Posts

even emergence

Farm Financial and Business Information – Best Practices

/0 Comments/in , , /by

Recently, I read an article that listed the “Top 10 Ag Data Platforms of 2015.” I recognized only 2 of them. Clearly, the choices available to producers in finding and using an appropriate data template is abundant. In recognizing that this does pose challenges in trying to decide which one to use, several of them offer a free trial period: use the service for a set amount of time and if you’re not happy, they’ll refund your fees. Can’t lose, right?

Like so many other aspects of life and business, going on the cheap, finding the lowest cost solution, spending as little as possible often has the opposite effect than what is desired. When I needed steel toed work boots for the farm, I used to spend about $120 for “cheap” boots from the discount or department store. The last pair I bought were Red Wing and cost me well over $300. They outlasted 2-3 “cheap” pair and my feet were far more comfortable during those long 18 hour days at seeding, keeping me less fatigued. Was there greater value in the more expensive boots? You bet there was!

If cost is your #1 concern when considering options for managing your data and business information, then please consider why you buy the name brand hand tools, cars, trucks, and farm equipment that you do? If cost was the only concern, wouldn’t we all be driving cheap $10,000 cars, using WalMart wrenches made in China, and farming with Belarus tractors?

Find what works for you and just use it. If you don’t know what works for you, then ask for help. I am meeting with an office organization expert this week to get the help I need in creating a work-space that is better organized and more suited to my work flow.

Last week we discussed “Using Your Financial Information,” but if you aren’t managing your information adequately, it will be difficult to use, and leave you to make decisions with information that is not accurate. We expect our financial institution to provide us with accurate statements, and we’d be pretty upset if the information they provided us wasn’t spot on. We need to have the same expectation of ourselves.

If doing your own income and expense entries, set aside 1 hour twice a week to input accounting data. I used to leave mine until it was time to file GST every quarter. I have found that there is value to letting my accountant’s office handle this task so I can focus on my business. In 2016, I’ll be leaving the data entry to my accountant.

The first piece of information I prefer to offer to new clients is a Unit Cost of Production calculation. This requires current and accurate figures for crop inputs, yield and price, operating costs, and overhead costs. To know what it costs to produce one bushel of canola or one tonne of barley on your farm requires accurate info, otherwise it’s still a guess! Using this accurate information is very empowering!

Here is a list of Best Practices to consider implementing for managing your farm’s financial and business data:

  • Research and fully utilize an agronomic data platform; ideally it would require minimal manual entry on your part by gleaning info from your tractor/sprayer/combine consoles, and also easily convert to your accounting software.
  • Manage income and expenses regularly: don’t simply fill the shoe-box! Designate 1 hour twice per week to data entry.
  • Evaluate the worth of your time relative to tasks you do, and delegate accordingly.
    (IE. if you’re the CEO helping the hired men sweep out bins, you’re not allocating your time very well!)
  • Consider using outside help, or a designated employee, to manage date entry if you deduce that your time is better spent elsewhere.
  • Keep income & expenses, assets & liabilities, and cash flow records current each month.

Direct Questions

How are you best utilizing the resources you have available to compile your data? Are you using the right people, or slugging through on your own?

What data and information management tools are you using? Do they satisfy your needs? How are you using the reports they create?

Does managing financial information take a back seat to other tasks? What do you need to make it more of a priority?

From the Home Quarter

Choosing an information management platform is a daunting task. But it is less daunting than trying to make informed decisions with little or no usable information. The learning curve is steep at the beginning, yet once you’ve done all your set-up, keeping it updated is relatively easy. Making information management a priority can be less easy, depending on mindset. The benefits you’ll enjoy from being equipped to make informed decisions immediately as required are similar to the benefits you enjoy from getting your entire crop seeded early into warm moist soil. Even emergence on an early seeded crop is as satisfying as highly informed strategic management decisions…and just as important!

analyzing finances at the bin

Using Your Financial Information

/0 Comments/in , , , /by

Last week, we described how compiling your financial information will be beneficial to you in being able to analyze your previous year’s results so as to equip yourself in making informed decisions in the current, and future, years. This week, we discuss how to use that info.

