old school farming

Social License and Its Impact on Farming

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Last week at our local CAFA chapter meeting was the second time I got to hear a presentation from Shelley Jones. Shelley is the Manager of Agriculture Awareness with the Saskatchewan Ministry of Agriculture. Her topic, both times, was Social License. Social License is becoming as much of a buzz word in agriculture as it is becoming a major issue not to be ignored. I’ve blogged in the past (a couple years ago now) about how I feel that agriculture is “under attack” from well funded activists and industries whose gain would come at the expense of conventional agriculture. While I hoped that the activism was a fad that might fade away, clearly it hasn’t; we as players in this most remarkable and diverse industry need to understand the impact of social license, recognize our role in the discussion, and enthusiastically take action.

We in agriculture are not alone. The oil & gas industry and the coal industry, among others, are also under attack. Those industries are putting together plans of action to deal with the activism. Sadly, it seems none of us were prepared for this ahead of time, and now feel like we have to “catch up” in getting our message out.

We had a great discussion at CAFA during Shelley’s presentation. Opinions were varied. One in particular suggested that we as farmers need to take that nobility we so proudly hold and check it at the door. The mind set that we “feed the world” and the never-ending gratitude that we are entitled to because of it is actually causing us harm, said this one opinion. His point is well taken: the consumer hasn’t always been our focus because we know we produce safe quality food. We know we farm in the most sustainable manner we can. Isn’t that clear to everyone? Why would the consumer put up any resistance?

What we’ve forgotten, or maybe it is that we just haven’t taken notice, is that our population is no longer ag focused. It was said today in the meeting that “years ago, no one planned any major events in May or late August through October because of seeding and harvest respectively. Now, there is little concern to planning weddings or vacations during those times because fewer people are affected; a wedding on September long weekend might only exclude one family from the long list of guests.” Translation: fewer people are farming.

Of course we know that fewer people are farming today than 10 years ago, than 20 years ago, etc. And while we feel we’ve reacted to that trend by farming more acres and increasing yields, what we haven’t done is anticipated how severe the disconnect between John Q. Public and primary food production actually would become. The average non-farming person has almost no clue where food comes from or how it is grown.

In fact, most still sadly believe:

  • that farmers are overall wearing, pitchfork carrying, laborious people;
  • that the proverbial “little red barn” and an open tractor are normal;
  • that any farm that is bigger than said red barn and open tractor must be a “corporate farm” owned by some large eastern Canadian corporation or a US conglomerate;
  • that chocolate milk comes from brown cows.

How did this happen? How did our society swing from a primarily agricultural base to what it is today? Without getting onto a tangent of socio-economic trends, which have been debated feverishly through the 80’s and 90’s, what I’m really asking is “How did such a disconnect come about?”

It comes from taking things for granted for too long. Farmers took for granted that they were trusted, that they produced safe food in a sustainable fashion. Non-farmers took for granted that the food they purchased from their grocery stores was abundant, safe, and cheap. The internet has changed all of that by giving a platform to activists.

I felt so completely naive over the winter when on the agenda at a conference I was attending was a man who’s business it was to lobby the federal government. Wait, lobbyists are for hire? They’re not just people with conviction and a drive to change something they passionately believe in? Nope. You can hire a lobbyist. You can hire a person or firm to grind on the government, get face time in the media, and generally cause a ruckus…all for a fee, of course. These lobbyists, or activitsts as it were, represent their employer, the entity that hired them to promote a specific agenda. Fact, rationale, residual effects begone! These activists don’t need to be in Ottawa, or any provincial capital. They have the internet; where anyone can be a celebrity, spew rants of blatant falsehoods with an abundance of sensationalism to garner enough of a following that uninformed people simply believe that “it must be true.”

Combine this with how it is common among marketers to no longer promote what the consumer wants, but to promote what the consumer doesn’t yet know he wants, and we have a perfect storm. Consider technology and gadgets. Before HD television, did any of us know we wanted a 720p or a 1080p or now a 4K television? I still don’t know what the hell any of those are, but darn it all, the consumer now expects it! Did the electronics manufacturers build a few 4K TVs first to see how they’d sell, or did they go full out into producing 4K TVs and let the marketing look after creating a demand? We all know it is the latter.

