Day 9 - Monday
theme: Rural communities; dry land farming
Our second week began with an early departure to Garden City, Kansas, after the class enjoyed Sunday off by travelling to Mount Evans (14 240 ft), going on biking tours, or just enjoying a relaxing day off in Denver. Travelling 332 miles, we made our first stop in Brewster, Kansas, at AgSun Inc. Phil Knox, owner of Ag Sun Inc., graduated with an Agriculture Economics degree from the University of Kansas, and entered directly into a PhD at the University of California. After the completion of his Doctorate, Phil taught Agricultural Economics at Colorado State University. His inner drive, initiative, and eagerness for achievement had little patience so he returned home to take over his family's 3rd generation farm in 1978. At this time the farm consisted of a 160 acre beef and cash crop business. , Dr. Knox saw the opportunity to expand and specialize by increasing the farm to 9 000 acres and building a steamed corn flaking processing plant. With a corn supply from their own acreage which is a 4 year corn-corn –wheat-wheat rotation, surrounding cash crop farmers and option purchases, AgSun Inc. processes 2.5-3 million bushels of corn annually into steamed flaked corn. They have 1.5 million bushels of on-site storage capacity which is emptied twice yearly, and storage is refilled with option purchased corn to fill their demand. Their finished product is shipped to the 4 major dairy operations (located in Northwestern Kansas), their own 2 500-head Angus feedlot, and surrounding feedlots in the state of Kansas.
Upon receiving the corn at harvest, each truckload is recorded based on weight, source, and moisture, as well as being tested for the presence of aflotoxin. The load of corn is either emptied into storage, or is sent directly to processing. The flaking process begins with soaking the corn in a separate bin for 45 minutes- a process using a total of 9 000 gallons of water. The water is then drained and the corn goes into the steamer, and is cooked at 98 degrees Celsius for 45 minutes. Once cooled, the corn is crushed by two 8 000 pound rollers, producing the finished flaked product. The flaking process has made AgSun Inc's specialized product of greater value. The flaking process increases digestibility by the breakdown of starch's complex structure, making the corn 15% more digestible. The steamed flaked corn is 75-90% digestible by ruminants. The finished product has 19% moisture content and must be fed soon after processing. The flaked corn must be utilized within two days of production during warmer summer months while this increases to approximately 7 days in cooler temperatures. Consequently, AgSun Inc. ships the finished product to their customers daily. AgSun charges $0.39/bu (or $14/tonne) for processing. Customers pay $3.80/loaded mile for transportation. By charging a processing fee, AgSun Inc. is able to pass fluctuating corn prices directly onto the buyer.
AgSun Inc. runs their 9000 acres on no-till 2-year corn-2 year wheat rotation. Their no-till practices have saved most of their crop this year, due to increased water retention in the soil, and the full expansion of the plant's root system. Despite a 5-10 year field transition period, in which yields are reduced, no-till has increased yields due to better water retention, increased earthworm populations, and increased ground cover, which is key to reducing wind and water erosion. Herbicides are used to control kochia, Russian thistle, fireweed, and grass weeds. Nitrogen fertilizer is applied at 70 lb/acre on dryland corn and up to 190 lb/ac re on irrigated corn.
Typical crops for the region are wheat, corn, seed corn, sunflowers, and sorghum. Canola and soybeans have been experimented with in the area but have not been successful to date since there are no cultivars have been developed to handle the hot, dry environments. Thus, their sole source of nitrogen is through synthetic fertilizer application.
AgSun Inc. irrigates approximately 1100 acres (9 x 120 acres) on a centre-pivot system. Each centre-pivot is supplied with water from a 200-350 ft deep well, and is powered by natural gas pumps. The Natural Resource Conservation Service of Kansas has restricted water rights, allowing usage to 13-15 inches/acre/year. New water right permits for new irrigation installations have not been given since 1990. Sub-surface irrigation has grown in popularity in the region. Water rights have been a major issue, due to decreasing water levels, environmental awareness, protection of the Ogallala Aquifer, and the right to water from surface water. A lawsuit was issued against the State of Nebraska for blocking water flow into the State of Kansas.
Dr. Knox highlighted the importance of irrigation systems during the drought. In the last 6 months, 1.5 inches of rain was recorded for the area. Dr. Knox predicts a yield of 40 bushels/acre on his dry land corn, in comparison to 160-200 bushels/acre for his irrigated corn.
Dr. Knox has remained competitive through mechanization, technological advancement and expansion. AgSun's control room was designed to create an efficient and accurate control system to ensure quality, safety and consistency. By adding 1 million bushels of bin storage in 2011, AgSun Inc. has reduced transportation costs, improved corn quality and increased control of their supply. Dr. Knox has expanded both his acreage and feedlot operation. Don, the sales and finance manager, purchases options and uses hedging to gain on futures and increases in strike prices. AgSun Inc. has improved their aflotoxin testing to ensure that their dairy customers can feed the product to their animals. Aflotoxin testing ensures that their corn remains under the 20 ppb limit. Low moisture levels during the season and harvest have helped AgSun Inc. maintain aflotoxin levels of less than 1 ppb.
Dr. Knox highlighted the importance of crop insurance. If possible, he would choose to ensure for 50% crop loss, due to the high cost of insurance ($50/acre). However, bankers are more willing to loan to farmers who purchase crop insurance. The farm bill provides crop insurance options of up to 70% yield loss. With the removal of direct payments, Mr. Knox puts little value on the future of the Farm Bill in respect to the economic stability of his business.
The community around Dr. Knox has changed drastically in his lifetime. Dr. Knox emphasized several social and economic factors that have affected his business and the community. The reduction of the rural population, due to large farm expansion, has left communities with decreased access to quality education, health care, and social programs. The number of students per grade in primary schools has decreased from 25 to 2-3 students. School boards are amalgamating with surrounding schools to fill classrooms, or sending students out-of-county when a local school cannot be filled – the loss of schools is devastating to local communities. The school board brings both parents and children together for social events. Finding a full staff complement to maintain local hospitals is both difficult and expensive. The Community Health Care Board has fundraised to maintain the hospital. A medical doctor has agreed to practice in the community in 2013, in which surgeries and full health care services can be provided. Previously, a family doctor/ surgeon was brought in two times a week for the community, thus causing a wait time for treatment.
The future of AgSun Inc. is unsure due to both family and economic factors. A family succession plan needs to be developed to ensure a smooth transition when Dr. Knox and his wife retire. The second factor is economies of size. The major growth of the corporation, land prices, and additions made the business worth millions of dollars. A state law has a cap of $5 million dollars which can be passed on to following generations to ease the financial burden.
Dr. Knox left our group with words of wisdom, encouragement, and advice: gain experience, save money, and remain aggressive. Instead of beginning your own farming operation, specialize in providing large corporations/farms with products, such as hay or feed concentrates, or specialize in a service, such as raising heifers. Before leaving, we thanked Dr. Knox and his wife, Sharon, Dwayne (operation manager), Don (sales and investment manager), and Larry (Feedlot/crop manager) for the tour, and departed for Garden City, Kansas.
Before reaching our hotel, we made a small stop to view the Buffalo Bill Visitors Centre - a famous legend about "Buffalo Bill', the Buffalo Hunter of the Wild West. To learn more, follow the link below: