Winter Cattle Journal 2019: Creative Ag Entrepreneurs Diversify To Increase Ranch Income
Joe and Stephanie Nussbaum know a thing or two about hard work. The millennial ranchers live near Plevna, Mont. and are determined to make their way in the cattle business.
While diversification has always been a way to have multiple revenue streams in production agriculture, the next generation of producers are going beyond raising multiple species of livestock and a variety of crops. Today’s young producers are entrepreneurs who aren’t afraid to market their skills to bring additional income to the ranch.
The Nussbaums have embraced this idea. By day, the couple work as feed sales and feed managers for the local Beach Co-Op Grain Company. Nights and weekends are spent running the ranch, S Bar 7 Livestock, LLC.
“We get our health insurance through the co-op,” said Stephanie Nussbaum. “On the ranch, we’ve taken in share cattle to run alongside our herd, so we are getting as much out of our acres as possible. It was the best way to quickly get a lot of cow-calf numbers together without going broke or lending further past our ears.”
Nussbaum says the calf check each year goes back into the ranch, and the town jobs pay off student loans and living expenses, with any surplus applied to loan principle and savings.
This young ranching couple isn’t alone in seeking supplemental income off the ranch to cash flow expenditures, pay off debts and take advantage of health insurance coverage offered by employers.
Stephanie Nussbaum graduated with an animal science degree from South Dakota State University (SDSU) in 2012 while Joe studied agricultural business. The two have put their educations to use in countless other ways, all of which have supported their ultimate goal of running cattle in Montana.
“We lease out part of our farm ground for extra income, and we help our folks on their ranch in return for the use of haying and farming equipment to help keep our input costs down,” Stephanie said. “We also are looking at turning part of our herd into recip cows to raise embryo calves for a premium bull producer in our area. And we clip and torch bulls for sales in our area, as well. All of these extra things have allowed us to continue to grow and weather through the recent tough years in agriculture.”
According to journalist Craig Myrhe in a recent article published in the Wall Street Journal, “Most U.S. farm households can’t solely rely on farm income, turning what was once a way of life into a part-time job. On average, 82 percent of U.S. farm household income is expected to come from off-farm work this year, up from 53 percent in 1960, according to the USDA.”
“My husband uses his carpentry skills each day on the ranch, but also on the side flipping houses,” said Justine Kougl, a rancher from Lodge Grass, Mont.
Jarrod Montford, who owns Montford Cattle Service in Bridgeport, Texas, said, “I have used my AI skills, which I learned from my dad, to create a full-time off-farm job, which includes serving as a semen rep for Genex, teaching AI schools and transferring embryos for clients. Now the ranch supplements my reproductive business.”
Boyd Dvorak, owner of Dvorak Herefords in Pickstown, S.D. said, “I started selling cattle handling equipment for Daniels Manufacturing in 1997; at that time, I had graduated with an ag business degree from Mitchell Technical Institute, had 30 cows and needed another source of income to help get through the lean years and make ends meet.”
As the next generation looks into careers in production agriculture, they are also looking for ways to obtain the necessary skills and training needed to be marketable on and off the farm or ranch.
Heather Gessner, SDSU Extension livestock business management field specialist, says there are many ways she’s seen local producers and their spouses cash flow their ranch enterprises in creative ways including custom harvesting, custom feeding, contract heifer development, selling feed or seed, working for the local co-op, putting up a hog finishing unit, starting a daycare, providing in-home health assistance to elderly neighbors, cleaning houses in the community, learning how to AI cattle or set up recip cows, as well as getting training for welding, mechanics, electricians, accounting, photography, marketing, or precision agriculture, just to name a few.
“We are seeing more young people pursue careers in agricultural business,” said Gessner. “This adds value to the ranch because the individual can then do things like handle the bookwork or market grain and livestock more efficiently. This is a good way to add value to the farm without adding more cows or land to grow the business up instead of out.”
Gessner says an entrepreneurial spirit can assist producers in not only bringing in additional income, but lowering input costs, as well.
“We are seeing more partnerships between neighbors to share the costs of equipment and labor,” she said. “Everybody needs decent equipment to cover their ground, but it requires so much capital outlay. The technology is at a point where we can cover a lot of acres, so why not spread the cost out over shared acres with the neighbor to do things right but to share the expense?”
Of course, these creative partnerships needed to be in writing to keep everybody on the same track.
“Whether it’s with family or the neighbors, handshakes are good, but they don’t remember much,” she said. “If you’re going to pursue any types of partnerships, write everything down and make sure everybody is on the same page. Communication is becoming increasingly important, and that applies to talking to Dad or Grandpa about their retirement and transition plans or visiting with the neighbor about potentially working together. These conversations can be tough, but a young person needs to factor out the details before jumping into production agriculture with both feet.”
Earlier this year, SDSU developed a compensation calculator to provide families with a way to value wages, salaries and benefits to employees and family members in the business. Benefits may include health insurance, retirement allocations, monthly value of housing and utilities, transportation, equipment, and boarding or feed of livestock.
Gessner said, “We often think of the obvious things, but what about Mom serving everybody dinner everyday at noon? How about when Dad covers the rent when the kid runs short at college? I had one producer call me upset because his son had presented him with a bill for labor, yet the kid had never paid for any feed for his cattle on the ranch. I advised the dad to put together a feed bill to cover the same period of time, and perhaps that would start a conversation about the perceived and real values of both labor services and ranching expenses.
The calculator allows producers to plug in the obvious, and not so obvious, value-added benefits and expenses to determine the full value of labor not necessarily seen on the paycheck. View the calculator here:
Punching the numbers on a farming enterprise may help the young producer make more concrete plans about whether off-farm income is needed when they come home to the operation.
According to the South Dakota Center for Farm/Ranch Management’s 2017 South Dakota Annual Report, published by Mitchell Technical Institute, the average net farm income for farms in South Dakota was $53,708, with the bottom 20 percent losing $97,455 and the top 20 percent earning $255,010. Meanwhile, the average farm family living expense was $63,161 ($56,718 for the bottom 20 percent and $90,068 for the top 20 percent of farming families).
Gessner says understanding the performance of the ranch business and keeping the family’s standard of living expenses in check are critical, and it all goes back to communicating — with spouses, parents and grandparents.
“I know producers get tired of hearing it, but it really is all about communication,” said Gessner.
For young people to have a shot in production agriculture, she advises seeking a skill set that adds value, creates new revenue streams or improves an area of weakness in the existing business.
“If your dad and siblings all went for agronomy, it might benefit you to look at another field of study,” said Gessner. “There’s a lot more to farming than just driving a tractor, so bring home additional skills that will benefit you and the operation down the road.”
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