Back to farming, we now have well funded activists with a platform that knows no bounds, who are free to generate as many half-truths, cherry-picked facts, and blatant falsehoods as they like in order to advance their agenda. Do they give a rat’s keester about how it affects you, your family, your community, or your industry? Nope. I believe that you or I do not matter to these activists. They don’t care one iota how you farm or if you’re still farming next year. They are only here to stir up a ruckus and gather “followers,” uninformed people who latch on to these revocable fallacies, minions who are intended to carry the momentum that the activists have started. Poor sheeple, if only they knew they were nothing more than pawns in a game.

The danger really comes into focus as the sheeple begin to do the activist’s work for them, shouting their “truth” from the rooftops and gaining more followers and momentum, convincing other people to “vote with their wallet.” I vote with my wallet regularly in how and where I chose to spend my money. We’ve been groomed to live by the old adage that “the customer is always right.” But, what about when they’re not?

Readers who have followed my writing have read it several times and will continue to for a while yet: you don’t know what you don’t know. These consumers don’t know what actually happens on your farm, in your pastures, or in your barns. They get their education from the University of Google where facts are not checked and reality is whatever you want to believe.

Are these activists, and their loyal followers, getting in front of legislators? Yup.

Will they influence future laws and regulations that will affect how you run your business? They might – – they’re sure trying!

Does getting into a fight with any of them online help? Nope.

What “we” can do in this has been well documented already in many different places. Farm & Food Care Saskatchewan is a great place to start: https://farmfoodcaresk.org/. There is also Farm & Foodcare Ontario: http://www.farmfoodcare.org/ Both of these entities are focused on informing the consumer and would benefit from your volunteerism. If you haven’t yet watched License to Farm, do it soon: http://licensetofarm.com/. The list of “to-do’s” for what you can do in this situation does not need any additions from me.

Direct Questions

How would your farm be different if the laws forbade you from using certain (or all) pesticides on your crops, certain (or all) vaccines on your livestock, or mandated how and when you managed your production?

We talk regularly about financial risk in these articles. You consider market & production risk regularly. Currency risk  and interest rate risk will become more dominant in future conversations. How will socio-economic risk affect your farm?

From The Home Quarter

One of the greatest benefits of farming is the independence, the connection with the land, and contributing to society in a way that few others can. For any of us to think that the independence we enjoy, and maybe even take for granted, is safe for us and our future generations is a bit naive. There are major factors at play, any or all of which could affect your future in this dilemma we call social license. You, me, and everyone in the industry can step up and make a positive impact. Or, we can take our way of life for granted and risk getting trampled by a stampede of sheeple.

 

Shaking Hands

The Farmer-Banker Dating Game

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When I went back to college in my mid-20’s, a mature student by definition, it was because I found a course and career path that would allow me to bridge my passion for agriculture & farming with my finance minded brain. My goal, as my friends and family will attest, was to be the kind of ag-banker that was a partner, not a foe, of the farmer.  My view at that time, which was a time that we were in the depths of a very real farm crisis at the end of the 1990’s, was that farmers “generally” had a poor view of bankers. I aimed to change that perception.

Now as a management advisor, I still aim to bridge that gap. I invest myself into building good relationships with bankers so as to have a list of qualified partners whom I can refer in to my clients for financing requirements. Here are the top 3 points to remember when considering a new bank relationship.

 1. Perfection is Not Required on the First Date

The initial meeting is a first date. Think about it: you’ve met someone you’re interested, you’ve had an interesting conversation that identifies some common interests, and you eagerly and excitedly agree to go on a date. On that first date, it’s a lot of “what do you do for fun?” and “what kind of music do you like?” If you’re really getting into it, you might discuss your date’s political views! You aren’t deciding on the first date if you will or will not marry this person; you’re just hoping to learn enough about him/her to decide if you want a second date.
The initial meeting with a new prospective banker is a first date. You’re getting to know each other. The banker wants to know how your farm is doing financially, how you manage & make decisions, and what you vision is of the future. You want to know how the banker manages his/her client relationships, how the bank would deal with a farm like yours, and how everyone would expect to work together should you take your relationship “to the next level.” On a first date, no one expects perfection. Each person on a first date easily overlooks the little nuances that may, or may not, become an issue later on. No one needs to be perfect on a first date with a banker.

