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A graduate of Iowa State University studying Ag business, economics, international Ag, and political science, Dakota went to work for a large diversified farming operation and private equity group in central Iowa. Working in Business Development, Dakota aided in the growth of the farm in additional states through development, acquisition, and management. Today, Dakota works with professional farms in the western Corn Belt helping them reach their potential and meet their growth goals (including Farm Expansion).

Dakota Hoben Photo farm expansion

Dakota Hoben


How do you define farm expansion?
Farm expansion is often defined as “getting bigger,” but the action of expanding is actually far more complex than that. Most farmers today can quickly identify the farms in their area that are growing in acres, people, facilities, or even equipment. But what about their balance sheets? Expansion and growth still refers to visible, physical aspects, but now more than ever farmers also want to grow profits, find new revenue streams, or even build new capabilities.
Farm expansion does not have to mean added complexity— with the right tools and processes in place, farm expansion can be “business as usual” as opposed to increased difficulty and headache. Rest assured a 2,000-acre farm without the right tools and processes can be more of a headache for the CEO than an operation that is 20,000 acres with the right systems and organization.
Why, and how, is farm expansion critical to the long-term success of a farm business?
Let’s be very clear, consolidation in farming is real, and it’s not slowing down. Sadly, right now there are a number of farms going out of business in today’s commodity market. But on the other side of struggle is opportunity. Farms are expanding all over the country, even in economic environments like these.
The key to taking advantage of these growth opportunities is understanding your own financial health, having the right processes and tools in place, and the discipline to take advantage of only the opportunities that fit your vision. It’s not about acres, size of the bin site, or number of people. It is about meeting the long terms strategic goals of your business and strengthening your balance sheet accordingly.
Based on your experience working with farms, what are the 5 best practices that any farmer should keep in mind to make sure they’re tackling farm expansion effectively?

  • Get your house in order. Know your cost of production, your profitable acres, have established streamlined SOP’s (Standard Operating Procedures), and understand your business top to bottom and inside and out. It’s hard to manage 5,000 acres well when you can’t manage your existing 4,000 acres very well. Getting bigger will not make you a better manager.
  • Find better friends. Remember what your mom, dad, or mentor would always say growing up: “You’re the average of those you surround yourself with.” The same goes for your farm and benchmarking it against others. Many land grant universities create extension budgets to help farmers know where they stand, but these tools are not good enough for the best farmers. If you really want to grow your farm, benchmark yourself against the best. The best farms are pushing new boundaries on cost management, marketing discipline, and operational efficiency.
  • Have scalable processes. Look around you, specifically at other non-farm businesses running revenues of a comparable size (or better yet, the size you’re aiming for). Are they tracking their inventories on pieces of paper in cabs of trucks? Are their settlement sheets buried in a pile of magazines from their suppliers? You need tools and processes in place to structure, track, and optimize the everyday workings of your farm. At a humble size some processes may seem excessive and unnecessary, but if 5,000 acres came up for rent right next door, would you be ready? The tools to help with that are available to every professional farm today.
  • Cash flow. Cash flow. Cash flow. One of the most important analyses farms will do when evaluating growth opportunities is a cash flow projection. New opportunities need to cash flow for farms, but how do you project cash flow if you have no idea what your cost of production is, or how your 5-year marketing average compares to the market? Know what’s coming in and out (and when) so you know which kind of opportunities you’re looking for.
  • Evaluate growth opportunities in the context of your goals. If you don’t know where you want your farm to be in 5, 10, or 20 years it is really hard to make the right turns and decisions to get there. Opportunities for growth presented or pursued need to fit your overall long-term strategic vision for your farm. Maybe that includes bringing additional family members back to farm, maybe that includes a cash-out, maybe that includes transitioning into niche markets. Growth needs to fit your strategic vision for the farm; otherwise it just becomes an expensive distraction.

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September 2015 ushered in a curious shift in the way agriculture is characterized these days. In the legislative halls of North Carolina, a proposed change aimed to legally define “sustainable farming” for public policy decisions. In the end, the effort did not succeed, because … how can you legally define what’s effectively become a buzzword that different parties use for different interests?

