Higher Management Skill Leads To Higher Profits

Farming is often a balancing act between environmental sustainability and financial viability. On one side, you are out to make money and on the other, you are protecting your most valuable economic resource.

The Minnesota Water Quality Certification program was begun in 2015 to help incentivize farmers to protect one of their valuable resources: water. Almost 1,200 farms have been certified, covering nearly a million acres of Minnesota farmland. Certification also deems an operation in compliance with any new water quality legislation for a decade. The regulatory certainty has become an attraction for beginning the Water Certification program.

Brad Redlin is the Water Quality Certification Program Manager for the Minnesota Department of Agriculture

Brad Jordahl Redlin: Folks in Minnesota decided that they would like to try a certification program to really assess farms, help them and provide the service of getting them opportunity, finances, technical assistance for improving water quality.

Brad Jordahl Redlin: What we have is that regulatory certainty component which says that if you get water quality certified for a ten year period, no matter what new laws come along or regulations of whatever form, you're going to be deemed in compliance. 

That's really an insurance policy for those ten years to know they're either going to be in compliant with it after those ten years or they have ten years to make any tweaks that they might have to meet some new law.

The  WQC program reviews every part of a farming operation that might affect the water leaving a farm, from tillage practices to manure management. The surprise finding is that farms that fulfill the parameters required by the Water Quality Certification are consistently more profitable.

Brad Jordahl Redlin: I mean, I know the answer is that when you do site specific risk assessment, response analysis, you're maximizing your performance on the farm. We have these licensed accredited agronomists, conservation planners that go out and work with the farmer throughout the entire operation every step of the way, maximize their performance.

It's going to be more profitable. It's no different than any other industry or any other application of management to a production challenge. If you maximize that performance property or the profits are going to be there. And that's what's been shown to happen.

The study’s authors emphasize that being certified is not the key to improved profitability, but rather managing a farming operation at a level that would qualify a farm for certification is an indicator of other work being done.

Keith Olander is Executive Director of AgCentric, a  State of Minnesota program that bridges the gap between agriculture and education.

Keith Olander: I think that as we look at that become to become water quality certified, you have to step through the process, which means that I am watching all of the practices on my fields and within my livestock. You know, is it as it comes to what are my tillage practices, what are my chemical practices, what are my cover practices on that soil in a more year round basis?

Keith Olander: How am I managing residue? Those are things that maybe we take for granted in some of the farming operations, but it isn't maybe uniform in practice, but it tends to bring those out to say that helps us become more profitable. So, yes, I'm a little leery to just say your water quality is certified now and you're going to be more profitable.

Keith Olander: But undoubtedly that cohort effort over four years and starting to get over 100 farms, it's really hard to argue that. 

Brad Jordahl Redlin: And so the fact that certified managers are still showing to be more profitable than even their cohorts within this financial service provision process that the Farmers Manager program provides, that it just more clearly, you know, just really delineates the fact that what certification values is what's profitable.

Producers who market directly to consumers use their water quality certification to differentiate themselves for others in the market.

Keith Olander: That's possible. But over the long haul, absolutely not. Water quality certification is an enhancement to your farm over the long term. I think that's it's a bold statement, but it's a fair statement that we can make.

Keith Olander: At the same time so the consumer can draw back a little confidence to say we're doing both of those in a fair way, that we're supporting farmers to be viable economically and environmentally sustainable.

For Todd Stencel, a Mankato, Minnesota-area farmer, reducing tillage passes, one of the requirements to get certified, lowers input costs and creates a higher performing soil.

Todd Stencel: Why I do. I guess bottom line, the number one would be time savings. So if Dad started it. I'm familiar with it. I grew up that way doing this practice of ridge till slash strip till the amount of labor savings and fuel savings is significant. I can get by with one hired man in the fall.

Todd Stencel: Okay. So I, one of the things that will work really well for corn production if we start there, is banding the fertilizer. So I try to get the fertilizer placed right directly below where I want to plant that seed. And with that fertilizer there, it's readily available and directly close to that seed with the root structure right on it.

Todd Stencel: And it just seems the corn responds very favorably.

To achieve certification, Stencel made adjustments to the tiles on the edges of his fields. He installed low velocity water quality inlets that slow the access to the tile once ponding occurs, reducing the amount of soil that is washed down the tile, and he keeps the trash from harvest on the field. 

Todd Stencel: It was a fairly simple process. I inquired about it. I don't remember what year I'm in the year before I inquired about it through the NRC, US and our local soil and water got the paperwork, kind of contemplated it, and then with with the help of the NRC, us was encouraged to apply for it and the local soil and water.

Todd Stencel: And on my particular farm, because of that ridge till and strip till I was already using, it was actually very simple to implement the different things they recommended for like the, the, the tile intakes. All I had to do is change a few of those, prove the paperwork on my current practices. And I was in.

Stencel also teaches farm business management at South Central College in nearby Mankato. Examining the financials of working farms confirms that small tweaks to farm practices can increase profitability. 

Todd Stencel: So that means a full year production cycle. We need to see what that schedule F is, what it's going to look like we'll project. And the strength of the program is after we find their data, we can put it into a software called RankEm that's available through the University of Minnesota. That RankEm software then gives them a comparison benchmark against other farmers and we can see different metrics of their their management level to see, for example, is our cost production high low, you know, where are the things, the little things that we can change on their farm to improve it?

Todd Stencel: And then we do that over and over again to try to refine, to say, for example, if fertility is an issue, how much as far as dollars per acre should we spend and what type of return should we expect from that investment.

Water Quality Certified farms tend to have more livestock than the average farm in Minnesota, which may require a higher level of management. Access to manure reduces input costs while also improving soil chemistry. 

That practice of examining every dollar earned and spent on the farm and determining the unique best practices for each producer often improves the profitability compared to neighboring farms.

Keith Olander: I don't want anybody to say if I go get water quality certified, I'm going to make more money. I don't think that that's the case. I think it's always the idea that if I'm going to be a successful business, I got to think like a successful business.

Keith Olander: And certainly with water quality, as pointed out, as that, those people that are certified think like successful business owners, but that just comes back to this management of soils, the environment, and that falls back into my economics.

For Market to Market, I’m Peter Tubbs