How Illinois Farmers Manage Risk

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risk management

The Liefer family grain farm in Randolph County supports the households of Kevin, Kirk, Kristopher, Kent, and their wives and children (a few of them with K names, too).

Two of their households generate some off-farm income, but none with health insurance or retirement benefits. Needless to say, the Liefers keep a keen eye on the farm’s costs and management strategies. They continually look for ways to reduce risks and promote profitability to pay the farm’s bills and fund family living expenses.

“Back 20 years ago when I started farming, you put the crop in, you harvested it and for the most part you made money,” says Kirk Liefer, a fourth-generation farmer who works with his wife, parents, two brothers and their wives on the family farm, CH Farms LLC. (Not considered a corporate farm, many farm families establish an LLC, or limited liability company, to allow for shared ownership, defined management structure and liability limited to the farm’s assets.) “Today, you must do a good job of controlling costs and marketing. Farming isn’t an industry that because you do it you make money.”

The Liefers grow corn, soybeans, wheat and grain sorghum near Red Bud. At times, growing grain seems a gamble with a variety of risks: Too much rain. Not enough rain. Rain at the wrong time. Soybean aphid infestations. Excessive heat during corn pollination. Volatile grain  and oilseed prices. High costs for supplies. Adverse or threatening government policy.

High costs bring high stakes, so many Illinois farmers today tap a variety of tools to manage risk and farming’s variables. Computers in their tractors and apps on their smartphones bring a new level of management unavailable to the previous generation. Farmers today use GPS-guided operations for soil sampling, planting, spraying and harvest to reduce costs and use supplies efficiently. They also buy insurance policies, analyze their costs and rely on generations of experience with Mother Nature.

risk management

The four-household Leifer family grows corn, soybeans, wheat and grain sorghum. Their livelihood depends on many unpredictable factors, including weather and the economy.

How to Handle Mother Nature

Previous generations called summer precipitation the “million dollar rain” when valuable crops received desperately needed moisture to boost production.

“I think that a million dollar rain might have turned into a five million dollar rain now,” says David Gramenz, who grows corn, soybeans and wheat with his dad, uncle and brother in Randolph County.

For Gramenz, adding underground field tile improves drainage on soils that receive too much rain. His farm’s dedication to no-till (the practice of planting directly into the previous year’s crop residue without tilling the soil) helps preserve soil moisture through dry spells. And they try to choose biotech seed varieties with greater heat and drought tolerance and insect resistance.

The Liefer family uses weather monitoring services among its risk management tactics. The web-based service monitors weather along with fertilizer applications, plant dates and other pertinent management data.

“There is nothing we can do about the weather,” Liefer says, “but knowing where we are helps us manage based on what we think yields will be in the fall with those weekly weather reports.”

risk management

Input Management

The University of Illinois estimates central Illinois farms spent around $770 per acre to grow corn this year. Economists predict a wide variance of revenue estimates from the mid-$600 range to $900 per acre, which calculates from a nice profit to a significant loss per acre dependent on crop value and production.

“We try to manage our inputs the best that we can to keep our costs down,” Gramenz says. “A lot of that is through technology. We try to use new technology to cut down on chemical, seed and fertilizer costs. Variable rate applications help us put them where they do the most good and give us the most bang for our buck.”

Cost analysis proves important, too. Liefer says that knowing costs helps his family know what price they must capture on the market to lock in profitability. Both families use Gateway FS, a GROWMARK member company, to market their grain and minimize risk.

risk management

The families also buy multi-peril crop insurance, a federal product that provides them with a price floor for their crop. With a new federal farm bill looming in 2018 or 2019, family farms want a continued insurance component in the legislation.

Over time, the Liefers also have diversified to generate income to support four family households and a farm employee. They operate a seed sales business from the farm. The Liefers grow seed soybeans, seed whea, and white corn for premium prices, and the family soon will open a microbrewery.

“We spread our risk out to various crops and various operations to help us minimize our risk,” Liefer says.

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