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On Buffett farm, lessons germinate

Grandson of Warren tries novel approaches to increase soil productivity

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Posted: Sunday, April 6, 2014 3:30 pm

TEKAMAH, Neb. — Howard Warren Buffett scraped aside some frosty earth and dug out an ear of corn, one of few missed during last year's 230-bushels-per-acre harvest on a farm his grandfather bought in 1986. • He likes to save an ear as a souvenir from each year's crop. This will be his third full year operating the 400-acre farm that his grandfather, Warren Buffett, recently cited as a lesson on investing.

The Nebraska farm's productivity determines its value, the elder Buffett pointed out, and a wise investor puts money into businesses that build long-term value through productive assets, just like the farm.

The lesson — included in Buffett's annual CEO letter to Berkshire Hathaway Inc. shareholders, excerpted in Fortune magazine and reported as far away as India — isn't lost on the younger Buffett, 30.

Among his goals, supported in part by about $12,000 from a USDA conservation contract, is to increase that productivity with practices that will build its value, improve crop yields and help other farmers adopt similar practices.

"He's a creative guy, and he's thinking about how to make these soils more productive for the long term," said Robert Myers, regional director of the University of Missouri's extension programs and a regional manager for a USDA conservation program.

"He's definitely experimenting on his farm, even though he's growing corn and soybeans," Myers said. "How can he make sure there's a stewardship focus and productive crops and preserving the soil for the future?"

An example: planting radishes as a cover crop, in between the rows of corn, to improve the soil, increase its yield and save water.

Farming the property near here also brings a sense of nostalgia, said Howard W., as he's called to reduce confusion with his father, Howard Graham Buffett.

As a toddler, the younger Buffett played in a pond on the farm. He remembers that his sisters didn't like visiting the farm because there was no bathroom. (There's still no house there, although there's a shed with plumbing, plus a $45 recliner from Mrs. B's Warehouse.)

Stacked in a corner of the shed are some campaign signs from his father's successful run for the Douglas County Board in 1988, which kindled Howard W.'s interest in politics. He has a bachelor's degree in communications and political science from Northwestern University and a master's degree in public administration from Columbia University, and has worked in the Obama administration.

He helped his father with farm chores when the family lived in the Ponca Hills area on the northern edge of Omaha. They later moved to Decatur, Ill., where he grew up working on his father's nearby farm.

But on this bright morning, as he drove his F-150 XL Ford pickup for an hour north from Omaha, he talked mostly about the future, including the USDA's Conservation Stewardship Program.

That's where the radishes come in.

Farmers participating in the program, which began in 2008, add steps to improve soil, water, air and habitat quality and to save energy, such as using cover crops.

The USDA has a national goal of increasing the use of cover crops to 20 million acres by 2020 from about 2 million today, said Loren Ehlers, USDA resource conservationist in Burt County.

Farmers in the stewardship program help spread conservation ideas, Ehlers said. "They're the front drivers. They see the benefits, and hopefully others will follow suit."

Buffett qualified for the program through a point system that recognized past conservation practices and evaluated his plans for improvements. The farm's income is below the program's $1 million-a-year limit, and his status as a beginning farmer (fewer than 10 years on his own) helped him qualify.

He's in the third year of a five-year contract with the program. "I never considered this a subsidy because it's actually a contract with the USDA to improve the soil or water," he said. He doesn't receive direct subsidy payments from the USDA but does participate in its crop insurance program, which is subsidized by the USDA.

Under the stewardship contract, Buffett plants cover crops and makes improvements in the farm's irrigation systems that reduce water usage.

He hires a pilot to seed the radishes alongside the existing corn plants. As they grow, the radishes break up the soil with their roots, reduce water run-off and then die when the frost hits. The decomposing plant material adds nutrients to the soil, reducing the need for fertilizer.

The stewardship program payments offset part of the cost of the conservation measures, in his case the $12,000 cost of seeding the radishes, Buffett said. He tracks the performance of the cover crop and the efficiency of the irrigation system and reports results to the USDA.

