CGE130115 by Farm Business Communications

EASTERN EDITION

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January 2013 $3.50

TAKING ON

2013 Cory Van Groningen, building a better beef market

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JANUARY 2013 BUSINESS 8

BIG IDEA — 40 YEARS Does supply management still make sense? Our Gord Gilmour asks a farmer who was in at the beginning.

FARMING BY DEGREE Do you really need an advanced university degree to run today’s farm?

YOUNG HORSES Parents fear that bringing the next gen on board will increase risks. Instead, it increases profits.

THE NEXT FRONTIER The time has come to start looking overseas for the next big efficiency jumps for your farm.

TAKING ON 2013 All we know for sure is that 2013, much like 2012, will turn out differently than any of us have predicted. That’s why we’ve packed this issue with a full slate of articles to inspire and prepare you for whatever comes. Bring it on!

THE VISION A couple of years ago, a vision statement seemed an empty waste of time. Now it’s an essential tool.

SIX PROFIT-MAKERS An hour with your financial statements will help you identify and start to grow these profit opportunities.

FAMILY DEAL Succession planning at an equipment dealership produces a model that farmers can use too.

AN HONEST WAGE 2013 may be the right year to start paying regular salaries to yourself and your family team.

HOW FAR FORWARD SHOULD YOU MARKET? Strategic marketing can help you lock in today’s grain and oilseed prices, but still exploit rallies.

GUIDE HR — WHEN WORKING TOO HARD IS A DISEASE Workaholism is the addiction that we praise on the farm. Pierrette Desrosiers says that’s got to change.

GUIDE LIFE — SAFE ON THE ROAD

INCHING ALONG Why is RTK gaining ground so much faster in the West than on eastern corn and soybean farms?

PRECISION AG’S REPORT CARD If precision ag doesn’t fit the way you farm, maybe it’s time to change your cropping systems.

AGRITECHNICA, EH? The world's biggest indoor farm machinery show aims to do more business with Canada. Here’s how.

INSURE IT BETTER Ontario and Alberta margin insurance programs may tip market outlooks for farmers in other provinces.

PRODUCTION

PESTPATROL Pre-emergence is still your best bet for these tough soybean weeds. Mike Cowbrough shares his tips.

EVERY ISSUE 5

MACHINERY GUIDE Check out the new technology in these pull-type sprayers before shelling for a self-propelled.

We all worry about young drivers, but you can do more, helping them drive safely with these tips.

HANSON ACRES Sometimes two bosses is just the right number, although it can be painful finding it out.

Our commitment to your privacy At Farm Business Communications we have a firm commitment to protecting your privacy and security as our customer. Farm Business Communications will only collect personal information if it is required for the proper functioning of our business. As part of our commitment to enhance customer service, we may share this personal information with other strategic business partners. For more information regarding our Customer Information Privacy Policy, write to: Information Protection Officer, Farm Business Communications, 1666 Dublin Avenue, Winnipeg, MB R3H 0H1. Occasionally we make our list of subscribers available to other reputable firms whose products and services might be of interest to you. If you would prefer not to receive such offers, please contact us at the address in the preceding paragraph, or call 1-800-665-1362.

JANUARY 2013

GUIDE HEALTH Your friends are taking multi-vitamins. Now your relatives are as well. Should you pop some too?

PETUNIA VALLEY Mid-January at the Kingbird Café has got the old guys shoving aside for a surprising new arrival.

CONTENTS

country-guide.ca 3

desk EDITORIAL STAFF Editor: Tom Button 12827 Klondyke Line, Ridgetown, ON N0P 2C0 (519) 674-1449 Fax (519) 674-5229 Email: tom.button@fbcpublishing.com Associate Editors: Maggie Van Camp Fax (905) 986-9991 (905) 986-5342 Email: bmvancamp@fbcpublishing.com Gord Gilmour (204) 453-7624 Cell (204) 294-9195 Fax (204) 942-8463 Email: gord.gilmour@fbcpublishing.com Production Editor: Ralph Pearce (226) 448-4351 Email: ralph.pearce@fbcpublishing.com ADVERTISING SALES Lillie Ann Morris (905) 838-2826 Email: lamorris@xplornet.com Cory Bourdeaud’hui Cell (204) 227-5274 (204) 954-1414 Email: cory@fbcpublishing.com

Tom Button is editor of Country Guide magazine

The numbers we need We’re a broken record here at Country Guide saying that the real energy driving agriculture isn’t what’s coming out of the genetics labs, or what’s being dreamed up on the electronic drawing boards. Technical innovations are powerful, but they have to be used by someone first, and that someone is the farmer. Nor is government policy the real driver of agriculture, although again there are those who would have us believe otherwise. Good government action is designed to put power into the hands of farmers, and hence it happens too rarely. Instead, our bigger concern is that governments here or abroad will jump in 2013 to manage agriculture, seemingly in the name of farmers but actually in the interests of consumers, especially if rain doesn’t come. Overall, as everyone who reads Country Guide knows, the real drivers of agriculture are the individual farmers, one at a time putting it all on the line and making an unending string of decisions that they can’t afford to get wrong. This brings us to the point. To make critical business decisions, farmers need real-time information. It’s the same thing as needing to scout a field or monitor a herd before making crucial production decisions. That’s why we have an urgent need in Canada for better economic research on agriculture. If you want to know about farmland pricing and sales volumes, you can at least get an indication from FCC. 4 country-guide.ca

But what if you want to know who is buying? Or how these farms are being financed, or how they are being structured? For that kind of information, you have only one source: the rumour mill. Or let’s say you’re a young farmer and you are looking at a range of possible next steps. Ottawa’s impulse is to reduce your interest rate on land purchases, or to help you analyze your own farm with Growing Forward. Yet you also desperately need sectoral information, plus detailed studies of various business models, and precise information on the playing field. You can’t get that kind of information from Canadian governments. Nor, as a rule, will you find much interest in it among Canada’s farm organizations, who seem to talk to ag economists only when they’re costing out new safety nets. Ag economists haven’t exactly helped either, content to mire themselves in research protocols that mean their work is five years out of date before it’s released. (Nor does it help that economists especially in the U.S. are eroding their credibility by arguing ethanol has zero impact on crop prices.) 2013 will be the start of a better future if farmers encourage farm groups, universities and governments to break out of the box with ag economic research. Once again, it won’t happen without you. Are we getting it right? Let me know at tom.button@fbcpublishing.com, or call me at 519 674-1449.