 2. Be Aware of Where You Are At, Where You Have Been, and Where You Are Going

The greatest risk to derailing any chance of a second date is for you, as the borrower, to not have an adequate grasp on the effects to your business from past issues & business decisions. Bankers appreciate accountability when it comes to “what happened” in the past. Own your choices, both the good one and bad ones. Describe what you are doing to rectify your poor decisions from the past and what you are doing to ensure those same choices aren’t repeated. Have an idea (at least) of a vision for what you want your business to look like in 5 years, recognize what it will take to get there, and understand what you need to do in the near term to take positive steps towards that vision.

 3. A “Partnership” Mindset

While taking your relationship with your banker to the next level has been described by some as a “marriage, I agree in figurative terms only. Your relationship with your lender is a partnership, however, and proactive & productive efforts must be initiated by both parties.
While I believe that your banker relationship is akin to marriage figuratively, I do believe that it is a partnership literally. In almost every presentation I’ve made through the winter and spring, I have described the partnership as follows:

“If you have a Debt to Net Worth figure of 1:1, that means your debts are level with your net worth. At that point your creditors have equal skin in the game as yo do; your lender’s ‘investment’ in your business is par with yours. You have a 50/50 partner.”

There are many farms with Debt to Net Worth figures that are 1:1 or higher. Where do you stack up? Do you have a “partner” by the definition of equal investment in your farm? It is only decent and respectful for both parties to behave in the relationship like a partnership.

Direct Questions

What is your mindset with it comes to your relationship with your lender? Is it friend or foe? Necessary evil or business partner?

How prepared are you, as the CEO of your company, to discuss your current situation and share your vision of your farm?

Are you excited for a dance or two on a first date, or are you expecting your date to be on bended knee by the end of the interaction?

From The Home Quarter

This is penned in large from the message that my old boss from my banking days used to lean on: early interactions between bankers and borrowers are like courtships; everyone spends time getting to know the other(s) and jostling for position to make the best impression. It takes time to build a trusting relationship, and like any first date, if either party pushes too hard too soon for too much, a second date is unlikely.

4 R's of Fertility

Easy, Efficient, Effective, or Expensive?

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Let’s get it right out of the way first: I am not an agronomist.

I do, however, have a solid base of understanding relating to agronomy. With tongue in cheek I like to say, “I know enough to be dangerous.” Nonetheless, I took great pride in the significant attention to detail I employed while being in charge of seeding when still part of the farm. I carefully measured TKW (thousand kernel weight) and calculated seed rates accordingly. I was diligent about what fertilizer, and volume of fertilizer went into the seed row (we only had a single shoot drill.) I always slowed down to 4mph or less when seeding canola and ensured to reduce the wind speed to the lowest possible rate to minimize the risk of canola seed coat damage.

I always had a long season in spring from having to cover the whole farm twice: once with a fertilizer blend to be banded, (all of the N and whatever PKS that couldn’t go in the seed row) usually at least 2″ deep; the second pass was with seed and an appropriate PKS blend that could be be in the seed row. It’s just what I did to respect what I’d learned about the importance of fertilizer rate and placement. It took more time in applying, hauling home, storing, etc. It created operational challenges during application (it seems there were never enough trucks and augers available.) It took more time to set the drill for the correct application rate. All of that didn’t matter to me because I only had once chance to get the crop in the ground and fertilizer properly applied (at least at that time, the equipment we had made it so that all fert was applied in spring) and I wasn’t going to leave anything to chance that I could easily control.

The key point in fertilizer management is “The 4 R’s.” Right source, right rate, right place, and right time of fertilizer application make for the best use of your investment. So why over the last number of years have we seen such a boom in spreading fertilizer on top of the soil?

This article was recently published by FCC. There is no ambiguity as to the best and most effective way to apply phosphorus. I’ll ask again, “What’s with the shortcuts?”

I know the answer: time. There isn’t time to incorporate adequate volumes of fertilizer into the soil. We can use a spinner that has a 100′ spread at 10mph (or more;) this permits more fertilizer to be applied in a shorter amount of time, and it permits fewer stops to fill the drill during seeding…all of it saving precious time. I get it.

But where is the trade off? Have The 4 R’s of Fertility been tossed aside completely? Where is the balance?

Casting aside the proven science of the 4 R’s in order to save time by broadcasting is easy and efficient, but is it effective? I suppose that depends on what effectiveness you are trying to accomplish. I’m suggesting effectiveness of the fertilizer you’ve paid dearly for.

Direct Questions

When making important management decisions like fertility, what methods are you employing to determine your best strategy?

