MidWest Tour Day 9

Brewster and Garden City, Kansas

Rural Communities & Dryland Cropping Systems

By: Hayley Hickmott, Blaine Malecki, Lauren Westerlaken, Megan Wright

AgSun LLC Steam Flaked Feeds sign

Today we visited AgSun, a steam-flaked feed company owned by Phil and Sharron Knox. The Knox’s farm 12,000 acres, have a 2,500 head feedlot operation and a corn flaking facility where they process 2.5 million bushels of corn annually. Phil and Sharron both attended Kansas State University and then headed to the University of California, Berkley where Phil completed his Master's and PhD in agricultural economics. It only took Phil a few years to get spring fever and start missing the farm life, so he and Sharron moved to Phil’s hometown of Brewster, Kansas in 1977 to take over the family farm.

Phil explained to us how he wanted to expand the farm to support he and his wife and decided to start a feedlot business. After a few years his next move was to become more vertically integrated. Phil first spent five years at Texas A&M researching sunflower oil processing but determined he would not be able to compete against larger nearby companies such as ADM. He then talked to a friend in California who designed corn flaking facilities and decided this would be a way for him to vertically integrate the farm and incorporate a value-added option by setting up a business plan to deliver flaked corn to other farmers in the area. We learned about how they operate their business with 14 employees between the farm and corn flaking facility, as well as toured the steam flaking facility.

Students with 2019 OAC Grizzly sign in front of buffalo hunter statue

This morning we also stopped at a historical site where we were able to read about the history of the area. One of the signs talked about dry-land farming and stated “The first theory of dryland farming—‘rain follows the plow’ –was merely wishful thinking.” We thought back to this while at AgSun as Phil told us that they have been using no-tillage practices for the past 20 years. On the way from Brewster to Garden City we stopped in Oakley, Kansas, to visit the Buffalo Bill Cultural Centre. We enjoyed pictures with the large bronze statue of Bill. The centre had many write-ups that were interesting to read and understand the legend of Bill as a very successful hunter for the union army. A true icon of the Midwest, we all enjoyed the history the centre had to offer.

Overall, today’s themes were about dryland cropping and rural communities. Our key learning points of the day are water use and the sustainability of irrigation, vertical integration and value-added business initiatives, and the challenges and future of rural communities.

Water Use and Sustainability of Irrigation

At AgSun, we learned that each year farmers are only allowed to take 15 inches of water from the Ogallala aquifer. If for some reason they take more than their allotted 15 inches there is a chance the water company could shut off their access to the aquifer or reduce their allotted amount for the following growing season. It’s important to only take your allotted amount of water considering that the aquifer is a limited water resource other counties and states rely on. Looking at how little rain this area of the country gets and how much they rely on irrigation, the question “is what they’re doing here environmentally sustainable?” came to our minds. If growing crops such as corn and beans in this area takes so many inputs (such as heavy irrigation), should they be growing these crops at all? More drought tolerant crops like sorghum would take much less water/irrigation and can also be used as feed for cattle. There may be more environmentally sustainable alternatives for crop production than depleting the aquifer for growing conventional crops.   

Phil told us that in Kansas, soil organic matter is very low (under 1%, yikes!) from the repeated use of conventional tillage practices, meaning that soil water holding capacity is very low. Phil Knox was one of the first farmers in Brewster, Kansas to adopt no-till practices and is still one of the only farmers who has continued this practice for the last 20 years. Since adopting no-till management, Phil’s soil organic matter has increased to almost 2%, meaning that the soil water holding capacity in his fields has increased.

The continuous use of conventional tillage has led to a significant issue with nitrogen leeching from fertilizer use back into the aquifer, as well as into the local water supply which people living within that community ingest. From the sounds of it, nitrogen leeching does not seem to be a huge issue within this community and people are not that concerned with it. Although nitrogen is not something humans should be consuming in their water or at all for that matter, we were told by Phil that soil water quality testing costs around $8000 in taxes by the local community each year. Given that Brewster, Kansas has such a small community, this could be a daunting financial issue for residents. But isn’t clean drinking water worth the cost?

The key takeaway in terms of water and irrigation use is that limited resources such as water from the aquifer should be used in a way that is both environmentally and economically sustainable. If they are not used in this way, future generations could suffer the consequences. If people continue to farm in these very dry lands, they will need to find a way to grow crops more adjusted to such a climate to try and conserve what is left of the Ogallala aquifer.  

