Rice Farming

Mike Doguet hopes he has found the formula for weathering the rice industry's economic ups and downs—diversification.

During the past two decades, the Beaumont, Texas, area producer has added a mix of turf, registered Brangus cattle, crawfish and rice milling to the family's existing rice production operation. The result is Doguet has reduced the family's financial exposure and spread the risk and expenses among several commodities.

"It helps to have these other entities," Doguet says. "Turf is doing really well, cattle prices are up and rice milling is steady."

And crawfish, which are just now recovering from the 2000 drought, are in such demand that Doguet sold all he could harvest this season at an attractive price.

But before he entered each new endeavor, he thoroughly studied the market to make sure he would have a home for his product.

"If you think about growing sugar cane, where are you going to sell it?" Doguet says, referring to a south Texas effort to diversify into cane.

"If you don't have that mill sitting there, where are you going to ship it? Just make sure whatever you're going to get into that you have a market. If you don't have the market, don't get into it."

Doguet also looks for endeavors that will help him carve out a niche and set him apart from the competition. With his rice business, for example, he obtained organic certification for the mill and his ground and now grows, mills and markets organic rice.

With his turf business, he chose the new Jamur Zoysia variety because most other area turf farms have St. Augustine.

"That market is very competitive," Doguet says of St. Augustine. "But none of the area farms was growing Zoysia, so that was our niche."

Purging his entire crawfish catch for 24 hours with clean well water before selling them also sets Doguet apart from other operations.

To market, to market
Having a market is but one of the factors you need to examine before diversifying, says Keith Coble, a Mississippi State University associate agricultural economics professor in Starkville. You need to look at capital outlays, time demands and labor requirements, and what might happen if other producers view your success and decide to enter the market, too.

Richard Earles of the Appropriate Technology Transfer for Rural Areas program in Fayetteville, Ark., says he is receiving an increasing number of inquiries from farmers about diversification.

The non-profit group is funded by grants by the U.S. Department of Agriculture's Rural Business Cooperative Service and helps rural residents with enterprises that might spur local economies.

Not only are producers asking about different crops, but they are exploring value-added options, like on-farm processing, rather than just treating the crop as a commodity.

"There's a lot of capital expense for something like milling, so a lot of farmers are going into a cooperative," Earles says. "There's definitely a trend in co-ops like that for processing."

Like Coble, Earles says the biggest piece of advice he gives is to ensure you have a market lined up beforehand.

And what happens with the current farm bill debate also may play a role in the options to consider. If the new farm bill, for example, expands the wetland reserve program, then some producers may want to consider enrolling marginal rice ground. The wetland reserve lease payments would provide another cash flow source to the family farm and could help diversify income, Coble says.

Consider options carefully
Diversifying just for the sake of diversifying may not may financial sense, either.

"If you diversify into something that isn't profitable, that doesn't help," Coble says. "It may be kind of obvious, but you didn't do yourself any good."

Trading rice for corn acres may not make sense since both commodities are experiencing depressed prices, and the markets track fairly closely. Searching for a commodity that draws from a different market may make more sense. But it also may carry a sharper learning curve.

In Mississippi, for example, some rice producers have switched part of their land to catfish production. "If you are getting into catfish, then you're going to have to go back and learn a lot if all you've done is rice and soybeans because there are going to be a lot of different issues," Coble says.

Are specialties the answer?
If you're considering a specialty market, you have to look at how easy it is to enter.

"Sometimes these specialties scare me a little from the standpoint that if you are the only person doing it, you'll do well," Coble says. "Maybe with a small demand for a specialty crop, it only takes four or five producers in the region to supply the demand. But if eight or 10 people jump in, then the market will go broke."

Look at labor, time demands
Labor and time demands also are issues to consider. Some cropping options may have the same planting and harvesting dates as rice and would require additional labor or harvest equipment.

Other options may actually complement your labor and equipment, allowing you to make better use of your resources.

"The biggest advantage to the diversity is to be able to spread your costs from all of the equipment," Doguet says.

During crawfish season, for example, Doguet uses the same workers that help put down turf in yards. Although some of the machinery he uses is specialized, such as the rigs used to harvest turf, much of the equipment can be shared between the turf and rice operations.

But looking at labor, equipment and capital expenses is just a start, Coble says.

"When you start thinking about diversifying, then you need to step back and think more in terms of the financial situation of your entire farm," Coble says. "That particular crop budget may not tell the entire story."

Continue talking to buyers
And even after you've successfully diversified, studying and keeping up with the market doesn't stop. Doguet continues to talk to buyers to make sure he's giving them the product and the quality they want.

"You've got to find out what the market wants and produce what it wants," Doguet says. "If you produce quality, you can sell it."

And the Beaumont producer is always looking for additions that will complement his existing mix. This season, he produced about 100 acres of organic Dellmati rice as a large-scale trial.

Before planting, he had already done his homework by gaining the interest of a large buyer.

What he hoped the trial would show is how the newer variety from Louisiana State University yields, how it mills and whether the end product will meet the demand for imported basmati.