Head Office: 1666 Dublin Ave., Winnipeg, MB R3H 0H1 (204) 944-5765 Fax (204) 944-5562 Advertising Services Co-ordinator: Sharon Komoski (204) 944-5758 Fax (204) 944-5562 Email: ads@fbcpublishing.com Publisher: Bob Willcox Email: bob.willcox@fbcpublishing.com Associate Publisher/Editorial Director: John Morriss Email: john.morriss@fbcpublishing.com Production Director: Shawna Gibson Email: shawna@fbcpublishing.com Director of Sales and Circulation: Lynda Tityk Email: lynda.tityk@fbcpublishing.com Circulation Manager: Heather Anderson Email: heather@fbcpublishing.com Designer: Jenelle Jensen Contents of this publication are copyrighted and may be reproduced only with the permission of the editor. Country Guide, incorporating the Nor’West Farmer and Farm & Home, is published by Farm Business Communications. Head office: Winnipeg, Manitoba. Printed by Transcontinental LGMC. Country Guide is published 12 times per year by Farm Business Communications. Subscription rates in Canada — $36.75 for one year, $55 for 2 years (prices include GST). U.S. subscription rate — $35 (U.S. funds). Subscription rate outside Canada and U.S. — $50 per year. Single copies: $3.50. Publications Mail Agreement Number 40069240. We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage.

Canadian Postmaster: Return undeliverable Canadian addresses (covers only) to: Circulation Dept., PO Box 9800, Winnipeg, Manitoba R3C 3K7. U.S. Postmaster: Send address changes and undeliverable addresses (covers only) to: Circulation Dept., PO Box 9800, Winnipeg, Manitoba R3C 3K7. Subscription inquiries:

Call toll-free 1-800-665-1362 or email: subscription@fbcpublishing.com U.S. subscribers call 1-204-944-5766 Country Guide is printed with linseed oil-based inks PRINTED IN CANADA Vol. 132 No. 1 Internet address: www.agcanada.com

ISSN 1915-8491 The editors and journalists who write, contribute and provide opinions to Country Guide and Farm Business Communications attempt to provide accurate and useful opinions, information and analysis. However, the editors, journalists, Country Guide and Farm Business Communications, cannot and do not guarantee the accuracy of the information contained in this publication and the editors as well as Country Guide and Farm Business Communications assume no responsibility for any actions or decisions taken by any reader for this publication based on any and all information provided.

january 2013

Machinery

By Ralph Pearce, CG Production Editor

There may be snow in the fields and a nip in the air, but in no time at all the crop will be going into the ground and you’ll be spraying. For many farmers, that means dreaming of sitting in a pricey, new, self-propelled rig. But before you make that investment, be sure to shop around and look at the new generation of pull-type sprayers. Manufacturers have made big strides with the efficiency and work capacity of pull-type designs. As you’ll see from the selection below, these aren’t yesterday’s sprayers.

case ih 100/160  When spraying, you really have only one chance to get it done right, so Case IH says it directed its engineers to aim at designing its Precision Spray 100/160 as a superior choice for a wider range of field conditions. Growers can take their pick of suspended or wheeled boom designs from 80 to 134 feet, plus tank sizes of 1,000 or 1,600 gallons. Case IH has also shown careful planning in the choice of the plumbing components, making spray applications efficient and convenient. As well, windscreen and accurate rate controls help keep you on target while reducing drift and increasing precision and performance. www.caseih.com

brandt quick fold field  Simplicity has its advantages, and Brandt has built a reputation for rugged performance and affordability. The Quick Fold sprayer offers widths of 80 to 130 feet, and strong 5-inch x 5-inch booms that can handle everything from conventional to no-till operations. And higher field speeds? Not a problem with Brandt’s responsive spring and shock suspension that maintains optimum “tip to target” distances, complete with wind-cone technology to minimize drift. A frost kit also comes standard with each unit, plus a Handler II induction tank and ground-level pivot, as well as automatic rate controllers, foam markers and a safety lighting package. www.brandt.ca J an u a r y 2 0 1 3

country-guide.ca 5

hardi commander  The Hardi Commander offers an optional on-board SafeTrack computer that monitors speed and turns, ensuring maximum safety and performance. It also means less damage to crops. Commander’s chassis and axles are built for high speeds and the toughest field conditions. Plus the HC 9500 controller puts fingertip functionality on a joystick. Combined with the touchscreen spray controller, it offers added convenience, performance and precision. www.hardi-us.com/

demco 850 and 1250

farm king 

When do you see ideal conditions in farming? Let’s face it, there’s very little in farming that’s certain. Not the weather, not the field conditions, not even the timing. That’s why Demco's design team focused on giving you more control for a little extra consistency, plus a unique tank design. Choose from the new 850 or 1250 sprayers. Both models feature one of the shortest pin-toaxle lengths in the industry — nearly 53 inches shorter than the 193-inch standard. That means tighter turns, less worry and fewer damaged crop rows, and it’s proof again that size isn’t the real key in sprayer technology. It’s performance in the field that matters. www.demco.com

Driving across the field pulling a perfectly tuned sprayer tank is the goal of Farm King, with your choice of seven different pull-type models. Whether you’re looking at the 850, the 1200, the 1700, or something in between, Farm King offers a wide range of tank sizes, boom lengths, spray controllers and other options. One constant is the durability that comes with the tube-style boom, a standard on all high-clearance trailer sprayers. Plus there’s a tight turning radius and a lightweight design that combine to reduce compaction while improving manoeuvrability. www.farm-king.com

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January 2013

Spotlight on Crop AdvAnCeS Crop Advances is an annual report that summarizes applied research projects involving the OMAFRA Field Crop team, in partnership with commodity groups, industry and the OSCIA. www.ontariosoilcrop.org/en/resources/cropadvances.htm

Soybean yields from no-till fields comparable to other tillage practices By Lilian Schaer New research shows that no-till can achieve equal soybean yields to conventional tillage practices. A study led by the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA), showed that excellent yields and profits can be achieved without conducting primary tillage when growing soybeans. “Two thirds of Ontario’s soybean production has traditionally been grown under no-till or reduced tillage systems, but many growers have expressed dissatisfaction with their yield performance using no-till,” says Horst Bohner, OMAFRA Soybean Specialist. “Through this project we wanted to learn whether no-till practices are resulting in lower soybean yields in today’s high corn residue fields.” How was the research conducted? Researchers conducted both small plot and field scale replicated trails over the two-year project. Plots were tilled at the trial sites the preceding fall and again in the spring, and planted shortly after spring tillage. Two small scale trials were conducted each year, along with four field scale trials in 2011 and five in 2012. Soil moisture and temperature assessments were conducted along with yield analysis.

