INDIANAPOLIS, Ind. — As Indiana farmers struggle to cope with the challenges of a changing market for their products, they must change the way they do business, said Joe Kelsay, director of the Indiana State Department of Agriculture.

Livestock producers are looking hard at alternatives to corn and soybean meal, while grain growers are trying to gauge their rising input costs, as well, Kelsay said.

“We’re not sure where we are in the process. The paradigm is stark ... with the volatility of the market and the dramatic increase in the raw price of corn. It’s like throwing a rock into a pool. It’s splashy,” he said.

“It’s the nature of any business. It’s dynamic, reacting and responding to changes. In ag this is anything but new, though it’s heightened now.”

Ethanol is the “new customer for corn,” creating many of these waves, Kelsay said, but he emphasized other changes, as well. World demand, growth in countries, the exchange rate and production concerns each assert influence on market swings, he said.

“Ethanol takes the blame – or is celebrated – because it’s a new customer of corn. Ethanol is a big player, but it’s too simplistic to blame it or celebrate it (alone) for the changes,” he said. “Some people are very contentious. It’s a big issue, a game changer, and I don’t want to minimize how this change affects businesses and neighbors.”

Kelsay, also a dairy farmer, said there are not winners and losers in this contest involving grain and livestock producers.

“Grain farmers’ costs have escalated. Their business model has changed. They have more invested in every bushel of grain. Their risks grow: pests, weather, missing the market with higher input costs ... Marketing skills are more important now,” Kelsay said.

In many cases, farmers raise both grain and livestock in Indiana.

Sarah Ford, spokesperson for Indiana Pork, said there are varied opinions among pork producers because of differences in production practices. “In general, pork farmers are supportive of a level playing field for all competing uses of grain,” she said. Ford said Indiana Pork is working on policy issues at the state level and on promotion of pork through advertising and events.

Along with many other state leaders, Kelsay said he tries to be optimistic and to work with others across the state and across commodity lines. “In Indiana we have a very cooperative ag community ... We have more interaction between ag sectors than other states,” he said.

He noted in the Indiana’s Family of Farmers (IFOF), various commodities meet to discuss issues and compare ideas. Kelsay said on his dairy farm he is adjusting his business model by growing as much of his own feed as he can and adding a cocktail of dry distillers grains, hominy, forage and brewers’ byproducts.

It is complicated by the fact that there is no perfect substitute for straight corn or soybean meal, Kelsay said. “With increased complexity, greater managerial expertise is needed in this business,” he added.

Ford echoed that sentiment: “A smaller profit margin necessitates more attention to detail in every aspect of the business. Using market strategies to capture every penny both in purchasing inputs and selling livestock is very important.”

“Our producers are very resilient, and they have done the best they can to adjust to a volatile market that they have little control over,” she added.

The market will always move up and down and create anxiety, Kelsay said. He is a big believer in the market as the source for price discovery and the gauge for needed adjustments on farms. “The market’s not perfect, but it’s the best tool we have to organize our resources. It will lead to price discovery,” he said.

Kelsay hinted that may mean some farms get leaner or fewer in number. Though the pork industry has been hit hard, Ford said last year Indiana marketed eight million pigs and that number is expected to remain steady through 2012.

Kelsay said livestock generally is better off than three years ago. He remembers 2009 as a “tough” market year.

Despite the challenges, Indiana agriculture has a bright future, he opined. “We have good farmers who are really good at what they do. We like the challenge to continue to provide the bounty we are blessed with in Indiana.”