Where is your balance between ease, efficiency, effectiveness, and expense when making critical management decisions?

How has your Unit Cost of Production projection changed if you decide to accept only 80-90% effectiveness from your fertility program?

From the Home Quarter

What is easy might seem efficient, we might believe it is effective, but it is most likely expensive. Historically, decisions were made with the goal of minimizing expense with little else given to consider ease, efficiency, or effectiveness. Management decisions that do not provide adequate emphasis on effectiveness will likely see higher expenses. Your focus with your agronomy must be to produce at the lowest Unit Cost of Production possible on your farm. Choosing a fertilizer application method that places more emphasis on that which is easy versus that which is most effective is likely to create a situation that is expensive. Management decisions that focus heavily on one aspect to the detriment of the others rarely achieve results that meet or exceed expectations.

Introducing the Growing Farm Profits 4E Management System™. Details to follow.

ic_leap

Experience: LEAP – – Leadership, Engagement, Authenticity, Passion

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Leap year only comes around every 4 years, so to some people, it’s kind of a big deal; to others, not so much. I will have spent the 2016 leap day by taking part in a unique event, Experience: LEAP.

Experience: LEAP is an initiative of the wonderful people behind Project: SHINE Inc. Their passion is for everyone to live the fullest life possible, to be their true self, and to experience life with passion and purpose. The key message is for everyone to learn that where you are is not where you have to stay. The message applies to us personally, but also has business implications.

In the case of this event, LEAP is an acronym as follows:

Leadership

Leaders are made, they are not born. While some people are born with the characteristics that are often found in great leaders, the fact is leadership skills are learned, and therefore, leaders are made. This has 2 different aspects that apply to your farm:

  1. You are the current leader of your operation.
  2. You need to identify and develop a leader to take your place for when you’re no longer leading the business.

We often learn from experience, or learn from others’ examples, but rarely do farm business owners ever get sat down and taught how to be an effective leader. Everyone in your business will perform in direct correlation to their response to the leadership of the organization. It is like the old saying, “Would you rather be in an army of lions led into battle by a sheep, or be in an army of sheep led into battle by a lion?” If you find yourself questioning the effectiveness of your employee(s), first gauge your effectiveness as a leader.

As a leader, you need clarity in the results you expect in your business, the strategy for achieving those results, and the tactics in execution of the plan. Naturally, sharing this information with your team is critically important in effective leadership.

Engagement

One cannot expect to build a profitable business or an effective team without being engaged. A person who is disconnected and unattached will achieve sub-par results, and find the same in their team. How does one become more engaged? What can be done to increase the engagement of a team? By and large, it begins with purpose. Clarifying the “why,” which means “why are we here; why do we do what we do; why are we the best people for the job?” Clarifying purpose by answering the “why” helps teams, and individuals, recognize that they are a part of something bigger and that they have a key role to play in the organization. By turning a basic employee, a laborer per se, into an engaged and contributing member of a highly functioning team will pay dividends to your business that may astound you.

Authenticity

To be authentic is to be real or genuine. This involves interactions with your staff, your business partners, your family, your vendors, but most importantly with yourself.
I find it curious that authenticity is required for true engagement, which is required for effective leadership. Passion affects everything.

Passion

Passion can be difficult to describe because it is a feeling like few others. Passion can consume you, drive you to heights never imagined, and lead to immeasurable levels of joy or even anxiety. Passion can often create infallible commitment, which, if not balanced with sound rationale in decision making has potential to lead to undesirable outcomes. Unbridled passion sounds poetic and profound, but it can be dangerous if not balanced with reason and objectivity.
Yet, life (or business) with no passion becomes an insufferable task to endure. Most farmers I meet are passionate about their farm, about the land, about growing things, about the family legacy they are living and plan to leave behind. “Life becomes work” if there is no passion. But don’t forget balance, because “work can become life” on the opposite end of that spectrum; neither is desirable.

Direct Questions

How are you gauging the effectiveness of your leadership? (HINT: this isn’t a “self-assessment.”)

What are you doing to match your engagement to that of which you expect from your team?

How would you describe your passion?