Critical Balance Sheet Metrics

  1. Your Current Assets should be greater than your Current Liabilities by an amount that at least matches your cost to put in next year’s crop.
    Ideally, the difference between current assets and current liabilities should at minimum match your entire costs to run your farm for one year.
  2. You want your Total Liabilities to be no more than your 125% of your equity after net worth adjustments have been made.
  3. ROE is an acronym for Return On Equity. It is your net income divided by your net equity. Are you happy with the returns you’ve earned in each of the last 5 years?

Critical Income Statement Metrics

  1. First and foremost, is your Income Statement accrued? You can tell if you find an adjustment, up or down, to your income that would be labelled “inventory adjustment.” If your income statement is not accrued, call me for a quick description on how to do it yourself. It’s easy.
    Accruing your income statement is the only way to truly measure your profitability from the crop produced in a specific year.
  2. Did you have a profit? EBITDA (Earnings Before Interest Taxes Depreciation & Amortization) is a very important figure to know. It represents your profitability from operations; it shows you can generate profits. The calculation is Net Income + Interest Paid + Taxes Paid + Depreciation Expensed.
  3. Now that you’ve got EBITDA calculated, divide it by the following figures: Current Portion of Long Term Debt (found on balance sheet) + ALL interest paid (found on income statement) + ALL lease payments made (found on income statement). This is an important indicator for your lenders. This figure indicates to them your capacity to meet your financing obligations.

Critical Cash Flow Statement Metrics

  1. Cash Flow from Operations divided by Gross Sales indicates how many dollars in cash your business generates from every dollar in sales. The higher the figure, the better.
  2. Cash Flow from Operations divided by your “Property, Plant & Equipment” indicates how well your business uses its hard assets to generate cash.
  3. Cash from Financing divided by Cash from Operations indicates how dependent your business is on financing. The higher the figure, the more dependent on external money.

Solvency Calculations

Liquidity Calculations
Liabilities / net worth current assets / current liabilities
EBITDA / loan payments, interest & leases current assets – current liabilities

 

Direct Questions

Does the thought of doing such calculations overwhelm you, scare you, or just plain bore you? If the urgency of knowing these numbers doesn’t strike urgency into you, are you willing to ask for help?

How would you describe the benefit to your decision making if these figures were readily available?

From the Home Quarter

The comment has been made time and time again: “It’s easy to make money in the good times.” With tighter margins of late, more attention than ever before is being paid to management and finances. These calculations above are only a few of the measurements that you can take to gauge your financial strength or weakness.

And if you need a hand figuring out what to do next, contact me any time.

2016 year end review

Reviewing 2015

/0 Comments/in /by

We often get so focused on process that we fail to stop to take a look back now and again. If you feel like you’ll never reach your goal of <fill in your own goal,> take some time for review to see how far you’ve come.

Where were things one year ago? If you were like most, you were concerned about excess moisture from fall 2014, and about how you might get the crop in next spring. If you grew durum, you were likely troubled with how to market a crop decimated by fusarium. If you have hired staff, you may have been thinking about how to keep your good people over the winter so as to ensure you’ve got them in the spring.

Spring changed from too wet to a drought in about a 3 week period. Mix in a handful of late May frosts, and before the first in-crop spray was applied, many of you were not sure what kind of crop you might have. After the frost, many of you had re-seeded a significant portion of your farm. The frost and the re-seeding brought on a new challenge that was unforeseen to many: multiple levels of plant growth/maturity. What fun this created at harvest! Of course, that’s when most of the rains came…August and September.

Yields weren’t the disappointment most of us were expecting based on such little rain through May, June, and most of July. And while this kept many income statements from looking like a total disaster, there were far too many discouraging sides to crop rotations everywhere; returns resembled the early 2000’s rather than the last 4 to 5 years. Oil prices were dropping all year, and many of you began getting phone calls from people now unemployed from the oil industry to come work on your farm.

And so, in looking back over 2015 we want to focus on progress, innovations, shortcomings, and of course, lessons learned over the last 12 months.

Direct Questions

What progress did you make on your long term goals? Short term goals?

What innovations did you employ this year? How have you evaluated results to determine their success or failure?

Where did your business fall short of expectations in 2015? What did you learn from it, and what will you do different?

From the Home Quarter

Without getting too proverbial, if we don’t take the time to review results, we are likely to repeat our previous actions. Decisions that hurt our gross margin, or dramatically increased our controllable expenses need to be acknowledged and rectified. Decisions that maximized profits, or increased efficiency need to be leveraged even further. But we will never know if we don’t stop to look back once in a while.