We don’t need to dismiss the notion of sustainability in agriculture thinking it is a useless buzzword. It’s not. If you hang out with the most successful farmers in the United States, you will see farm management that is, in fact, sustainable.  Sustainable farms capture the essential factor of business efficiency and align it with a long-term outlook.  The scale of operations, the number of workers, the extent of mechanization, and the presence or absence of organic certification do not matter.
Economic achievement and growth are prerequisites for sustainable farming. Farms are businesses first and foremost, and profits are used to grow the business and to provide for employees and family (and can be generated with the additional intent of contributing meaningfully to the social and environmental fabric of the community). What matters to be a sustainable farm businesses is the ability to consistently pay attention to what works and what doesn’t, no matter how large or small. So how can sustainable farming do it?
1. They have defined their mid- to long-term goals. Rather than spending too much attention on what’s happening today or tomorrow, they plan with a generation’s span in mind.  Reaching the vision and goals of a farm takes an effort advanced by small steps.  Some steps might prove risky and require re-routing, but the long term plan remains as a guidepost every day.
2. They use real-time information because data from “now” is essential in sustainable farming. They check in with other team members, they stop by fields, they visit the tractor repair work and walk through barns, taking in all they see, hear, and sense. They blend these personal observations with records provided by their software. With field observations and real-time data, the gut instinct they have honed over the years serves them better than ever.
3. They make a daily practice of recording and analyzing records. They understand that if it is not written down, it’s not going to improve. Crop notes, harvest records, a task journal, input cost information, and income statements form the backbone of good farming and effective decision-making.
4. They build resilience and readiness into the farm by anticipating change and knowing what to do if things change. Practically speaking, they require farm data to be backed-up and easily accessible anywhere.  They protect electronics and make sure everyone has the technology tools to keep in touch and manage a crisis, even when far from the home farm.
Sustainable farming is not “sound science” or “organic” or a term meant to be applied to certain small farms.  It is a set of habits and philosophies that makes sure the farm is strong and successful for family and employee generations to come.

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Granular was featured in a recent Wall Street Journal article about farmers profiting from data generated on their farms. I wanted to expand on the ideas explored in that article and Granular’s perspective on the applications for farm data. Before co-founding Granular, I was an executive at Nielsen, a $6 billion global company that sells data across a wide variety of industries. Nielsen collects and sells information on TV viewership (the famous “Nielsen Ratings”), grocery store purchases, website traffic, radio listenership and many, many other things. In my role at Nielsen, I learned a lot about how data can help certain industries operate more efficiently.

When I look at the opportunity for data in the agriculture industry, I see three main applications:
1. Data For Better Management Decisions
The best use of data from any individual farm is to help that same farm operate more profitably. Our goal at Granular is to make sure every customer measures their business accurately and uses their data to make better decisions, every day and every season. Furthermore, we believe the operational, financial and agronomic data that Granular captures is each farm’s intellectual property (IP), and one of its most valuable assets. The best farms in the business understand this already and are using Granular to share, protect, and enhance their IP.
2. Data to Learn from Peers
Farmers have historically shared experiences and learned from each other. This back-and-forth knowledge sharing has traditionally been done informally and, more recently, through structured farmer peer groups. By bringing together the best (most professional, growth-oriented) farms in North America on a common software platform, Granular is creating a technology-enabled peer group. Through the Granular software platform our customers are able to accurately and anonymously benchmark their performance against peer farms every day. Granular customers don’t have to wait for a winter meeting to learn from peers or travel somewhere else – they can do it every day from their office by comparing anonymized metrics collected in the software (e.g. What is the average number combine days needed to complete harvest?, or What’s the average price paid per bag of DKC43-46 this season?).
3. Data in Supply Chains
Granular is also helping its customers profit from sharing data off the farm and beyond the Granular peer network. Professional farms understand that access to capital and land is critical to their success and are using Granular to share timely, accurate and complete information with lenders and landlords. By providing a professional interface to access their data, Granular customers make their businesses more competitive (e.g. accessing land at the right price, getting better rates on operating lines). Over the longer term, Granular also sees an opportunity to license data to industry suppliers on an aggregated and anonymized basis (e.g. What is the Monsanto vs. Pioneer hybrid market share on 7,000-10,000 acre farms?). Granular is the only company in the industry that has committed to share the profits from this type of data licensing back with its customers.
Ultimately, nobody can fully predict how data and analytical tools will change farming in the future. However, it is important that farms choose technology partners that they trust to help them navigate this new landscape. Many ag technology companies are giving away their products for free (or at a very low price) today in the hope of discovering a viable business model in the future. This puts them at high risk of needing to do something bold with your data or sell their companies to input suppliers in order to survive. From day 1, it’s been my priority at Granular to make sure we have a business model that works – we build great farm management software and sell it to hundreds of leading farms at a fair and consistent price. We are excited about the future of farm data, but we will pursue those opportunities in very close coordination with our customers because ultimately it’s their data, and they are the foundation of our business.

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Last week, Adam (our Business Development lead) and I attended the Forbes Agtech Summit in Salinas, CA. In a beautiful outdoor downtown setting, a collection of entrepreneurs, investors, media and farmers discussed their industry views and the role they want to play in advancing the future of agriculture. An industry event sponsored and organized by a mainstream business publication indicates that agriculture is finally receiving the mainstream attention it deserves. That’s a nice reassurance for me and for others who work in the industry. But beyond that, it was encouraging to see that agriculture was being discussed as the center of big business challenges and opportunities, not as a separate, slow and removed industry like it was perceived to be just a couple of years ago.

