Managing the risks of switching to a new crop

Switching to a new or different crop has its pros and cons. Market prices may be financially lucrative, but you might incur new costs in making a change in what you grow. Don’t take the decision lightly and consider how you manage risk if you’re thinking of making a change.

“I see shifting weather patterns as an opportunity for producers to diversify their cropping plans and rotations, particularly to crops they traditionally have struggled to fit,” according to Nationwide Risk Management Consultant, agronomist and Iowa farmer Derek Hommer. “But there are a lot of questions to answer in finding the right crops from both a risk management and an agronomic standpoint.”

Make sure new crop is right fit

If you have a specific crop in mind, start with the basics. Do you have what’s needed to make a switch work? “Identifying the biggest potential obstacles out of the gate will help you begin to plan for success,” Hommer said.

He recommends answering these other questions to start the process:

• Is there a local market for the new crop?
• Do I have the right acreage, equipment and crop inputs to make the switch?
• Will I generate more revenue with a different crop?
• Do I have the financial capacity to make a switch?
• Will I have adequate labor to raise a different crop?

Consider all the details

Even if you answered “yes” to those initial questions, think more specifically about the details of your own farm. Every farm is different, and every farmer’s management strategy is different. Think about things like the infrastructure, equipment and land needed to support a new crop. Do you have what it takes to be successful?

“Once you have a potential plan for success, start down the path of the logistics, equipment, seed and transportation necessary. Do you understand the risks associated with a crop switch? Do you have the right crop risk management and adequate insurance coverage?” Hommer said. “Think long-term. Will switching my crop rotation change my farm infrastructure needs? Is adapting my current crop storage facility feasible for this new crop?”

Don’t neglect risk management

Depending on your location, general crop mix and the new crop you’re thinking about adding, there are likely additional specific components of risk management to consider. That’s true of both farm-level production variables as well as ones beyond the farm gate, according to Nationwide Farm Produce Director Peter LaMair.

“Make sure you’re familiar with any specialty equipment that a new crop may require. Think beyond your operation and make sure you understand any potential regulations,” LaMair said. “Also think about any contractual liability concerns if you begin growing a crop that requires contract harvesters or haulers.”

If you’re considering a crop switch on your operation, talk to your Nationwide Farm Certified agent today to make sure you’ve got the right risk management plans in place.