Rural Communities

With the increase in farm size and the decline of the family farm, it’s no surprise that rural America is facing some challenges. Phil and Larry both expressed that having a school as well as medical facilities is crucial in the rural community. Interestingly, Phil sat on the hospital board as well as the school board for many years, working to improve these services for those within the community. Through negotiation they were able to secure nine full time doctors as well as support staff, such as nurse practitioners, providing the surrounding area with adequate medical services. Additionally, specialists come to town on a regular basis making care more accessible to those in rural areas. For young families the small class sizes make the school more appealing, creating a balance between young and old within the community.

image of areal map of Colby, Kansas

Despite the small population, finding employees has not been a challenge for Phil. He credits his low turnover of staff to paying them well and treating them well. Larry, an employee of 14 years, shared that Phil is easy to work for. Alternatively, local dairies and feedlots are finding it more challenging to hire Americans and are turning to foreign labour.

When asked about leadership in the community, Phil shared that years ago they led by example and began practicing no-till soil management. It’s taken almost twenty years to really see the benefits, but the earthworm populations have returned, and soil organic matter has gone from almost zero to over two percent.

The relationship between farmers and rural communities can be complicated. Water availability and quality is a growing concern. We learned that nitrate contamination resulting from fertilizer use is an issue in the area, with levels exceeding levels determined to be safe. As a result, local residents are usually warned twice a year. Consuming high levels of nitrates is primarily a health concern for infants, causing blue baby syndrome, which can result in irreversible brain damage or even death. An additional problem faced by local towns is the availability of water. Phil noted a drastic change in the wells on his property, sharing that pump rates had dropped significantly. For towns relying on the Ogallala aquifer for drinking water this is also a problem. Larry told us that some towns have bought ranches with water rights in order to ensure adequate drinking water.

The key take away regarding rural communities is that services such as schools and medical care are crucial to maintain populations and that relationships between towns and farmers must be established in order to ensure adequate and clean water for future generations.

Vertical Integration and Value-Added Business Initiatives

Ten years ago, Phil and Sharron Knox decided to vertically integrate their farm by combining their corn production with their feedlot. This was accomplished by constructing a steam flaking corn plant with 2.5 million bushels of storage capacity. Phil’s decision to construct this plant helped him to achieve a higher value in his business model by both controlling the sourcing of his cattle’s feed for the feedlot as well as achieving an 8-10% increase in cattle digestibility of the corn feed. Phil told us that the vertical integration has allowed him to control all three levels in his value chain from his corn crop production to finished cattle.

left; Phil Knox showing roller mill, right; hand full of steamed corn flakes
Left: Phil Knox showing his roller mill.,  Right: Freshly steamed corn flakes.

When asked about the changes in his community that he has observed in his lifetime, Phil shared that the small nearby town of Brewster has maintained its population of about 300. However, big box stores like Walmart have displaced local businesses, creating less job opportunities in rural America.

image of computer screen for AgSun processing plant controls monitoring
The operating software for the flaking facility.

By doing this, Phil has differentiated himself in the feed supply industry as he offers a specialized product that offers more competitive traits than conventional corn as feed. The traits that he offers are a product with a better starch digestibility than conventional corn as well as guaranteeing their corn flakes contain no more than 20 ppb aflatoxin which is harmful for cattle.

outdoor storage bin and steam house
The tempering bin (left) and
the steam house (right).

They can test for this toxin by grinding up a sample corn flake batch and testing to check these levels. This has proven to be very successful as his business model differentiates from other conventional corn feed producers which gives him the competitive advantage in the cattle feed market. He gains this advantage as he offers a different product from his competitors and is therefore not competing in the same market.

With the trade wars occurring in the US today, Phil suggested that since all of his flakes are being distributed domestically, he is shielded from these potential dangers that may arise in the near future with fluctuating corn prices. The steady income business model of steam flaking helps him to manage risk in his other steps in the value chain. The risk posed by volatile futures and cattle markets can be offset by his new steady business model that he claims brings him a steady profit annually. The key takeaway from his vertical integration is the fact that vertical integration can minimize risk in uncertain markets as well as building a competitive advantage amongst other businesses.

Following our discussions water use and the sustainability of irrigation, vertical integration and value-added business initiatives, and the challenges and future of rural communities our hosts graciously provided us with baked goods and refreshments. We are so grateful for the Knox’s taking the time to discuss their business with us.  

Dr. Swanton with tour hosts
Left to Right: Dwayne (employee of 25 years), Sharron Knox, Phil Knox,
Professor C. Swanton, and Larry (employee of 14 years)