Agriculture

Booming Business

By Kathy Chambers
From the October 2013 issue of Columbus CEO
  • Photos by Ryan M.L. Young

As Ohio works to rebound from years of economic struggle, one industry that continues to make its way through the toughest of times is agriculture. It’s Ohio’s No. 1 industry, bringing in about $93.8 billion a year to the state, according to the U.S. Department of Agriculture. The industry keeps an estimated one in seven Ohioans working. But the farmers and producers aren’t the only ones behind those numbers.

“When you talk about the people that supply those farmers or buy product from those farmers or [are] involved in manufacturing foods or transporting, the banking industry—the agriculture footprint in Ohio is huge. … A lot of people are going to do well when the farmers do well,” says Joe Cornely, spokesman for the Ohio Farm Bureau.

The past few years have been good to Ohio farmers. Crops and commodity prices have been steady, and despite challenging weather, farmers have been able to make it through the seasons. This fall, if the weather holds, Central Ohio farmers could see one of the most successful harvests yet. “This year, things have been about as perfect as you can get. We have one of the best crops in the field growing today than we’ve had in my history of farming. … We’re going to have a very good corn and soybean crop this fall,” says Fred Yoder, a Plain City farmer.

Yoder’s neighbor, Brent Hostetler, is seeing the same. “I was out doing yield estimates on corn and hit some pretty big numbers,” says Hostetler.

Grain farmers are not the only ones bringing money to the state. Livestock producers are an important industry as well, but have struggled in recent years. “Livestock farmers have been up and down in terms of how the economy has treated them. Right now, cattlemen are making a whole lot of money selling their steers, but that’s because they didn’t make any money before and they reduced the herds,” says Cornely.

Even though cattle producers have had a rough go of it lately, they remain an important part of Ohio’s overall economy. “There is a large commercial livestock sector in this state. … Ohio is one of the leaders in breeding pigs, cows and other animals for 4-H shows and fairs,” says Carl Zulauf, an agricultural economist and professor in the Department of Agricultural, Environmental and Development Economics at Ohio State University.

Ohio pork producers are learning new ways to successfully market their products. In return, they are seeing an increase in business both in-state and abroad. “The pork producers in Ohio have done very well because exports of pork have grown. … Right now in 2012, in the United States and also in Ohio, 27 percent of all the pork raised was exported to other countries,” says Dick Isler, executive vice president of the Ohio Pork Producers Council. Isler adds that as the livestock business grows along with grain farmers’ success, it puts money right back into the state—especially into other businesses.

Zulauf agrees. “Like any business, if you’re making money you’re going to spend it on inputs and particularly going to spend it on inputs to improve productivity because that’s your livelihood. … So that money will cycle back into the local economy,” he says.

Interdependence

A variety of agricultural-related businesses in Central Ohio rely on farmers and producers to stay afloat. If the farmer doesn’t come out ahead, neither do they.

Gary Hamilton, owner and president of Hamilton Agri Sales and Service Inc., knows that firsthand. Hamilton started his Johnstown business 27 years ago. It specializes in grain systems for farmers. To be successful, Hamilton needs good crop prices and for local farmers to have strong crops and sales. Over the past year, all those things have fallen into place. “This year compared to last year, we’re up maybe $1 million. … We’re probably going to top out at $5 million this year,” Hamilton says.

Hamilton says it’s not just his business that is seeing the effects of a positive agricultural economy, but all things ag-related. “There hasn’t been really a bright spot in the Ohio economy the last three or four years other than agriculture. It’s the best it’s been, and you can see it in 4-H sales at county fairs, you can see it at your local truck dealer, you can see it in local businesses and in local agribusinesses. It’s a trickle-down effect,” he says.

In the village of Amanda, Ruff’s Seed Farms is doing well this year. General Manager Allan Reid says it’s all about maintaining current customers and taking care of them first. That motto has been good for business. “We anticipate having a good year. Our income is not only based on seed, we also farm 1,800 acres and that looks good, so consequently I think we’re going to have a good year,” says Reid.

Reid is quick to add that weather will play a huge role in overall sales. “We have excellent-looking crops, but they’re not in the bin. They’re still in the field. We could get storms, hail … there is all kinds of stuff that could happen that could change that 180 degrees.”

Even with the unpredictability of weather and the rise and fall of crop prices, Reid says agriculture helps not only Ohioans, but also the United States. “It’s the backbone of our industry. It’s about the only thing that we trade with foreign countries where we don’t have to borrow money to do it. In doing that, it helps pay off the national debt,” he says.

In Delaware, family-owned fertilizer business OHIGRO Inc. has ridden the industry’s ups and downs since the company began in 1965. Manager Jim Gray says the company bases its success on the amount of fertilizer sold. Each year, the goal is to increase the tonnage by 10 percent.

OHIGRO had a rough patch from 2010 to 2011. Fertilizer prices increased, and farmers were buying less. As a result, the company’s tonnage decreased by 12 percent. However, Gray says things have since turned around. In 2012, tonnage went up 15 percent, surpassing the goal; this year, the business is seeing an 8 percent increase. “We’ve done real well, sales have been good,” says Gray, adding that it has helped to have a good working relationship with farmers. “The better the farmer does, the better our business is, and the more fertilizer they’ll buy.”