 

For an impartial view of your farm’s 2015 results, our proprietary Farm Profit Improvement Program™ will clarify your financial position, and help you understand the factors that feed your growth or hinder your progress. Call me or send an email to learn more.

ag excellence

Musings from the Ag Excellence Conference

/0 Comments/in , , /by

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™.

grass

BMP – Best Management Practices

/0 Comments/in , , , /by

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.

planning

Financial Literacy Month

/0 Comments/in , , /by

November is Financial Literacy Month, an initiative of The Financial Literacy Action Group which is “a
coalition of seven organizations that work to assist and improve the financial literacy of Canadians.”
http://www.financialliteracymonth.ca/About-FLAG/

Watching some news the other morning while having breakfast, I saw a financial commentator discuss 3
simple financial questions to which Canadians have averaged 1.8 out of 3 correct answers. And trust me,
these were SIMPLE questions. But anyone who knows me knows that I will always acknowledge that
“you don’t know what you don’t know.”

That being said, there is no shame in not knowing what you don’t know. It is when you don’t know what
you should know that risk is increased. Here is a short quiz for you to take regarding your farm financial
literacy for the occasion of Financial Literacy Month.

1. Your current assets are MORE than your current liabilities. This means your working capital is
a. Negative
b. Positive
c. I don’t know

2. Your contingency fund (emergency cash) has a balance of $50,000 in a savings account earning
1% interest per year. If inflation is currently 2%, then the net real value (the buying power) of
your contingency fund after 1 year is
a. More than $50,000
b. Exactly the same as the start: $50,000
c. Less than $50,000

3. The tractor you bought last year for $200,000 can be sold today for $215,000. You’ve claimed
$30,000 in depreciation on that tractor, meaning it has a book value of $170,000. You’ve just
sold the tractor for $215,000, and now you will have a
a. $45,000 capital gain
b. $15,000 capital gain
c. $30,000 recaptured CCA
d. Both b) and c)
e. None of the above

4. My banker is always in a hurry to see my financial statements because
a. He’s looking for a way to increase my interest rates
b. They need to ensure I’m still a good credit risk
c. She’s trying to lend me more money

5. I’m a farmer; I don’t need to know all those ratios and analysis and stuff.
a. True
b. False

While these questions I’ve posed to you aren’t the simplest questions that everyone should know, they
will create a benchmark for you to get an idea of what you do know and where your mindset is. At the
end of the day, it is up to you to determine if and how you will tackle the imperative task of advancing
your farm financial management. In a bit of shameless self-promotion, I have developed a classroom
seminar titled Advancing Your Farm Financial Management.
https://fbdi.gov.sk.ca/LP_LearningActivityDetail.aspx?id=Q6UJ9A03H15A&area=Financial+Management

It is a one day commitment. It has been developed for the farm business owner who wants to take his
basic financial knowledge to an intermediate level. It has been approved for reimbursement under the
Farm Business Development Initiative. http://www.agriculture.gov.sk.ca/GF2-FBDI

Course participants will learn what is important to their banker and why. They will develop an
appreciation for the risks all farmers face, plus the risks to their specific farm and how to mitigate those
risks. Each participant will go home having built the foundation of their own personalized financial
management plan. And the best part: lunch is on me!

Direct Questions

When it comes to financial jargon, the importance of financial management and how to use the
information, if you don’t know what you don’t know, who will you call for help?

I hear it is not uncommon to pay upwards of $10,000-$20,000 to your equipment dealer for them to go
through your combine to ensure everything is up to par. What is it worth to do the same for your farm’s
finances? Do you do it as often as you do for the combine?

From the Home Quarter

In a business with as much inherent risk as production agriculture, ignoring certain aspects of your
business increases risk exponentially. And whether that ignoring stems from a lack of interest or
understanding or time, the risk does not simply go away because it has little attention paid to it…in fact,
it grows. To create an analogy, ignoring risk is like ignoring a weed in your field: pay little attention to it,
it still grows; deal with it right away, and you increase your probability of a successful crop.

In the spirit of Financial Literacy Month, I challenge everyone to become more fluent in one new
financial term each week in November.

