
While new enterprises need to be analyzed separately from what is currently occurring on a farm or ranch operation, Hewlett encouraged producers to be cognizant of how the enterprise would fit in with current business activities.
“When we start something new, it might have implications on what we already do,” he said. “It’s good to ask if it would fit, not only financially but also in terms of labor and risk.”
For example, introducing a spring lambing enterprise to a spring calving operation may spread already limited resources even thinner, which would be detrimental overall.
“I challenge producers to also think about if it is a competitive enterprise,” he said. “Cow/calf and sheep enterprises can be competitive in terms of labor resources. We can only introduce so much competition before our production suffers.”
However, the same enterprises may be complementary in the right situation.
“A traditional crop grower might have a little free time in the spring, so adding sheep or cow/calf pairs might help them to engage in a new activity with available time,” he said.
Another factor for producers to consider, particularly if they work with a banker or lender, is whether or not they can obtain financing for alternative enterprises.
“We need to make sure our lender is willing to walk down this path with us,” Hewlett said. “We might be looking for more resources, and if we want to add a dimension to the operation, we need to generate dollars of return.”
“We can’t do this without our lender on board,” he said.
Hewlett also noted underutilized full-time employees or resources or land that may be suited for another use outside of its current use may provide opportunities.
“We have to think about what we want to get involved in because success depends on our objectives,” he said. “There are a lot of details, and we have to think about them all.”
“There are a lot of details to consider that go beyond ‘can we grow it?’” Hewlett said.
For example, marketing must be considered before embarking on alternative enterprises. If no buyers or markets are available for a particular product, the enterprise will be much more difficult.
“Another component we have to think about is our personality traits,” he explained. “A lot of us are involved in ag because we don’t necessarily like to deal with people, but if part of a new enterprise involves standing at the farmers’ market and selling our product, that might not work out like we hope it will.”
Hewlett challenged producers to seriously consider their level of commitment, their background and their interests.
“We also have to think about the attributes of the product,” Hewlett said, explaining that some products, such as quinoa, can be grown conventionally, but there is no market for convention quinoa. “We have to think about whether organic or some kind of other attribute is preferred in the product we choose.”
In terms of business planning, Hewlett told producers to conduct a SWOT analysis to identify strengths, weaknesses, opportunities and threats (SWOT).
“Our analysis should include internal factors, as well as external factors, to look at how well the idea stands up compared to other activities,” he said. “We also have to think about the risk we are taking and how we can spread out that risk.”
Hewlett continued, “In some cases, adding diversification might enhance our risk portfolio, so we have to carefully and deliberately consider alternative enterprises.”
Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at email@example.com.