Ohio Ag Net | Ohio's Country Journal Ohio Ag Net | Ohio's Country Journal 
By Ty Higgins, Ohio Ag Net
Diversification has long been part of agriculture, with farmers expanding acreage, adding crops or introducing different types of livestock. But the conversation is increasingly shifting from whether farmers should diversify to how they can do it successfully.
“We’ve always seen some level of diversification,” said Rudy Pitzer Perry, regional vice president of ag lending for Farm Credit Mid-America. “A farmer I recently visited calls it his “side hustle,” and he told me how important it was to help keep his entire operation strong financially during down times like this. More and more producers are thinking that way.”
The decision to diversify, however, requires an honest evaluation of the farm’s financial position and available resources.
“Anytime you go into a new venture, it can be a little risky, so operations need to have the financial strength to bear that risk, ” Pitzer Perry said. “That may look like working capital or underutilized or underleveraged assets. ”
Identifying a market opportunity is also important. Farmers may have equipment, labor, and existing skills that can be used to meet demand for ag-related products or services in the local marketplace.
Before moving forward, farmers need to carefully evaluate whether the new venture can actually generate a profit.
“First, I always encourage producers to make sure they’re evaluating all the startup costs,” Pitzer Perry said. “They need to identify the big-ticket items and dig into the fine details.”
That includes licenses, certifications, insurance, and other expenses, along with the potential for a slow start.
“When farmers look at required expenses and review potential cash flows, they tend to look at the best-case scenario, which is awesome,” she said. “But also, it’s important to think about the worst-case scenario and be prepared.”
Labor and management capacity are additional considerations. A new business venture may require more people or management time than the farm can currently provide.
“Diversification can also provide a pathway for the next generation to return to the farm,” Pitzer Perry said. “Sometimes, you either have to grow the core operation or find another line of business to make that work, but diversification certainly can provide that opportunity.”
For farmers considering a new venture, Pitzer Perry recommends starting a conversation with their local Farm Credit Mid-America financial officer.
“I caution farmers not to pursue an idea simply because it worked for someone else and make sure it really fits their operation and future needs,” she said. “We’ve got a lot of experience helping people through business planning and the general diversification thought process, and we can provide guidance based on situations we’ve experienced with customers in the past.”