From the Home Quarter

Recently, I listened to a presentation where the crowd was polled: If you could sell all your land for 25% above market value today, and rent it back for life at half of current rental rates, how many would take that deal? No one raised their hand. The presenter then acknowledged that no one in the crowd was a farmer, but actually a land owner. Everyone laughed in subtle agreement.
The point is to define your passion, your “Why.” Clarity in what you do, why you do it, and how you do it is no longer something that only applies to large corporations who need that “feel-good mumbo-jumbo” as part of their strategy. Make no mistake, farms of the future will require processes that were once foreign, or only found in corporate cultures. The need for social license becomes greater each day. The need for strong and committed teams becomes greater each year. The need for passionate, authentic, engaged leadership becomes greater with each new generation in the family business.

Daddy Selfie

Additional Family Members

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It is amazing how a family is changed when you add another member to the fold. Whether it be the addition of my new daughter last week (Feb 16 if you want to keep track) and the changes she brings to this household, or the addition of another generation into the family’s farm business, the change is not only imminent, but it can also be drastic, unpredictable, and challenging.

Both situations above involve adding a child, or another child, to what used to be “normal” and “routine.” The similarities don’t end there.

Where Does Everyone Fit?

Bringing another person into the mix creates upheaval. What used to be a shared role could now fall to one person solely. New roles that didn’t exist before now have to be addressed to determine who should fill these roles. This can be stressful, cause tension, and can lead to feelings of inadequacy or inequity.

Can I Understand How This Affects Others, Not Just Me?

We humans, despite being the most intellectually and emotionally intelligent animals on the planet, often struggle with empathy and being able to put ourselves in “someone else’s shoes.” We see ourselves as “up earlier, up later, working harder, taking fewer breaks, taking less personal time, doing more than just the fun jobs, etc.” than our cohorts do. We feel our own plight, get grumpy at our circumstance, and then usually either withdraw or lash out (depending on the individual.) If we were to acknowledge that everyone else in the unit probably felt the same way, we would likely find more patience and understanding for each other and for each other’s quandary.

What Do I Have To Do To Do My Part?

Communicate. Of course, it is much more than just that, but it is critical to communicate with your partners about what you want and what you feel. Most issues in business and personal relationships stem from one or more parties feeling like they haven’t been heard. Being reciprocal is key: if we want to be heard, we must also hear our partners.
Clarifying everyone’s “part” is also important. Assuming that Dad should just keeping doing <insert task here> because he’s just always done it is a recipe for conflict. Does Dad even enjoy that task? Is he actually the best person for that task? Same rationale applies to everyone in the family unit.

Direct Questions

To use an analogy, every person is “rowing their own boat.” What are you doing to ensure that everyone in your family (business or household) is rowing in the same direction?

Change is inevitable, even without adding a new person to your business or family unit. How are you ensuring that you aren’t blaming the arrival of a new person for your stress in the face of change?

There is always positive and negative in every situation. The upheaval and change from adding a new person also brings about great opportunity. What are you doing to identify and leverage all of the opportunities that a new person brings to the fold?

From the Home Quarter

The degree of change that comes with the addition of a new person into your realm is monumental, especially if that person is a little baby who is dependent on you for everything. But as we adjust to our “new normal” and a child becomes less dependent, we are no longer suffering under the weight of anxiety of “how to adjust” and actually have to stop and look back once in a while to truly see how far we’ve all come. By working together with a strategy on how to adjust to the new normal, we can accomplish so much more with far less stress and anxiety.
The same holds true in your family farm business. Whether it be a new employee, or a family member who is joining the farm with ownership aspirations, the same tactic applies. Work together with a strategy in mind on how to adjust to this new normal. You’ll find that this new person is more independent than a new baby. Plus, you’ll actually get some sleep from not having to be up every 3 hours.

On a side note, can anyone tell me how adding one tiny person to a household can more than double the volume of garbage produced by 2 adults and a toddler a week earlier? I can’t rationalize this at all.

equipment efficiency

Managing Operating Efficiency

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“You can’t manage what you don’t measure.” It’s been said time and time again, by me and many others. Here is an example that should get everyone buzzing.

A client of mine recently shared a sample of information that they collected from their equipment. The information shared with you is specifically from their sprayer:

Sprayer Utilization pie chart

 

A simple pie chart creates an “A-Ha Moment” that no one saw coming. I am sure you can all imagine the conversation around the table when this information was presented. What would your response be if this was your data?

As the discussion progressed, it became clear why the number of hours spent idling was what it was:

Admittedly, no one was tracking the number of idling hours that were attributable to any of those 4 points, but there was little argument that loading and rinsing contributed the largest share to the number of idle hours.