At Granular, in fact, we strongly believe that successful farmers need to supplement their deep agronomic knowledge and passion for the land with managerial strategies and behaviors that are more characteristic of corporate CEO’s. We believe that they need to think and act as such because they deal with the same challenges: increased volatility, proliferation of technology, more competition, etc. Yes, they are dedicated farmers first and foremost, but they are also leaders of complex entities with a broad network of stakeholders they are accountable to.
So what are the observable characteristics of a Farmer CEO, the kind of farmer who we believe will lead agriculture into a new age? We look at our customers, and this is what we see:
1. They have a plan. Farmer CEO’s think of their farm as a business that needs to grow, and there is a plan in place that outlines where that growth is going to come from. Having short- and long-term goals, both agronomic (yields) and financial (margins), is what differentiates a farming enterprise from a farming lifestyle.
2. They know their numbers. Farmer CEO’s sweat the small stuff – and they invest in the tools and spend the time required to know what drives profit at a field and enterprise level. They think of both crop yield and dollar yield. They know their data well enough to apply Danny Klinefelter’s five percent rule to their farm.
3. They cultivate and grow their network. They build relationships with all the members of their operation, with their peers, and with business partners. It’s no surprise that most of our customers are active in peer group organizations, participate in conferences and attend industry events. They are perceived as leaders in their community, but this leadership is a result of not only commercial success, but of a lot of time spent both learning and teaching.
4. They are proactive. They don’t wait for innovation to come to them, they seek it out. They study, compare, and research to understand what will work for their particular operation and why. They chose Granular because it addressed a challenge that they had already identified. They have strong beliefs about what it will take for them to reach their goals (see #1) and they prioritize the tools that are aligned with those beliefs.
5. They stay nimble even as they scale. Our Farmer CEO’s have built a foundation of data, processes and tools on their farm that enables them to make unplanned, responsive decisions. From unexpected weather to potential new traceability regulations, they are more ready to respond to new market incentives and meet rising customer expectations.
The Forbes Agtech Summit is only a small recent example of mainstream business and agriculture communities coming together to address issues that affect us all. We meet and work with Farmer CEO’s every day who proudly belong to both, farmers who want their operation to become stronger and more efficient. And everyone benefits from that.

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As a Product Manager, I regularly talk with large conventional row crop operations. But recently I had the opportunity to directly address a large group of organic bean growers in Michigan. Many more growers in the process of transitioning into organics were also in the audience – farmers are increasingly considering adopting organic farming practices as a way to protect margins in the face of low commodity crop prices and growing public demand for organics.

There is an obvious divide between organic and conventional farming, but the reality is that both groups face similar challenges in scaling their operations while meeting market and regulatory demands:
Operational complexity as a barrier to growth – Yes, organic farmers are likely to spend more time scouting each of their fields and managing weeds and pests than their conventional counterparts, but both groups need to consider the same operational challenges when considering the possibility of expanding: Should I plant more or fewer crops to be more profitable? Should I buy or lease land? How do I effectively manage a larger teams? Do we need more machinery, or can we do with the equipment we have?
Scaling professionally – Conventional or organic, all farmers face the challenge of having to productively and efficiently manage more acres if they want to grow profitably. Managing increasingly larger operations requires professional tools to remotely monitor field health, to communicate with larger and more distributed team, and to make smarter operational and agronomic decisions for each newly planted field.
Access to real-time information as a competitive advantage – All farmers are facing increasing tracking requirements. Complying with stricter environmental regulations or meeting end-users’ demands to know where their food comes from means farmers need to track and report activities down to the field level – and do so in real-time to avoid long hours of manual data input. Clear and easily shareable records can also have an impact in negotiations with third parties such as landowners, crop insurance agents, and certification agencies (critical for organic farms) that in the longer term will translate into sustainable advantages.
Today we signed our first 100% organic operation. We are excited to work with both organic and conventional growers to help them realize operational efficiencies and to scale their businesses to meet today’s, and tomorrow’s, market demands.

Latest

How a Potato Grower Found 11% More Profit Using Granular

Learn how Granular helped a real farm discover that their variety choice was costing them $800 per acre

Karl Wozniak, Role
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September 11, 2017

Company News

Our Continued Committment to Independence and Data Privacy

Karl Wozniak, Role
  |  
September 11, 2017

Our Continued Committment to Independence and Data Privacy

Karl Wozniak, Role
  |  
September 11, 2017

Our Continued Committment to Independence and Data Privacy

Karl Wozniak, Role
  |  
September 11, 2017

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Three Ways to Run a Successful Harvest

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