And for the answers to the quiz above, send me an email.

Our proprietary Farm Financial Analysis provides you with a straight-forward, easy to read report of
your farm’s financial position with focus on areas of strength, caution, and danger. Call or email for
more details.

grain2

Innovation in Agriculture

/0 Comments/in , , , , , /by

Innovation
Noun | in·no·va·tion | \ˌi-nə-ˈvā-shən\
: a new idea, device, or method
: the act or process of introducing new ideas, devices, or methods
(Source: http://www.merriam-webster.com/dictionary/innovation)

No one could ever decry the innovation of Canadian agriculture. Often looked favorably upon for
consistently being on the leading edge, Canadian farmers are typically the envy of other nations’
producers for our advanced processes and our willingness to constantly strive for something better.
Innovation takes many forms. It need not be monumental. It does not require a farm to re-identify itself.
While significant innovations like direct seeding and minimum tillage required major capital
investments, many others do not. If you’re like virtually every farm, there is innovation all around you…if
you take the time to look.

Consider the changes you’ve made to your farm since you began farming. Again, not just the big obvious
changes, but the little things too. The little things often make the biggest difference, and yet they are so
easy to overlook. Just think about the positive effect of doing your own grain moisture tests on farm.
I was having a conversation with a client recently about the impact of grain sampling and how the
grading at delivery points can sometimes be a bone of contention. He described in detail how and why
he samples every load as it is being augered from the bin onto the truck. This is an innovation he has
employed to ensure he has taken appropriate measures to protect himself during a dispute. It has paid
off several times in the past, and will likely be of continued value in the future.

An interesting conversation, to which I was privy, among a group of very progressive farmers was about
how each of them managed the challenge of “feeding their help” during harvest. Crews that number
well into the teens require more than a cooler full of sandwiches and donuts. One innovation that I
thought was most creative was the customization of an old Class C motorhome into a quasi food-truck.
While we automatically focus on operations when considering our success with innovation, we cannot
ignore the management side of business. A common issue among my clients this fall is land rent
renewals. Many of them are seeking better ways to access their rented land without taking on so much
risk with these high cost all cash arrangements. As with land prices, rents have also increased
substantially over the last several years (thank you Captain Obvious for contributing to this week’s
article.) Farmers, generally, are becoming less comfortable with the $70-$100+/ac they’ve added to
their LBF (Land, Buildings, Finance) costs for land rent over the years and are now recognizing that they
often can’t make money on that rented land. Unless you’re running a charity, one that benefits your
landlords, “re-think profit” becomes an innovation all on its own.

Innovation is refining your record keeping, automating your payroll services, or focusing on improving
your working capital. While innovation also includes variable rate, advanced water management, or
specialized grain monitoring systems, it need not always be BIG and OBVIOUS. I think the best
innovation for every farm is to examine how it views profit, growth, and wealth.

Direct Questions

How do you view profit, growth, and wealth? I define each as,

Wealth: – discretionary time.

Profit: – that what is required to fuel “wealth.”

Growth: – not necessarily “expansion.” Growth is innovation at any and all levels.
(Remember “always grow; grow all ways!”)

How can you bring about innovation in your management arsenal?

How does innovation make its way into your business? Do you invite it in, or does it have to force its way
in?

From the Home Quarter

I am a firm believer that change will continue to be rapid and drastic in the future. In terms of record
keeping and data management, it will one day be mandatory, so why not get on board before you’re
forced? Regarding my client’s issue on his grain sampling, I believe that future farmers will be forced to
manage their inventory similar to that of a food processor today. And if you have not heard the term
“social license” yet, then let this be the first. A farmer’s social license to farm could face scrutiny like
we’ve never seen before. All of this will require significant innovation. But, don’t fret over the big issues
yet. Start small with manageable innovations today.

Our proprietary Farm Profit Improvement Program™ includes analysis and advice on negotiating land
rental agreements. Please call or email for further details.

emotion

Performance Management: A Post-Harvest Checklist

/0 Comments/in , , , /by

With harvest done, or nearly done, across the prairies, this is the time to engage in a little retrospect.
Recognizing the window is small (and shrinking) to get all the fall work done before freeze-up, this task
may end up a notch or two down the priority list. But nonetheless, it is important to go through this
exercise now that the crop is in the bin.