What can be done with this information? Since this sprayer is on a lease contract, the “cost per hour” is very easy to calculate. Now that we know the cost per hour of running this sprayer, we know how much all that idling costs. Now let’s go back to those 3 potential responses to first seeing this original data:

What this client of mine is now doing is evaluating the cost/benefit of putting a chem-injector system on their sprayer. Such an addition will:

To truly test this option, we would need accurate data over the period of at least 2-3 growing seasons measuring:

Naturally, very few, if any, farms record this data. Yet we can clearly see the effectiveness of having such useful information available to make the most informed decision possible. Without it, we are using emotion and our best guess. Obviously, our best guess can be way off, as is seen in just how much this sprayer spent idling in 2015.

Direct Questions

How are you managing and using your business data?

If you are not measuring it, and therefore cannot manage it, what are you using to make business decisions if accurate and useable data is not available?

How many decisions relating to improving efficiency can be made on your farm with better data?

From the Home Quarter

The report that contained this information (including the pie chart above) provides much greater detail to the goings on of that one machine than just usage by hour. Some of it, like the 8,970,000 yards this sprayer has traveled is not necessarily useful, but knowing that the 92.2hrs spent in transport used 910 gallons of fuel is.

While laughing and pointing around the table when comparing similar data from the combines, and identifying “who is the best combine operator” is interesting and fun, it is the action that comes out of the data that has the greatest impact. Positive action can and will impact your bottom line…but then so will inaction.

goal planning

Goal Planning 2016

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Thinking about 2016? Here are some of the goals that my clients are making a priority in the new-year:

  1. Reduce Equipment Cost per Acre
    Fully recognizing that equipment costs are one of the few expenses that are controllable on the farm, yet it is this controllable expense that is often least controlled, many farmers are looking hard to find efficiencies in their equipment line. The “nice to have” is being measured stringently against the “need to have” and consideration is being given to divesting assets that are deemed expendable.
  2. Establish a New Lender Relationship
    Each lender that plays in the ag field has an area of strength that makes them unique. Some rely heavily on equity; others focus more on cash flow. One may be strongest when lending for hard assets, another for operating credit, another for quota, and yet another for leasing. When your lender’s strong suit does not match your business plan, it is likely time to find a more fitting borrowing relationship.
    Unfortunately, if your borrowing approach has been piece-meal credit from several sources, the first step is for you to determine what your business goals are before seeking the right lender.
  3. Construct a Workable (Usable) Business Plan
    Having a formal business plan helps immensely when seeking a new lender. But if you’re only building a business plan to appease your lender, then please read on.
    A business plan is not a restriction like the “room seating capacity” on a liquor license. The business plan is your road map, your guide of the best actions to take in the immediate future based on expectations and identified risks. Your business plan will also lay out alternative maneuvers that will help you act quickly in the case of unforeseen circumstances.
    A business plan should not restrain you in a box; it should create awareness of opportunities & risks and lay out the best plan of action based on your existing situation and your goals.
  4. Define Appropriate Land Rental Rates
    In a trend fueled by greed, rental rates in many areas are now at unsustainable levels. Whether viewed as a factor of gross revenue per acre, or a factor of fair market value per acre, there are many geographic regions of the prairies where land rents are unsustainably high. (There are also some areas where rates are still very low/tenant favorable.) The landlords are not entirely to blame for getting us here, or for keeping us here. There first needed to be someone willing to pay exorbitant rates in the first place, and there continues to be those willing to keep paying them.
    Some of my clients desire a plan, a strategy, for determining a mutually beneficial land rent agreement with their landlords.  This can be a challenge when landlords are becoming increasingly distant and isolated from the goings on at the farmgate, not to mention absentee landlords who know nothing of modern farming. The argument for/against cash agreements, share agreements, and flexible agreements depends on many considerations, the most important of which is the relationship between landlord and tenant.
  5. Increase Financial Awareness and Confidence
    Even sophisticated business people find value in having an advisor critique the decisions being made on their farm. In a world with so much “noise,” confidence in our choices can be more difficult to realize when faced with multiple options (and no shortage of propaganda supporting/decrying each.) More and more farmers want an independent unbiased view of their financial position. Knowing where you stand today is key when trying to determine how to prepare for tomorrow.

Direct Questions

What are your goals for 2016? Have you documented them? Have you shared them with your family and/or your team?