Bohner. “No-till proved to be an effective production system at each of the trials harvested over the two years of this study.” The yield reductions in no-till being reported by growers may often be due to reduced plant stands. A no-till plot where the seeding rate was increased by 30 per cent in 2012 resulted in a yield of 38.5 bushels per acre over the 35 bushels per acre in no-till with a normal seeding rate. By comparison, the best tillage treatment – fall disc ripper and spring cultivate – yielded 37.8 bushels per acre. “Although this theory was only tested in 2012, initial results strongly suggest that one of the ways to overcome possible yield reductions in no-till may be simply to increase seeding rates in no till,” says Bohner. Stuart Wright, a Wellington County dairy and cash crop producer, had two plots on his farm where various tillage practices were tested during the project.

What did the study find? “In this study, we found no evidence of significantly reduced yields in no-till. So far, it appears the best way to achieve high yields, profits, and maintain the environmental benefits of no-till is to remain in a no till system,” says

ontArio Soil And Crop iMproveMent ASSoCiAtion

“The bottom line was no-till came out pretty well,” he says. “You can solve a lot of problems by just pulling a moldboard plow through the ground, but if you can accomplish the same things with reduced till or no-till, you’re not only encouraging soil preservation but also saving time and reducing fuel use and emissions with fewer passes over the field.” Where can I get more information? More information on this project can be found in Crop Advances at http://bit.ly/WXSeb7. How was the research funded? Support for this project was provided by the Farm Innovation Program, funded in part through Growing Forward, a federalprovincial-territorial initiative. Project contributions were also made by the University of Guelph, the Environmental Sustainability Directed Research Program, Grain Farmers of Ontario and John Deere. OSCIA assisted with communication of research results.

Top tips for farmers No-till can achieve equal yields to conventional tillage when growing soybeans.



Yield loss sometimes associated with no-till may be due to reduced plant stands in no-till.



Reduced till can provide excellent soil drying and warming as well as small yield advantages.



Mission: Facilitate responsible economic management of soil, water, air and crops through development and communication of innovative farming practices

www.ontariosoilcrop.org/default.htm

opinion

BIG IDEA

40 years on Does supply management still make sense? By Gord Gilmour, CG Associate Editor Harold Froese knows how sharply opinions are divided. Supply management is either a crown jewel of Canadian agriculture policy — or an affront to the free market. It’s a carefully thought-out policy that has brought two generations of stability to some of Canada’s most volatile agriculture sectors — or it’s a glorified closed-shop union that needlessly endangers Canada’s stature in ongoing trade negotiations. Froese is a Manitoba egg producer who got involved right from the start as a young farmer when the supply management system was set up. Since then, he has covered a lot of ground,

zation’s work on international trade agreements, as well as pursuing a career in agriculture lending.

including stints at the national egg producers’ board

Admittedly, he’s a supporter of supply manage-

table and as one of the farmers who led the organi-

ment. We asked him if other farmers should be too.

Country Guide: Can you tell us a bit about the history of supply management and how it came about? Harold Froese: Back in the 1950s and ’60s, egg producers and the producers of all the supply-managed commodities were experiencing huge cyclical swings in their income streams. I’ll speak about eggs because it’s the sector I know best. It was a roller-coaster and it caused us to ask if there wasn’t a different way of doing things, which is how supply management came into being. I think one of the main reasons it worked is the nature and size of the world export market for all of these commodities — the market tends to be very small. For example in eggs only about six per cent of global production trades internationally. If you were looking at a larger market where more of the production trades internationally — like our pork, beef or grains sectors — it just doesn’t work.

CG: In your opinion has supply management been successful for the farmers involved? How about for the consumer? HF: I think it has been successful for the farmers because one of the biggest risks in any kind of food production is price risk, which is as great or greater a risk than production risks like weather or animal health. I think it almost goes without saying that any time you can reduce that risk, it’s going to be good for farmers. On the consumer side, and societal side, I would say it’s been successful there as well, for a couple of reasons. We’ve been able to maintain production across the country in all the provinces from B.C. to Newfoundland, and we’ve therefore been able to create jobs and economic activity throughout the country. I think we’re also able to provide a very good-quality product, at a very reasonable price.

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january 2013

BIG IDEA

CG: It’s certainly been said that the prices of supply-managed products are higher than they otherwise might be, and that it’s unfair to expect consumers who are just trying to put food on the table to pay more, especially since they’re a captive market and times have changed — with a global economy they’re exposed to more competition from cheap labour jurisdictions. How would you respond to this criticism? HF: It’s a valid question. I certainly understand where they’re coming from, and it’s definitely something producers in supply-managed commodities always need to be conscious of — but I don’t think the facts necessarily back up that assertion. We do regular studies and comparisons of a basket of supply-managed goods, which we then correct for things like currency. What we find, time and time again, is that if you get away from certain border locations, where these products are being used as a loss leader to attract Canadian consumers, you really don’t find that much difference in price. Frankly, you can’t get that far out of whack from other markets, such as the U.S. market. If you do, you’ll lose consumers to cross-border shopping. I also think the process we use to set our cost of production is very important. We use a third-party accounting firm, for example, and we take great pride in having a transparent and accountable process that happens regularly — every five years in our case.

opinion

CG: Changing gears a bit, what about the impact on international trade? It seems like I’m constantly hearing about this or that trade negotiation which is being threatened by our supply management system. How do you respond to those criticisms? HF: One of the things I’ve had the opportunity to do over the years is work on the trade file, especially during my time with the Egg Farmers of Canada, and I’ve attended a number of trade meetings and negotiations with the WTO and participated in ministerials. I think this has given me some fairly good insight into how trade negotiations actually work, and the relative importance of supply management in them. Take the current negotiation that’s ongoing with the EU. In that negotiation the most important issue, the one with highest priority, has been the issue of patent protection on pharmaceuticals, and extending that patent protection for two more years. That’s been a huge concession for Canada, and supply management really didn’t come up in a big way. I think that’s a very important lesson. We tend to debate this issue very vigorously domestically, and where you come down on it seems to depend a whole lot on your own ideological outlook — but when you get to the actual trade negotiations and see how they work, you learn that supply management is actually well down the list of issues.