Equipment is one of the most important parts of any agricultural-based operation. It’s also one of the most expensive investments a farmer makes. Doug Loudenslager, manager of Evolution Ag in Delaware, says it’s not unusual for a farmer to have $2 million worth of equipment in his operation, especially given rising equipment prices. “Farmers are good stewards. Unfortunately, good stewardship comes at a price. Reducing emissions to meet higher EPA standards have caused higher purchase and operational costs of most equipment being produced today,” says Loudenslager.

He says farmers want to protect the environment and are willing to pay the price, but they have to make money to spend money. In the past few years, a lot of Central Ohio farmers have done so, which in turn has helped his business. “It’s a direct impact. As the financial success of farms goes up and down, it directly impacts machinery purchases,” says Loudenslager.

Loudenslager adds that Ohio has been fortunate in the recent past and has yielded relatively good crops and prices. In return, that has kept sales where they should be. “I would say we’re steady, consistent at this point in the year—where we were last year. There has always been uncertainty in agriculture bred by weather, crop and livestock prices and government policies,” he says.

Ups and Downs

There are many reasons agriculture has maintained a bright spot in Ohio’s economy. Like most businesses, it’s important that the industry continues to evolve. Over the years, agriculture has been able to do that. Farmers have taken a stronger business approach to their operations and have become better stewards of their crops and livestock. Equipment continues to improve, and farmers have embraced newer technologies, allowing them to become more efficient and cut down on labor costs. All of those things feed right back into Central Ohio’s economy.

One of the biggest improvements that has helped Ohio farmers is stronger seed varieties—ones that are more drought-, pest- and disease-resistant. However, even with the best equipment, technology and products there are still factors that could turn business upside down. In the agricultural world, weather is one of the biggest culprits.

Every year, Ohio farmers gamble with Mother Nature. She’s one of the biggest deciding factors on whether they’re going to have a successful year. The outcome affects the bottom line not only of farmers, but also of local businesses.

Those who work in the industry say weather has been relatively cooperative the past year. “A lot of agricultural equipment is purchased in the last part of the year after the harvest,” says Loudenslager. “The crop was better than expected last fall, and it translated into strong purchasing in the last quarter.”

As a result, Evolution Ag and other local ag-dependent businesses may have another profitable year—if the weather holds out. “We’ve had a few iffy periods so far when it was a little bit wetter than we needed. But for the most part, farmers got the crops planted early and then got sufficient amounts of rain, and when you put good planting weather and good growing weather together … crops are going to look real good and farmers are going to be really happy,” says Cornely.

Farm Bill Impact

Even with the good weather this year, there are other factors that could potentially stand in the way of farmers and related local businesses being profitable: market prices and the farm bill.

Corn, one of Ohio’s top crops, is projected to be set at a much lower price this year because yields are expected to be higher. The expected boost from 719 million bushels to 1,837 million bushels produced could drop prices from $6.75 to $7.15 a bushel to between $4.40 and $5.20, according to the USDA. That’s bad news for farmers who incurred higher costs to grow the corn.

“All of a sudden, we’re going to be receiving a price for our corn that’s less than the cost of production in soybeans. That’s going to be very tough to survive out here, especially when we don’t have the assurances of a farm bill,” Yoder says. “People don’t understand how important the farm bill is: It’s a safety net that we can make sure we have a place where we can smooth out the edges when we have a short crop or low prices.”

Farmers and livestock producers rely on the farm bill to help them out if bad weather hits or market prices plummet. As of early September, Congress had yet to agree on a final farm bill. It has until Sept. 30 to do so. The U.S. House of Representatives passed a five-year farm bill in July, but did not attach federal food-assistance programs.

House Republicans want $40 billion in cuts to the Supplemental Nutrition Assistance Program, commonly known as the food stamp program, over the next 10 years. Senate Democrats and President Obama are pushing for $4 billion in cuts. The program is used by one in seven Americans who rely on food stamps to feed their families.

The stalemate has frustrated many local farmers. “There is a whole lot of great potential in agriculture today, but there is a whole lot of risks and uncertainty because of the lack of willingness in Congress to get something done,” says Yoder. He adds that the whole process has made farmers hesitant to make bigger purchases, or plan for their future.

Local businesses say they are not seeing farmers pull back on big investments just yet, but some contend that with the amount of money farmers invest into Ohio’s economy and their own operations, they need a safety net. “Farming requires a tremendous investment. … A 1,500-acre farm will require well over $1 million in investments per year. That’s one of the reasons those in the agricultural industry feel it’s important to have a strong farm bill that provides farmers with confidence and the tools to be able to go out and make that investment year after year,” says Loudenslager.

Hamilton agrees and adds that these days, crop insurance is a must-buy on every farmer’s list. Crop insurance, sold by the USDA’s Risk Management Agency, protects farmers from severe financial losses stemming from weather, insects, disease and even price fluctuation. Policy costs vary based on type and size of crops, coverage chosen and other factors. “There is so much risk in farming today. It’s such a high-dollar game. Crop insurance didn’t used to be talked about 20 years ago, but now it’s a given that you have to have crop insurance … and the farm bill is behind [it] all,” Hamilton says.

Even with the farm bill tied up in Congress, business owners and farmers alike believe the future of agriculture in Ohio is a positive one. “I think the agricultural community will continue to be profitable,” says Gray. Farmers, including Hostetler, are already seeing positive changes going forward. “My friends say they have been able to take a lot of their sons or daughters back on the farm,” he says. “Agriculture is a bright spot in our economy and it always has been, and anytime we can do that, that’s a good thing.”

Kathy Chambers is a morning producer at WBNS-10TV.