1. Evaluate actual yields against expected yield
Determine why your yields did, or did not, meet expectations. Not meeting expectations could
be positive or negative, and knowing what you did to control the outcome is important to either
repeat the practice, or learn from the shortcoming.

2. Assign a value to your production
This will be a combination of the prices you’ve already contracted and the current street price
on unpriced grain. Be accurate here; it does you no good to overstate the value or quantity of
your inventory.

3. Determine your current Working Capital
Once you’ve got a value for your total grain on hand, consider the rest of your current assets
and current liabilities to determine your working capital. This is the point in each operating year
(right after harvest) where working capital should be strongest. If it currently is not, seek help.

4. Production Cost and Fixed Cost Review
Looking at your whole operation as one figure does not provide sufficient information to afford
opportunity to increase management and profits. Break it down by crop and by acre. Where are
your positive points? Where are your stress points? What was your equipment cost per acre on
your cereal crops in 2015? What is your unit cost of production on that new land you rented this
year?

5. Field and Crop Analysis
Which fields were profitable? Which crops were profitable? Did you have significant variability
in some fields and/or crops? If so, how are you managing that?

6. Cash Flow Projection
Working capital versus future cash obligations gives you a clear understanding of what your cash
flow will look like over the next several months. Consider your expected cash flow in the near
term with your projections for 2016 (you will be working on those, right?) Does this affect your
expectations for next year?

7. Current Year Tax Analysis
There are less than 10 weeks remaining in the calendar year, and if your year-end matches the
calendar, you’ve got a small window of time remaining to determine what your tax situation will
look like and enact prudent business decisions accordingly.

8. Accrual Financial Statements
Whether you are incorporated or not, you should be having your accountant prepare financial
statements. If those statements have not been accrued in the past, please start now. Accrued
financial statements are the only way to truly gauge your business performance for the fiscal
year. (HINT: old statements can be accrued and presented again for management purposes.)

From the Home Quarter

One of my favorite adages is “If you don’t measure it, how can you manage it?” You’ll notice that the
essence of the points in the check list above is heavily weighted on measuring results. Any advancement
towards innovation in your business is lost if results are not accurately measured. Take the time now
that you’ve got the time to collect your data, analyze the results, and manage your performance.

blindside

Bad Timing

/0 Comments/in , , , , /by

I recently spoke with a farm ownership team that needs help. They need help in labor and marketing,
but especially in management. They readily describe all that has gone against them, and quickly list off
all the reasons why they don’t have time to work on the tasks that I propose they tackle. They know I
could help them, but they’re too busy to hire me.

Years ago when I was a bank branch manager, one of the lessons I shared with my staff was “there is a
difference between business and busy-ness.” One will make you money, advance your career, and grow
your wealth. The other just kills the day, eats up precious time, and leaves you feeling empty.
This farm team I speak of is multi-generational. The party with the most at risk has the least control. The
debt has almost become unmanageable. The record keeping is minimal. Management decisions are
fragmented and lacking sufficient foresight. These are not my observations, these are their own
admissions.

The first time we spoke, their financial statements weren’t ready, so it wasn’t the right time. When the
statements were ready, they were seeding, so it wasn’t the right time. Recent follow up finds them with
about a third of their acres left to harvest, so (SURPRISE) it wasn’t the right time.

If we all allowed that thinking to be the rule of law in our lives, we’d never accomplish anything. I would
have never went back to school (attended college at age 25;) I would have never pursued career
advancement; I would have never made the leap from employment to entrepreneurship because there
could always have been an excuse to render it “not the right time.”

Guess what…it’s never “the right time.”

At least that is what we allow ourselves to believe when faced with a task, or an issue that we would
rather not deal with. None of us go shopping for a new canola seed variety in mid-May; we secure that
over the winter. Yet we rarely make a discussion with our accountant a priority until April…because
we’re just too busy?

Managing our respective businesses requires great priority. We take far too much risk in operating a
modern farm to allow our management to be an afterthought, or something that can be put off because
there’s something else to do.

Direct Questions

How often do you permit yourself to be mired in daily tasks and other work to the extent that you
essentially “avoid” the administration and management functions of your business?
How could your business be better if you begin to “make it the right time” to focus on management and
administration?

Is the fear of admitting that help is needed in management your reason for never making it the right
time?