A formula for success Diversification may help manage risk, but do your homework before embarking
By Vicky Boyd Editor
Mike Doguet hopes he has found the formula for weathering the rice industry's economic ups and downs—diversification. During the past two decades, the Beaumont, Texas, area producer has added a mix of turf, registered Brangus cattle, crawfish and rice milling to the family's existing rice production operation. The result is Doguet has reduced the family's financial exposure and spread the risk and expenses among several commodities. "It helps to have these other entities," Doguet says. "Turf is doing really well, cattle prices are up and rice milling is steady." And crawfish, which are just now recovering from the 2000 drought, are in such demand that Doguet sold all he could harvest this season at an attractive price. But before he entered each new endeavor, he thoroughly studied the market to make sure he would have a home for his product. "If you think about growing sugar cane, where are you going to sell it?" Doguet says, referring to a south Texas effort to diversify into cane. "If you don't have that mill sitting there, where are you going to ship it? Just make sure whatever you're going to get into that you have a market. If you don't have the market, don't get into it." Doguet also looks for endeavors that will help him carve out a niche and set him apart from the competition. With his rice business, for example, he obtained organic certification for the mill and his ground and now grows, mills and markets organic rice. With his turf business, he chose the new Jamur Zoysia variety because most other area turf farms have St. Augustine. "That market is very competitive," Doguet says of St. Augustine. "But none of the area farms was growing Zoysia, so that was our niche." Purging his entire crawfish catch for 24 hours with clean well water before selling them also sets Doguet apart from other operations. To market, to market Having a market is but one of the factors you need to examine before diversifying, says Keith Coble, a Mississippi State University associate agricultural economics professor in Starkville. You need to look at capital outlays, time demands and labor requirements, and what might happen if other producers view your success and decide to enter the market, too. Richard Earles of the Appropriate Technology Transfer for Rural Areas program in Fayetteville, Ark., says he is receiving an increasing number of inquiries from farmers about diversification. The non-profit group is funded by grants by the U.S. Department of Agriculture's Rural Business Cooperative Service and helps rural residents with enterprises that might spur local economies. Not only are producers asking about different crops, but they are exploring value-added options, like on-farm processing, rather than just treating the crop as a commodity. "There's a lot of capital expense for something like milling, so a lot of farmers are going into a cooperative," Earles says. "There's definitely a trend in co-ops like that for processing." Like Coble, Earles says the biggest piece of advice he gives is to ensure you have a market lined up beforehand. And what happens with the current farm bill debate also may play a role in the options to consider. If the new farm bill, for example, expands the wetland reserve program, then some producers may want to consider enrolling marginal rice ground. The wetland reserve lease payments would provide another cash flow source to the family farm and could help diversify income, Coble says. Consider options carefully Diversifying just for the sake of diversifying may not may financial sense, either. "If you diversify into something that isn't profitable, that doesn't help," Coble says. "It may be kind of obvious, but you didn't do yourself any good." Trading rice for corn acres may not make sense since both commodities are experiencing depressed prices, and the markets track fairly closely. Searching for a commodity that draws from a different market may make more sense. But it also may carry a sharper learning curve. In Mississippi, for example, some rice producers have switched part of their land to catfish production. "If you are getting into catfish, then you're going to have to go back and learn a lot if all you've done is rice and soybeans because there are going to be a lot of different issues," Coble says. Are specialties the answer? If you're considering a specialty market, you have to look at how easy it is to enter. "Sometimes these specialties scare me a little from the standpoint that if you are the only person doing it, you'll do well," Coble says. "Maybe with a small demand for a specialty crop, it only takes four or five producers in the region to supply the demand. But if eight or 10 people jump in, then the market will go broke." Look at labor, time demands Labor and time demands also are issues to consider. Some cropping options may have the same planting and harvesting dates as rice and would require additional labor or harvest equipment. Other options may actually complement your labor and equipment, allowing you to make better use of your resources. "The biggest advantage to the diversity is to be able to spread your costs from all of the equipment," Doguet says. During crawfish season, for example, Doguet uses the same workers that help put down turf in yards. Although some of the machinery he uses is specialized, such as the rigs used to harvest turf, much of the equipment can be shared between the turf and rice operations. But looking at labor, equipment and capital expenses is just a start, Coble says. "When you start thinking about diversifying, then you need to step back and think more in terms of the financial situation of your entire farm," Coble says. "That particular crop budget may not tell the entire story." Continue talking to buyers And even after you've successfully diversified, studying and keeping up with the market doesn't stop. Doguet continues to talk to buyers to make sure he's giving them the product and the quality they want. "You've got to find out what the market wants and produce what it wants," Doguet says. "If you produce quality, you can sell it." And the Beaumont producer is always looking for additions that will complement his existing mix. This season, he produced about 100 acres of organic Dellmati rice as a large-scale trial. Before planting, he had already done his homework by gaining the interest of a large buyer. What he hoped the trial would show is how the newer variety from Louisiana State University yields, how it mills and whether the end product will meet the demand for imported basmati.
Contact Vicky Boyd at (209) 571-0414 or vlboyd@att.net. Hotlinks: National Ag Risk Education Library http://www.agrisk.umn.edu/Main.htm click on "Search by Risk Management Topic," scroll down to "Enterprise Diversification" Appropriate Technology Transfer for Rural Areas http://www.attra.org
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