CG: So how do you think supply management is going to fare over the medium and long term? Are there trends that may affect its longevity and viability? HF: I think there are a couple of major trends in our society that are going to have the biggest impact. First in economies like ours, as they become more established, people become a lot more interested in how food is produced. What type of programs we have in place to meet these consumer concerns is going to be very important. Take the issue of cages for laying hens in egg production — we found by meeting with different groups that the enriched cages would give the birds the five freedoms and were acceptable to the majority of consumers. We’re also seeing this in the products we produce. We’re no longer just producing a Grade A large white egg, we’re now producing brown eggs, omega eggs, organic eggs, free-range eggs — all of which consumers want, though they do remain a relatively small proportion of the market. Secondly, there’s the issue of retail concentration in this country. Retailers are getting larger and more concentrated, which brings with it challenges. A grocery chain like Safeway, for example, doesn’t want to deal with a bunch of different suppliers — they want one supplier to provide eggs to all the Safeways in Western Canada. I think this challenge cuts across all commodity groups, and brings with it a lot of new issues. For example, none of the retailers want to carry inventory, because there is a cost associated with that, so it all has to be justin-time delivery. Those are key challenges, and I think they apply to all agriculture, not just supply management. As for supply management itself, I always say I was born an optimist, but in this case I will also say that periodically throughout its history, the system has been challenged. I’m not sure the challenges of today are necessarily any more threatening, though we certainly want to be aware of them. CG

january 2013

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business

Farming by degree You clearly don’t “need” an advanced university degree to succeed at farming. Still, it’s made a huge difference for these two farmers By Maggie Van Camp, CG Associate Editor Only about 10 per cent of farmers have a university degree, and of that 10 per cent, only a smattering have gone further than their BA, earning their masters or doctorates.

students doing their masters or PhDs in Canada in 1980. In 2010, there were 190,000. And, although they are still quite rare, there are a growing number of farmers with advanced degrees,

For the most part, that’s exactly what you would

including David Rourke, a semi-retired grain farmer

expect. Not only can the field and the barn be the

in Manitoba who earned his master in plant science,

best classrooms for learning how to farm, but a lot

and Cory Van Groningen, a young beef farmer in

of the skills that really make the difference for farm

Ontario who earned his in ag economics.

success — energy, ingenuity, shrewdness — aren’t exactly skills that schools seem able to teach.

Both acknowledge up front that formal education isn’t necessary to farm.

Even so, the numbers are about to change. The

However, both also say that they operate their

2006 ag census from Statistics Canada revealed

own farms very differently because of their master’s

that more than 55 per cent of farms with younger

degrees and because of the skills and connections

operators have at least one farmer with some post-

they got at university.

secondary education.

And they’re glad they do.

That finding reflects the swelling education

So, could a new generation of farmers, armed

levels of the whole nation. Over the last decade,

with research capabilities and a network of peers

the proportion of adult Canadians with a college

from colleges and universities revolutionize how we

diploma or university degree jumped from 39 per

produce food?

cent to 50 per cent.

You decide, but if Rourke and Van Groningen

Nor does it stop with the undergraduate pro-

are examples, this new wave of further-educated,

grams. According to the Association of University

yet very pragmatic farmers may stimulate grassroots

and Colleges of Canada, there were 77,000 graduate

research and new ways of farming like never before.

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january 2013

business

Vanguard farmer “ My view of education is not that you become more intelligent,” says David Rourke. “It’s just that you open doors and opportunities.”

n 1981, Dave Rourke finished his master in plant science from the University of Manitoba. That same year he also started farming — with $4,000, a half section of rented land and a couple of borrowed tractors. Underpinning the farm’s humble startup was Rourke’s job at the university as a research associate. “Without that job I might not have been able to farm,” he says. At that time, only about four per cent of farmers had a university education and it was very rare for a farmer to have done a graduate degree. Yet for Rourke, having employment opportunities to fall back on also gave him more freedom to try new things and to take relatively bigger risks, like investing in other ventures. “Getting my master was like my insurance,” Rourke says. “At least I’d have a graduate degree and was hopefully more employable if it didn’t work out.” Two years later, Rourke parlayed those employable research skills and university contacts into AgQuest Inc., a small-plot research company based on the home farm in Minto, Man., a half-hour south of Brandon. Today, Ag-Quest has four stations in Western Canada, it employs 19 research associates and it has 60 customers, including most of Canada’s crop protection companies. january 2013

Ag-Quest concentrates in three areas — product efficacy, variety testing, and research into the environmental fate of products. Rourke’s daughter, Dana, who has a master in molecular genetics, is taking on more responsibilities as he moves toward semi-retirement. When Rourke is hiring research associates for Ag-Quest, he looks not only at their education level but also at how they integrate their experiences into the job. His highest-earning associate only has an agricultural research certificate, but has practical life experiences that she follows through on. “Education doesn’t make you intelligent,” says Rourke. “It’s all your different life experiences and how you put it together.” With his off-farm, diversified income streams, Rourke has been able to be more innovative, and less afraid of failure on his own farm. He’s also been in the vanguard of innovation and research. On the farm, he tried growing many different crops from potatoes to corn. He tinkered with capturing nitrogen from the air and pursued his original vision to create an integrated farm with crops, livestock and a small ethanol plant. The idea was to add value to the grain for a more sustainable, more bulletproof, approach to farming. Continued on page 12 country-guide.ca 11

business

Continued from page 11 A year and half ago the Rourkes sold their hogs and shut down the ethanol production, as these enterprises were just not profitable enough. They are also selling their 600 dairy goat herd because the next generation does not have an interest in that business. Although being able and willing to try new things is important to success, Rourke says, knowing when to pull the plug is key. Six years ago, the Rourkes took a chance and bought 16 quarters. Since then, land has more than doubled in value and it is very difficult to even find that much land for expansion today. The Rourkes farm 5,300 acres of winter wheat, spring wheat, barley, canola, flax and occasionally peas, soybeans and corn. Their son, Don, has taken over all the seeding and spraying, as they work toward succession. Like many farmers, Don leaned toward the trades and has a diploma in heavy-duty mechanics and a part diploma in agriculture. That aligns with Canada’s overall farm population. We’re highly trained, but not at the university level. Proportionally, about three per cent more farm operators have apprenticeship or trades certificates or diplomas than in the general labour force, according to the 2006 Census. On the other hand, fewer have a bachelor’s degree or above when compared to the total labour force. Does it matter? Rourke says that some people without advanced education do have unique insight and they do have the ability to see and act on opportunities. But for many, education helps to make those connections. “My view of education is not that you become more intelligent. It’s just that you open doors and opportunities that without it you may not have even have realized existed,” Rourke says. For the practical aspects of farming, Rourke contends that he may have been better to get a diploma in agriculture. However, his undergraduate degree and post-graduate work exposed him to a broader network of people, even though he was shy and studious. “I was the geek in the front row, but I still got to know some pretty interesting people.” Even with education some folks don’t become connected, and are not naturally inquisitive. “I’ve had PhDs here who don’t know the first thing about basic agronomy,” says Rourke. “They’re doing a disservice to their PhDs. They’re supposed to be original thinkers and they can’t figure out basic stuff.” Conversely, he knows people with little formal education who knew they wanted to farm at an early age and are self-learners, well read and motivated to learn. “It’s more important that you take your head out of the sand and take a look around,” says Rourke. No one would ever accuse Rourke of burying his head in the sand. He was project co-ordinator for the Canada Grains Council and a director of the Conservation Tillage Productivity Centre. He reviewed for the Expert Committee on Weeds, and he sits on the board of the Western Feed Grains Development Co-operative. He’s also been involved in making a canola-based cleaner called Eco-50, and developing a grazing corn for cooler regions. With assets now worth millions, Rourke laughs at the thought of calculating a return on investment for the cost of his post-secondary education. Says Rourke: “Being able to create your own path and having the tools, connections and confidence to tackle a problem — rather than just going along doing the same things — is as important as a graduate degree.” 12 country-guide.ca