How do you prioritize your goals? What makes them realistic and achievable?

What is your plan to ensure you meet your goals? What is your plan if circumstances change?

From the Home Quarter

A plan is only as good as the work that is put into it. It is true that things change very quickly in production agriculture: weather, markets, etc. Being prepared before such deviations will make managing the change easier, more efficient, and provide you more confidence when doing so. A business plan need not be a 48 page behemoth (who would actually refer back such large document throughout the year?) The purpose of your plan is to be prepared, decisive, and responsive. The physical document should reflect that.
We are helping several farm businesses refine their direction for 2016.
To set Your Farm Compass™ Strategy Plan for future success and growing profits, call me or send an email.

ag excellence

Musings from the Ag Excellence Conference

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Last week, I attended the Ag Excellence Conference. Facilitated by Farm Management Canada, this year’s edition was held in Regina. Touching into 3 days of information sessions, speakers, and networking opportunities, I was impressed by the quality of content and the discussions that arose.  The following are some of the major questions and statements of which I took note during the conference:

  1. Will continued population growth in developing countries be enough to sustain the price and demand levels we’ve currently enjoyed?
  2. Why do we try to hire the cheapest labor available but expect it to meet high expectations?
  3. Are farmers losing their “social license” to farm?
  4. Why is there such a low priority put on advancing business management among farms?
  5. Just how far can automation advance production agriculture over the next generation?
  6. Are our water ecosystems at risk?
  7. How will Saskatchewan land values be affected with new ownership rules taking effect?
  8. Are you entrepreneurial or intrepreneurial, and can you be both?
  9. Physical (crop) yield does not equal financial yield.
  10. Strategy is nothing more than a dream without a tactical plan.

From the Home Quarter

Unlike most agriculture industry events which focus almost entirely on production, the Ag Excellence Conference focused on business management. Attendees recognize the need to elevate management awareness and skills to help ensure the future viability and sustainability of farm businesses.
The questions and statements above were asked/stated explicitly, or simply implied during conversations. These points stemmed from various regions of Canada, and various sectors of agriculture (from grains to cattle, to vegetables, to dairy, poultry, and egg.) Everyone in agriculture is asking the same questions, and raising the same concerns.
Give consideration to each of points above. Do you have a thought or response to any or all? We hope to tackle these and other issues in the coming weeks of Growing Farm Profits Weekly™.

sustainability

The RISK 2-Step

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Here is a quote I recently read that was attributed to John D. Ingalls in Human Energy:

“The degree to which ambiguity can be tolerated determines the amount of difficulty
the individual can, and is willing to, meet and overcome in coping with the problems of
human life and in taking advantage of the opportunities life has to offer.”

Let’s make a few changes and see how it applies to business:

The degree to which risk can be tolerated determines the amount of variability the
business owner can, and is willing to, accept and manage in coping with the cycles of
business and in taking advantage of the growth opportunities that risk presents.

A good fair portion of any given week has me speaking with some very smart farm business owners,
lenders, and other business advisors. I continue to hear the same message: “guys (farmers) just don’t
understand the risk they are taking when they “

Risk is something every entrepreneur faces. We get paid for taking risks, and the more risk we take, the
higher the expected payday. Of course we all also recognize that the more risk we take, the greater the
potential loss as well.

But isn’t that pretty much what John Ingalls said above (or at least the paragraph I amended?

  • The risk averse cannot tolerate variability, is unwilling to manage cycles, and fails to capitalizeon growth opportunities.
  • The risk ardent embrace variability and cycles as opportunity to grow and expand.

The first step in being rewarded for taking risk is understanding the risk. It cannot be understood until is
acknowledged. Acknowledgement happens either when one steps out of his comfort zone and takes a
good hard look around, or when an outside party brings their perspective to the table, such as a
creditor, who might for example, change the terms of the relationship due to an inappropriately
managed risk.

Acknowledging that a risk exists, and recognizing its potential impact on your business can often be
difficult, scary, or even embarrassing. It can be hard to admit that we don’t know or understand
something that we (society) feel(s) we “should know.”

The second step in this 2-step, once you understand the risk, is to manage the risk. You’ve heard me say
many times “you can’t manage what you don’t measure,” which holds true for risks as well. Managing
the risk takes an understanding of how it could affect your business, measuring that effect and the
opportunities to mitigate the risk (think of it as a projection of best case and worst case scenarios.)