The program can benefit other farmers. For example, last year's corn crop was planted late because of a wet spring. The radishes, planted before Aug. 31 as the contract required, were shaded by the corn, inhibiting the germination of the seeds and growth of the radish plants.

Myers, from the University of Missouri, said Buffett's experience shows that the program may need more flexible planting deadlines. "It's a learning experience for the (USDA) as well," he said.

Despite the Buffett family's wealth, Myers said, Howard W. qualified fairly for the stewardship program, which makes payments to all its participants.

Myers said the Buffett family expects each generation to "make it on their own. They're not going to get a big handout from the older generation," even though Warren Buffett is a multibillionaire, because the bulk of the family wealth is going to foundations.

"That's why we see Howard W. working to make his own income," Myers said. "He is not somebody that has a big trust fund or something. He's making a living on the farm."

This winter, Howard W. and Myers organized a conference in Omaha on cover crops that attracted 300 people, including innovative farmers, scientists, seed producers, equipment manufacturers and USDA officials.

Myers said Buffett's interest in soil conservation stems in part from his two years of working for the Howard G. Buffett Foundation, which works to improve agriculture and reduce hunger overseas. The foundation funded the conference.

"Howard W. was quite active in helping plan the conference and had a lot of great ideas on how to help think about what needs to be changed to make it easier for farmers to adopt these kinds of practices," Myers said.

Follow-up activities such as regional cover crop meetings will spread information among farmers, Myers said.

Buffett said the cover crop, no-till farming, monitoring the farm's center-pivot irrigation systems and other carefully programmed steps have increased the farm's corn yield by 11 percent and the soybean yield by 25 percent, to more than 60 bushes per acre, since he arrived.

The farm's finances work like this, roughly:

Warren Buffett owns the land and gets rent each year under an agreement with Howard G., who owns and maintains the equipment. Howard W. pays for the diesel fuel, rents the equipment from his father and operates the farm, his full-time job.

During planting and harvest, he is helped by his father and his wife, Lili, who as a child spent summers on a family wheat farm near Ogallala, Neb.

The two Howards split the revenue and the costs, including pay for Bob "Hondo" Schutt, who has worked on the Buffett farms in Nebraska and Illinois for years.

In his letter to Berkshire shareholders, Warren Buffett noted that in the 28 years since he bought the land, it has tripled its annual earnings and is worth at least five times the $700 an acre he paid for it.

The land itself is prime ground, close enough to the Missouri River to have the fertility of river land but far enough away that the 2012 flood didn't seep in. Its two parcels are split down the middle for corn and soybeans.

It looks flat from a distance but has slopes and drainage areas, including seven acres on one corner that are usually too wet to farm and are left as a mini-wetlands.

Buffett set up an Excel spreadsheet that calculates how much water and fertilizer to apply on the fields. He pull up a map on his iPad showing the layout of the farm's different soil types, which influence irrigation and fertilization in each zone.

"I love the organizational element and getting everything planned out," he said.

A weather station near the equipment shed measures humidity, rainfall, temperature and other variables. Once the ground thaws he'll push moisture sensors into key spots in the field, and then check the readings and control the irrigation through the Internet.

The farm and its vehicles use Real Time Kinematic satellite navigation, similar to the Global Positioning Systems that are becoming common in autos. From satellite photos, he calculates that a person who, without permission, drove across a field reduced its revenue by $600.

For all the planning and computers, Buffett said, "You can't control Mother Nature." One year was too wet, the other too dry, and he made adjustments as the seasons moved ahead.

On a tour of the farm, he pointed out the "Brock" brand name on a new grain bin. It's from Brock Grain Systems, a division of CTB Inc. of Indiana, which Berkshire purchased in 2002.

That was another investment by Grandpa Buffett, who now has a grandson focused on the well-being of the investment in Nebraska farmland that he made 28 years ago.

© 2015 The Norfolk Daily News . All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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1 comment:

  • huskerfanbb posted at 10:41 am on Mon, Apr 7, 2014.

    huskerfanbb Posts: 40

    How is this news?

    A farmer is making a living by farming in Nebraska. Um, so what? Thousands of other guys are doing that, also.


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