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business

Practical post-grad “ My dad didn’t finish high school but has a huge intelligence,” says Cory Van Groningen, who earned his master before coming back to the farm

Photo credit: Daniel Weylie

january 2013

n 2004 when Cory Van Groningen graduated with his master in ag economics at the University of Guelph, he emerged with more than a piece of paper. He had a scientific way to differentiate his farm’s production. Van Groningen’s thesis compared the traits that beef cattle producers normally select for against traits that contribute to meat quality, including cut size, tenderness and marbling. What he found was a negative correlation. In other words, his thesis gave him the proof that his family’s beef herd could be improved for tenderness, and his education gave him the research skills to set about doing it. More than that, the payback for Van Groningen has been direct — a burgeoning customer base demanding the consistent tenderness his family’s beef herd, abattoir and retail outlets have proven they can deliver. Cory and Heidi take care of 400 beef cows and replacements on 475 acres near Simcoe, Ont. and have just been named Ontario’s Outstanding Young Farmers for 2012. All their calves are internally marketed through the family-owned VG Meats’ two retail outlets (www.vgmeats.ca). Cory’s three brothers — Kyle, Kevin and Chad — handle the meat side of the business. As full partners, the four divide the work by their formidable skills, such as marketing, financial management, butchering, food safety, quality insurance, sales and, of course, raising cattle. In the mid-’90s, their father Wayne built a feedlot to finish the cattle they bought from local producers. Then, 10 years ago, they introduced 90 cows and a plan to develop a closed supply loop so they could control the quality and consistency of their meat all the way through retail sales. “My dad didn’t finish high school

but has a huge intelligence level and has inspired a lot by his anecdotal insights,” says Cory. “We put his anecdotes to the test. Dad’s a bit like a Jedi.” So while Wayne’s cattle skills were impressive, they were also difficult to replicate and quantify. Now, says Cory, a more science-based approach is helping the family improve quality and consistency. That’s critical, Cory says, because improvement must be measurable. Customer feedback was great, Cory agrees, but now he has taken data collection a step further. For every calf they slaughter and sell, the Van Groningens send a sample steak to the University of Guelph to rate shear force. The project is a partnership between the university, VG Meats and geneticist Stephen Miller of the Centre for Improvement of Livestock Genetics. How well the meat tears is a measure of tenderness, and that information can be linked back to the Van Groningen herd’s genetic selection through a regression model. If a bull throws calves that produce tough meat, he’s not used again. If a cow’s calves have tender meat, she’s not culled as soon. Of course, it isn’t tenderness alone that drives the herd’s selection, but a matrix of decisions. The Van Groningens are also trying to predict tenderness before slaughter by collecting data on things like“skinability” or hide thickness, or even meat pH, and running them through Cory’s regression equations. Using ultrasound, Cory and Heidi have also isolated calves with marbling and cut size and are working toward using DNA traceability to link all their individual cuts to individual calves. The Van Groningens’ research stretches

Continued on page 14 country-guide.ca 13

BUSINESS Continued from page 13 well beyond the cattle to include many different methods of slaughtering, butchering and tenderizing. They’re continually testing and trying to improve various cuts, including their latest quest trying to make hip cuts as tender as a steak. How to sell off-cuts is often the stumbling block for the local meat market. Basically Cory’s research results and skills have given them a means to achieve the core vision for all their enterprises, to produce and sell quality beef. Admittedly, part of the reason they can do this is because their system is so integrated. “What we do on the farm is often oriented to getting better feedback from customers,” says Van Groningen. “We are focused on product quality instead of quarterly profits.” That doesn’t mean they don’t want to make money. It just means that every purchase, every decision, and every expansion is based on quality first. Only then do they look at volume or efficiency. For example, they wouldn’t buy a machine that made curing more efficient if it compromised quality. This desire for tenderness differentiates their beef. It’s something their customers seem always to be talking about, and it gives the Van Groningens an advantage that they’d lose if they were selling wholesale. Instead they’d be striving for what the rest of the cattle industry sets as goals — yield and marbling. With Cory’s volunteer work on the Haldimand Cattlemen’s Association, Beef Improvement Ontario and the Ontario Independent Meat Processors, he understands why more farmers don’t select for tenderness traits. “Packers don’t want to pay a premium for tenderness since there’s just not enough cattle identified to create a brand.” The Van Groningens’ customers, however, are willing to pay. Quality also doesn’t necessarily mean organic or any other label thrown around with niche marketing, Cory has discovered. “When people are saying they want organic, or local or whatever, they are really saying, ‘Tell me about you and this meat.’” Applying Cory’s master’s thesis to their genetic selection process has helped the Van Groningen herd get ahead of the curve in meeting the new demand. “Although people come into their shop looking for local food, quality brings them back the next time,” say Cory. Now, the family’s strategy is to focus on quality so they make decisions on that goals alone. They can also stay relatively small, since their retail outlet allows them price stability for all their calves. Moreover, Cory says that it helps that they are not trying to change anyone’s mind, as they would need to if they were selling breeding stock. The years at the University of Guelph allowed Cory to mature and gain respect for his family’s abilities and the lifestyle on the farm. He also met and married a dairy farmer’s daughter with similar priorities, and they established a network of friends who share their passion for farming, even though few of the agriculture students at that time came from on-farm retail operations. Cory also learned some valuable lessons in self-confidence, community volunteerism and risk-taking during his undergrad degree. He participated in the agricultural economics society and agri-marketing competitions throughout North America. The degree program also opened up some opportunities for co-op and summer jobs. For Cory, it was also a way to discover that what he wanted in life didn’t involve having to wear a tie. “The 9 to 5 thing wasn’t me,” Cory says. “The farm is where we want to be.” CG 14 country-guide.ca