What does this all mean from a practical standpoint? Let’s consider a real world example from 2015.
Many growers were struggling on whether or not to apply fungicide to their durum. They were looking
for ways to reduce costs. The crop wasn’t looking so great (frost in late May and no rain until mid-July.)
The environmental factors that contribute to high fusarium were not as apparent as 2014.

The risk was the potential detriment to crop yield and/or quality from eliminating the fungicide
application to durum in 2015.

To understand and manage the risk, here are some questions that needed to be addressed:

  • How much damage can you withstand before lower quality grading eliminates profit potential?
  • How will lower grading affect ability to sell/deliver? (impact on cash flow)
  • Is there enough crop now growing to pay for the cost of fungicide if grade and yield are 100% protected? (cost/benefit consideration)
  • Is the crop at an even enough maturity to facilitate proper timing of the fungicide application?

Once these, and many other, points have been given appropriate consideration, one can make the best
management decision he/she can. In the case of the 2015 durum fusarium issue, some farmers sprayed
and still had toxic levels of fusarium; others didn’t spray and had manageable levels of fusarium. The
outcome is never guaranteed, but the process empowers you to make the best decisions possible.

Direct Questions

How are you determining which risks to pay attention to, which risks to manage, and which risks to
simply live with?

Even if you can’t dance, The RISK 2-Step does not require fluid movements or talented feet, but may still
require a lesson or two; who is interested in some “dance” lessons?
Are you risk averse or risk ardent? Knowing is important in being able to manage risk.

From the Home Quarter

Don’t kid yourself when answering the 3rd Direct Question above. We all know we need to be able to
handle some risk; my goodness, if we couldn’t, we wouldn’t be able to farm! But deep down at your
core, how do you handle risk? Consider this the “warm up” before stepping onto the dance floor for The
RISK 2-Step: truly acknowledge where your approach to risk lies, and then start the dance.

grass

BMP – Best Management Practices

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BMP’s, or Best Management Practices, are also often referred to as “Best Practices.” Commonplace in
corporate culture, the primary benefit served by BMP’s is bringing consistency to methods or techniques
used to accomplish a task or objective. Also focusing on efficiency and ensuring the best use of available
resources, BMP’s are everywhere, even if they aren’t documented in a manual somewhere.

Your farm is no different. Over the years, you’ve likely established a BMP for the way in which you
service the combines in season. With good harvesting weather typically in short supply (especially this
year) you’ve got “a system” for how you deal with blowing out filters, cleaning windows, greasing,
fueling, and the circle check you do to identify trouble spots like belts, bearings, and chains. If, and
when, you have new employees on the farm, how do you convey your “system” to them?

Is it fair to say that the Best Management Practice you’ve worked out for servicing combines, for
example, isn’t available in an employee handbook, or even on a notepad somewhere? It’s in your head.
It’s just what you do. It’s habit. It’s automatic. It’s common sense.

What may be a common sense natural work flow to you might be as abstract as a foreign language to
your new helper, your spouse, or your kids.

You may have felt the same angst as your new helpers at harvest while listening to your banker describe
the nuances of your financing arrangement, or your lawyer discussing tax implications. It can feel like
they are speaking a different language.

In your business, communication is the answer. Any best practices you have developed over time
(documented or not) are useless if not effectively communicated to the right people.
Best Management Practices apply to many aspects of your business, such as:

  • Managing financial data
  • Processing invoices
  • Servicing equipment
  • Soil conservation
  • Employee engagement
  • Etc.

This list is by no means exhaustive and could go on & on. There is likely a best practice you could think of
for just about everything in your business.

Direct Questions

How many specific Best Management Practices do you already have in place on your farm? How many
are documented?

How could your stress level be reduced in the busy season if you had BMP’s documented for new
helpers to review and be comfortable with prior to “trial by fire?”

It isn’t realistic to implement a BMP for every task on your farm, but what would it take to do so for the
most critical functions that take place through the course of a growing season?

From the Home Quarter

Best Management Practices are everywhere, they are all around you whether or not you see them, have
formalized them, or even give them a moment’s consideration. They have helped you expand, do more
with less, and streamline workflow. They are available in all aspects of your business, if you chose to
seek them out and implement them.

Over the winter, I will be spending time with each of my clients working on several issues, with one
being Best Management Practices. If you’re interested in learning more, please email me or call
anytime.