Kinks in the supply chain dominated much of the farming news headlines in 2021.

Shortages have made it difficult for farmers to get livestock feed, fertilizer and other necessities to maintain normal operations. Harvests are getting caught in the supply chain because of storage and transportation shortages. There are too few trucks and drivers to transport crops domestically and not enough labor or shipping containers to move crops internationally.

Meanwhile, climate change poses a different kind of challenge for farm business management. Droughts on the West Coast and flooding on the East Coast are just two examples of how an evolving climate has the potential to impact farms both large and small. 

All of which raises an important question: What's next for farming and how can farmers protect their livelihoods?

Energy Demand Is Affecting Supply Chain, Pricing

As countries around the world have moved toward reopening, demand for energy is up. That spike in demand for energy has sent ripples through the supply chain, affecting one of the most important aspects of farm business management.

"Energy is a critical component in fertilizer production, which has led some fertilizer plants to shut down, depressing supplies and pushing prices higher," says Michelle Klieger, an agricultural economist and adjunct professor at Bentley University in Waltham, Massachusetts. 

Natural gas is a key element for nitrogen fertilizer production. Soaring prices for natural gas are behind many of the plant shutdowns. Meanwhile, key exporters such as China and Russia have curbed shipments of fertilizer, which is compounding shortages and pushing prices for existing supply even higher. 

This is a significant issue for farmers, Klieger says, as higher fertilizer costs increase the cost of crop production. Without fertilizer, crop yields may be reduced which can lead to higher prices for livestock feed. "If feed costs go up, because of higher fertilizer costs or lower yields, the cost of livestock production will increase as well," she says.

This is something Jacqui Edens, owner of  Rooster Head Farms in western North Carolina, has experienced firsthand. Jacqui, along with her husband Jaye, runs a pasture-based farm specializing in pork, chicken and egg production.

"We're having a hard time finding local feed for a reasonable price," Edens says. "Our feed prices have gone up 30 percent since January of this year." 

Specifically, Edens says two staples—corn and soy—have become increasingly expensive, which has raised discussions over whether they can continue to operate under their current business model. It's to the point, Edens says, where she and her husband are considering no longer raising any animal that requires man-made feed, illustrating the kind of pressure that supply chain struggles are placing on farmers' bottom lines.

Shipping Delays Add More Wrinkles

Struggles with getting crops and livestock to market or getting equipment and other supplies delivered have also become hot topics in farming news, as farmers find themselves stymied by shipping delays. When a shipment is pushed back, that can lead to farmers having to delay the planting season or in a worst-case scenario, miss it altogether. Delays can also lead to products arriving expired or spoiled, turning a potential profit into a loss. 

For example, Klieger works with a greenhouse grower who ordered an energy curtain to help keep heating costs down, as utility prices are expected to be above average this winter. The product was delayed, however, and the grower was forced to set up the greenhouse without the curtain. Meaning, Klieger says, "his money is tied up in a product he can't use right now and that he won't be able to manage his energy bills as much as he'd like this winter." 

Changing Climate Conditions Bring Uncertainty

Incorporating the possibility of more extreme weather conditions into farm business management models is something farmers may need to consider. In 2021, for example, extreme droughts in the Northwestern US and Canada made farming news because of damage inflicted on production regions. A 2020 derecho—a fast-moving band of thunderstorms with highly destructive winds—walloped corn crops in Iowa, causing an estimated $11 billion in damage. Meanwhile, other farmers continue to deal with water restrictions or extreme flooding. 

The Edens' farm is located in the wettest county in North Carolina, with farmable land near the French Broad River. In 2020, Eden says she lost $30,000 in projected revenue when two 500-year floods hit the farm within a few months of each other, killing a large amount of livestock. Flooding and the potential for increasing amounts of rainfall have led the couple to make some strategic changes to their farming model. 

"We've cut back on the number of chickens and pigs we raise just so we won't take such a hard financial hit in the future," Edens says. "We're also looking at raising more sheep and goats since they can be moved easier and quicker when and if the next flood hits."

Adjustments like these may become more common as farmers seek out ways to adapt to a climate that produces weather they may not have experienced in the past. Klieger says that crop growers in particular are in a period of change as droughts in some parts of the country and increasing rainfall in others challenge crop production capabilities. There are two possible ways they may adapt, she says.

The first is making a shift to more sustainable farming and/or participating in programs that reward farmers for becoming carbon sequesters. "If farmers can find a stream of revenue in adopting certain practices or selling carbon credits, many will adjust to take advantage of those markets," Klieger says. 

The second is adapting their farm business management tactics to fit the mold of what they can grow, based on a changing climate. As one area dries out or another becomes wetter, farmers may need to reconsider what types of crops are most realistic to focus on producing. 

Planning Can Help Soften Supply Chain, Climate Change Impacts

The supply chain snafus experienced by farmers of late are not something anyone could have predicted. Likewise, extreme weather events can happen with very little warning. Yet, that doesn't mean farmers have no defense against them at all. 

In addition to the adjustments some farmers are making to adapt to a changing climate, having the right insurance coverage has never been more important. Comprehensive coverage makes it easier to survive the financial storms resulting from supply chain struggles, extreme weather or other unexpected events. Insurance is a key part of any business model, whether you farm on a small or large scale.

Get in touch with a Westfield agent today to discuss your farm business insurance needs.