YOUNG HORSES Here’s proof that multi-generation farms are the most profitable and valuable By Maggie Van Camp, CG Associate Editor

he middle-aged farmer from Alberta is telling me about his son coming home to the farm, and he is explaining why he thinks it is good news all round. “If you can,” the farmer says, “always hitch your wagon to young horses.” It turns out there’s a lot of wisdom in those words. A recent Agriculture and Agri-Food Canada report called Profile of Young Farmers in Canada sums it up almost as succinctly: “Profit margins, revenue per dollar of assets and return on assets were higher for farms with at least one young farmer.” As well, in AAFC’s 2008 Farm Financial Survey, farms that had at least one young operator had a much higher net operating income than other farms. Multiple-generation farms (which it must be said are generally larger and more established) had the highest level of net operating income, averaging $116,000. What many older farmers may get stuck on, however, is that farms operated solely by young farmers had an average net operating income of about $30,000. Indeed, it’s easy to get so fixated on the lower number for farms run exclusively by young farmers that you overlook the more important news. Farms run by older farms will be even more successful if they incorporate young blood. BDO on behalf of the Guelph-based Agricultural Management Institute recently asked about 500 key decision makers to rank their top three obstacles to setting up and implementing their succession plan. “Transition is often hampered by three fears within the older generation — fear of losing wealth, fear of losing control and fear of conflict,” reports Jim Snyder, national director of agricultural practice development for BDO Canada. But, Snyder adds, “This research is very helpful in allaying the fear of relinquishing control and the possible loss of wealth. By creating success, we also can avoid potential conflicts.” The AAFC study also concluded that farms with young farmers generally had stronger asset and net-worth positions, especially the farms operated by multi-family members. Farms with at least one young farmer owned on average $2.3 million in assets as compared to other farms with $1.4 million. Multiplegeneration farms had the highest level of assets at $3.2 million. Not surprisingly, farms with only young farmers had the lowest average level of assets at $1.3 million. Also not surprising was that the 2008 Farm Financial Survey, found farms with at least one young farmer owed on average $586,000, as compared to $230,000 for other farms. Debt increases risk, so young farmers and even the farms they are part of are more vulnerable. Support programs become important bridges, yet farms with only young farmers had the lowest support program use, probably because they produced less and generally this category had more off-farm income. CG JANUARY 2013

BUSINESS

TABLE 1. Per cent of the level of education of farm operators by Farm Group, 2006 FARM GROUP

A.1

A.2

A.3

Farms with at least one young operator

Farms with only young operators

Samegeneration farms

Multiplegeneration farms

Other farms

20%

18%

17%

25%

30%

28%

18%

29%

26%

% of farmers with a post-secondary education

51%

54%

55%

46%

44%

% of farmers that have a registered apprenticeship certificate and other trade certificate or diploma

14%

15%

13%

14%

23%

25%

20%

16%

11%

10%

% of farm operators with no certificate or diploma % of farmers with a high school graduation certificate or equivalency certificate

% of farmers with a college, CEGEP or other non-university certificate or diploma % of farmers with a university certificate or diploma below bachelor level

B:8.625”

% of farmers with a university certificate or diploma bachelor level and above

10% T:8.125”

S:7” Source: Statistics Canada, 2006 Census of Agriculture, (agriculture-population linkage database 20%)

By 2050, there will be 9,000,000,000 hungry people and less farmland than there’s ever been. On August 19–25, 2013, the world’s youth will gather at the global 4-H Youth Ag-Summit to advance solutions to this growing crisis of agricultural sustainability.

Come to the table. Your perspective could change the course of history. Apply now at youthagsummit.com.

S:5”

If you’re 18–25, you should send us your thoughts. We might just send you to Calgary, Canada (expenses paid) to share them with 120 other bright young minds and industry leaders.

business

The next frontier Efficiency is the defining characteristic of Canada’s farmers — but where are you going to find the next big gains to keep you ahead of the world?

For Eric Micheels, the farmers who make the next big leap will be those who search the globe for new farm ideas.

henever the talk turns to the virtues of modern agriculture, one word is sure to crop up early and often. It’s efficiency. The farms of today with their hightech equipment, modern inputs and cutting-edge genetics are super efficient. In fact, they’re the very apex of the incredible Green Revolution. Who would have dreamed 10 years ago that you could be as efficient as you are today? Fewer farmers produce more food than at any time in history, especially when measured in terms of the number of people that the average farmer can feed. Back in the late ’90s that figure was said to be around 80 consumers for every North American farmer. Today it’s closer to 125. Another dramatic metric is the percentage of the population that’s engaged in primary agricultural production. In 1951, according to Statistics Canada, 21 per cent of the Canadian population lived on farms. Over the course of the following decade, as wartime technology including chemicals and fertilizer from former explosives plants found new jobs on the nation’s farms, farm productivity began to jump and the farm population began to fall. By 1961, only 12 per cent of Canadians were farm folk.

16 country-guide.ca

Today that figure is roughly two per cent of the Canadian population, and it’s one more reason why there can be no denying that the surge in farm productivity over the last 50 years has been staggering. In fact, it may be the single most amazing accomplishment of our species’ entire time on Earth. The question now is whether our farms have seen those same efficiency gains in other critical areas. Has your overall management improved at the same pace as your crop yields and the performance of your livestock? Scratch the surface a bit and it begins to look like there are a whole pile of other efficiency ratings that we might not want to brag about — if the industry even bothers really thinking about them at all. Take the issue of energy efficiency on farms, for example. It’s vitally important. Whole civilizations have foundered on it, but agriculture has made incremental gains at best, and those efficiencies that we have achieved are largely due to the adoption of no till. In other words, now that no-till acreage has reached a sort of peak, the energy gains have levelled off too. In a Massey Lectures series that was later turned into the book A Short History of Progress, Canadian historian and archeologist Ronald Wright built a convincing case that one of the fundamental reaJanuary 2013

Photo credit: David Stobbe

By Gord Gilmour, CG Associate Editor

business sons the Roman Empire fell was that environmental degradation suppressed grain yields in the provinces. This created an unsustainable situation where it took more energy to produce and ship their crops than the crops themselves contained. This negative energy balance, Wright suggests, led to a situation where it was impossible to maintain the empire on diminishing resources. And what does this have to do with the modern commercial farm? It’s tough to say for sure, but with scientists today telling us that it takes 10 calories of energy to produce the inputs needed to produce one calorie worth of food today, it gives us pause for thought. It isn’t doom and gloom, but is it an opportunity, and are there other such opportunities hiding around us? The first challenge, however, may be among the toughest. It’s to change our mindset.