From the Home Quarter

The right time is not when things get tough. The right time is not when the banker is forcing the issue.
The right time is not when there are problems to fix, or a wreck to repair. Preventing a fire is much
easier than fighting one. The right time is now.

When making management a priority it can be daunting to figure out where to look first. Our
proprietary Farm Profit Improvement Program™ takes the guess work out of figuring out where to start
by first providing you with a detailed financial analysis that identifies your danger areas and offers
solutions to mitigate the risks. Call me or email for further details.

doit

Soil Testing

/0 Comments/in , , , , , /by

It’s soil sampling season. Hundreds of thousands of fields are yielding to the soil probe as farmers,
agrologists, and retailers are pulling cores as fast as they can before freeze up. The soil test is a crucial
decision making tool in planning the next year’s crop. Understanding each field’s organic matter,
residual nutrient levels, and pH levels are but a few of many factors that all come together in a soil test
report to allow you to make an informed decision on what it will take to produce a crop that meets your
expectations. Soil experts suggest that every field be soil tested every year. They surmise that each field
should be treated as unique and that using a whole-farm, or even crop specific, fertility management
strategy is not financially efficient. To paraphrase, how can one make decisions about fertility without
knowing what is currently available in the soil?

Despite some arguments that the unused nutrient can remain in the soil for future crops
(notwithstanding the varying disagreements over nitrogen losses,) over-fertilizing will use up working
capital in the current year. Under-fertilizing can limit your yield potential. Both are manageable risks.
So the question begs, “Why don’t all farms soil test all fields every year?”

“Labor” is part of the answer, so is “time.” If “cost” forms part of the reply, I have to seriously consider
mindset. What is the cost of a soil test on one field when measured against the risk of over, or under,
fertilizing? (Not to mention the value in being able to validate changes in your soil over the years.)
I would connect the same mindset to understanding a farm’s financial position before making business
decisions. Many farmers still do not make knowledge of their financial situation enough of a priority and
continue to make substantial business decisions based on emotion, or gut feeling. Pulling together your
net worth, income/expense, and cash flow statements provide you the same informed principles when
making financial business decisions as does the soil test when making crop and fertility decisions.
Understanding your farm’s financial position is crucial to making business decisions. Identifying how
your profitability, your equity, and your cash flow will be affected allows you to make informed choices.
These effects, once appreciated, can be measured against your business and personal goals to allow for
prudent and strategic business resolutions.

This leads directly into the heated debate over Big Data or Ag Data or whatever buzz word you prefer to
use. Without stepping onto that stage, the basis of the argument is the same:

  • Knowledge is power.
  • Uninformed decisions increase risk.
  • You can’t manage what you don’t measure.

While managing ALL you farm data is critical to the future of your success in the industry, I’m not
insisting that getting on the data train be 100% completed by everyone this winter. Like with anything
new, there are innovators & early adopters, and there are laggards, but the majority of us are
somewhere in between. Get over the mindset that the soil test is an excuse for retailers to sell you more
inputs; get over the mindset that “big data” will one day . This is about your business and how you can make
the most informed decision possible. Remember, you can only make informed decisions with quality
information.

Direct Questions

Would you write a cheque without knowing your bank balance? Would you accept regular information
from your bank that was “close,” or do you demand accurate reports each month?

Your soil test creates your “soil balance sheet.” Are you investing adequate time and effort into your
“financial balance sheet?”

The appropriate time for soil testing is after harvest but before seeding; once per year. How often are
you measuring your financial status? (HINT: it should be much more than once per year.)

From the Home Quarter

The parallels that can be made between doing a soil test and doing a financial review are many. While
there are subtle differences as well, the analogy is somewhat uncanny. Mindset comes up in this
discussion, as does data. In the end, it’s up to each business owner to decide how he/she will make
management decisions: with quality information leading to knowledgeable decisions, or by intuition
relying on emotion and gut-feeling. They’re almost as different as “black and white.”

Our Farm Financial Analysis service is akin to a report card, or a soil test report, of you farm financial
status. You get a clear and direct summary of strengths and weaknesses. It will also act as an indication
of the quality of your information (two benefits in one!) Post-harvest is probably the best time for a
Farm Financial Analysis so that you’re afforded opportunity to make changes (if necessary) before your
fiscal year end. Call or email for details.