Heather Watson, executive director of Farm Management Canada (the former Canadian Farm Business Management Council) says evidence is mounting that Canadian farmers may not be doing enough to pursue risk strategies at all, let alone innovative ones. “A 2012 study by KPMG reveals food producers are in the worst risk-readiness position when compared to all other industries,” Watson says. “They have the lowest ‘readiness’ and the highest risk.” Watson says FMC is convinced that the issue is important enough that it’s currently working on the first comprehensive risk management guide for the agriculture industry. Given the level of industry interest she says the organization has seen in the project, others share this conviction. Armed with this kind of insight then, what are the efficiency shortfalls, and how might we address them?

More with less Colin Rosengren farms near the community of Midale in southeastern Saskatchewan and has a clear vision for his medium-size grain operation, and he cheerfully concedes that his vision isn’t the same as his neighbours. While the other farms in the area have focused on growing in scale, so today they produce the same relatively short list of grain crops on ever-increasing acreage, Rosengren’s operation has focused on expanding in scope. New crops like the oilseed camelina have appeared, along with participation in a processing and marketing operation known as Three Farmers Camelina Oil which promises traceability right back to the field of origin. At the same time Rosengren has developed an intercropping system he says delivers both environmental and economic benefits to the farm. It’s all part of an ongoing search for new and innovative opportunities. “I guess you could say we’ve gone almost in the opposite direction,” Rosengren says. “We’ve got more employees, for example, than another farm of similar acreage would, but we’ve done that because we have other activities, like the camelina oil.” The primary goal of the farm can be summed up as making better use of biology, something Rosengren says the intercropping system is a good example of. It involves planting complementary crops together, such as peas and canola. The peas climb the canola, while also supporting it and preventing lodging and even limiting seed pod shattering. “It seems like every plant makes different use of the space and sunlight in the field, and we get better results both economically and environmentally,” Rosengren explains. Despite his success with this admittedly more management-intensive system, Rosengren is still looking for ways to do more with less. His latest interest is perhaps the greatest challenge for the perennially dry region — increasing yields on limited water supplies. January 2013

“ We get better results both economically and environmentally.” — Colin Rosengren “That’s definitely the thing I’m concentrating on the most right now,” Rosengren says. “It’s a bit ironic I suppose, since we had that season of flooding a couple of years ago, but historically that’s been our greatest challenge, lack of water.” Rosengren says he’s not entirely sure what a more water-efficient system will look like yet, but it will likely revolve like the rest of the farm around finding biological solutions to more problems. That may mean different crops, different production sysContinued on page 18 country-guide.ca 17

business Continued from page 17 tems or different equipment to address some of the challenges, much like zero till did a generation ago. “One of the things we have found is that there are some limitations to what we want to do that are due to the available equipment,” Rosengren says. In no small part that’s led to Rosengren’s participation in a new company — Clean Seed Capital Group — which is designing and building new environmentally friendly farm equipment. Rosengren was recently appointed the organization’s VP of agronomic practices and protocols. Rosengren says he believes the company, which holds patents for opener assemblies, in-ground openers and proprietary seed and fertilizer metering systems as well as electronic controls, will succeed in building large-scale equipment that’s suited to modern, mechanized operations, yet gives better biological results.

A wider net Eric Micheels, an agricultural economics professor at the University of Saskatchewan, says Rosengren might seem like an outlier to his neighbours, but he’s getting more and more company around the world as farmers seek new options to make their farms more economically efficient. For example, Micheels says, there are graziers in New Zealand who are looking at a complementary rotation of different types of animals through their pasture paddocks — in this case beef cattle, then sheep, followed by deer — at different times of the season to maximize their production on the same acreage. “It’s sort of like they’ve taken the rotational grazing system we all know about, and cubed it,” Micheels explains. “They’ve added another dimension to it, by adding these different species of animals that utilize different plants in the pasture in different ways and at different times.” Micheels says if there’s a clear trend emerging in the type of farmers who are making these moves, it’s that they’re all beginning to look further and further afield for the next good idea. Rather than watching what their immediate neighbours are doing, they’re trying to see how dryland producers in Australia cope with their perennial water limitations, for example. Or they may take a page from a different industry entirely and look at how a manufacturer gains 18 country-guide.ca

better inventory knowledge through better information technology. Taking this sort of active approach lets these farmers learn about new ideas more quickly, and it garners them the early-adopter advantage if they move quickly enough, Micheels says. That’s a reference to the time-limited nature of innovations. If you adopt new production methods quickly enough, you gain an efficiency advantage for a limited time. If you don’t, when the time comes and you do make the change, you’ll simply be maintaining the status quo. In effect, the whole industry is embracing the new efficiencies and you’re working just to keep your head above water. Of course, the potentially lethal risk is that some new production methods won’t pay off. “One of the biggest challenges for farmers is identifying which technologies and systems they want to adopt,” Micheels said. “I think this is where casting that wider net can really help. You can see what’s working in other locations and other industries and adapt it to your situation. That lowers your risk, but still gives you some of those early advantages. You don’t have to be the very first person to do something, but you do want to be one of the first.” Micheels also stresses that this approach can go well beyond the individual farm operation and can be adopted by whole sectors of the industry. “For example, Prairie grain growers might want to look at how Australian farmers are organizing their research and development model,” Micheels said. “I think there’s a lot of evidence this is happening already, especially in our pulse crops sector.” As for individual farms, the ways that this kind of thinking will be put into practice will look as different as the farmers are themselves. Even so, they will all focus on looking for opportunities where a skill or asset isn’t yet maximized. Micheels draws an example from his own experience. He’s a transplanted American who grew up in the Midwest and says some farmers he knows from the Corn Belt have set up operations in the Southern Hemisphere in places like Brazil so they can apply their skills across two growing cycles every year, not just one. “This is obviously not a strategy for everyone, and it seems to be the largest and most aggressive operators who are comfortable with significant risk that

are pursuing this, but it is an interesting one,” Micheels said. “They’ve identified a skill or asset — in this case the skills of the farm manager — that they feel are not maximized because of the limitations of the growing season. This is their strategy to maximize that asset.”

Risk and reward One thing Micheels readily concedes is any effort to move a farm in a new direction needs to be planned carefully, with a very clear eye to the risks. That’s a message that at least one farm risk management specialist echoes. Farm Management Canada’s Heather Watson says farmers need to concentrate on the basics of good business management when planning any innovation effort. “Put on your business-managementcoloured glasses and you’ll be able to apply a business sense to a range of issues like equipment use, labour recruitment and retention, production methods… you name it,” Watson says. “Start by looking at your business plan, and if you don’t have one, do a business assessment, followed by a business plan. It’s through this process that you’ll be able to evaluate all facets of your farm operation and work towards maximum effectiveness and efficiency while at the same time evaluating opportunities to bring in innovation and take on a little risk.” One thing is certain — trying anything new has some risks attached to it. But Watson says risk shouldn’t be a dirty word for Canadian farmers — just one that’s approached with a bit of caution. Indeed, risk can be both good and bad. It’s simply being exposed to the possibility of change and changing circumstances. As well, risk management is so much more than insurance, and should be thought of in a comprehensive way. Watson says good risk management should be at the heart of any farm operation, and farmers should get past just thinking about it in terms of insurance and government programs that offset market fluctuations or deal with disease, weather or other crises. “It comes back to good business management practices, couched in business planning, as the ultimate risk management tool,” Watson says. “You can use these tools to develop contingency plans before you’re faced with either an issue or opportunity. Be proactive, for the win, every time.” CG January 2013

MANAGEMENT

The vision Knowing exactly what success means makes it a whole lot more likely that your family will get there By Richard Kamchen

e all know where we want to go with our farms. Right? You want some money in the bank, lots of health and happiness for your family, the respect of your neighbours, and a chance to sleep at night, knowing you’re in charge of your own destiny. In anybody’s book, that sounds like success. But does it really describe what success looks like for you? More to the point, does it tell you how to get there? More Canadian farms are adopting vision statements to meet that need, especially if the younger generation is getting involved or if the farm is undergoing incorporation or other restructuring. Admittedly, there’s still the what-awaste-of-time faction, but history seems to be lining up on the other side. “Every decision that comes in front of you is easy to make when put in that framework,” says Dean Klippenstine, a certified accountant and agriculture specialist with MNP in Regina. The vision statement lays out the farm’s objectives and goal, Klippenstine says. Having that vision statement stated and bought into by everyone at the table then makes navigating your way through day to day decisions much easier, whether you’re talking about renting additional land, buying more machinery, diversifying your crop base, or hiring a manager. But for many families, agreeing on goals can be a struggle, says Cliff Harrison, manager with Prairie Skies AG Consulting in Winnipeg. “Some are ready to move on and JANUARY 2013

others aren’t as comfortable about where the family business is going,” says Harrison. “It is a juggling act to make sure people are at least comfortable and have commonality.” Differences can emerge. In fact, part of the whole purpose of the exercise is to draw those differences out into the open so they can be discussed rationally. Parents often hope the next generation will carry on their farm business the same way as Mom and Dad, but then find the successors have their own plans, says Wayne Ryan, CEO of Allied Associates in London, Ont. As part of the vision process, Ryan gets the different members to talk about their goals for themselves and for the farm, and then gets them to recognize the vision of other members so they can better appreciate their validity. Trying to marry personal goals with business goals can create a lot of blank stares, and grain farmers riding the recent wave of success may not feel compelled to create a vision statement. “But if you don’t know where you’re going, you can’t develop a framework in which to make decisions and reach end goals,” says Klippenstine. Often, however, it can mean bringing in an outside adviser or facilitator, which in turn means paying fees to build a plan that many farmers are convinced they don’t really need. Not everyone wants to think about personal feelings, after all, and many — perhaps “most” — farmers would much rather bypass vision statements and just get to the concrete business planning stage right away. “They feel the emotional bumps you have to go through at the beginning aren’t as valuable as the actual working through the detail of what they’re doing,” says Harrison. However, with more farms having operators and extended family members with off-farm business experience, the whole idea of vision statements is less foreign than it used to be, and many skeptics are being won over. They can then go forward and create a blueprint for where they want to grow the farm, and what areas they wish to either eliminate or give major attention to, Harrison says. Experts say greater numbers of farmers have been undertaking business planning in the last five years. “We still know there’s a huge amount of succession and transition

going on. The other side is, we’re seeing a large growth in either the ag service side, community service side or direct-marketing side of farming,” says Harrison. “From large, expensive farms all the way down to specialty marketing-type farms, there’s quite a range of farms that are looking for help.” More operators are also getting comfortable using third parties, despite those fees, in part because doing so allows them to stay as current as possible while not taking too much time away from the main part of their business of production and marketing, Harrison says. Those who do take advantage of business planning are going into it with greater depth and are a lot more focused on its benefits, especially when it comes to complex farm operations. A family with multiple businesses within the farm — for instance, cash crops and custom spraying — may want to divide those into separate structures for tax and estate planning reasons, says Ryan. Also driving interest is that lenders and other parties want to see more in terms of planning, as well as the fact there’s more at stake with the significant increase in land values across Canada. “When these kinds of dollars are up for grabs for the next generation, there’s more interest from other family members,” Ryan says. Klippenstine is a big believer in the process, having used it on his own farm. “I never understood my farm as well as when I did that process. It gets you focused on the important big issues and gives you clarity,” Klippenstine says. “I’ve seen it work and seen it translate into success. Not just peace of mind, but actual personal and financial success in farmers we’ve done it with.” Incentives from Ottawa’s Growing Forward program have also drawn more farmers into the process. “The fact there was some funding available and you were required to attend a workshop in order to access that funding was a bit of a kick-start to it,” says Ryan. Growing Forward 2 is replacing the original program and is scheduled to be in place by April 1, 2013, when the current five-year policy framework expires. With stakeholder consultations ongoing, Ryan says he has high hopes for the new program given the positive reviews for its predecessor. “There just isn’t any negative feedback about it,” Ryan says. CG country-guide.ca 19

business

profit-makers

An hour with your financial statements can help you zero in on these performance boosters By Maggie Van Camp, CG Associate Editor

In the business of farming where so much seems to depend on factors beyond our control — did I mention grain prices, trade disputes and, oh yes, the weather? — it’s sometimes all too easy to doubt our ability to get in charge of our own profitability, other than cutting our costs to the bone, of course. Even so, there are profit-makers hiding on all of our financial statements, and they can help all of us make better decisions. At first I wasn’t sure I believed it either. But read on. I started by talking to two farm financial experts, including Lisa Kemp, beef farmer, accountant and senior manager with BDO Canada at Lindsay, Ont. and Jonathan Small, MNP farm management consultant in Red Deer, Alta. When Kemp and Small analyse financial statements, they look for indicators of losses and profits, particularly across years. Then they roll up their sleeves to get to the bottom of those numbers, hunting for the factors that drive key trends in order to isolate decisions that can help you increase profits. Small says there are basically two approaches to improving gross margins on farms — get bigger or get smarter. In other

1. Know your gross margins When Jonathan Small analyzes farm financial statements, he starts by looking at the total farm’s gross margin, i.e. its production income minus direct or variable costs. The goal is to make more money on your farm by identifying ways to grow your gross margins without increasing your fixed costs by as much. “Gross margin is king when it comes to making more profits,” says Small. For most farmers, gross margin per unit of production per enterprise can be simple enough to be scratched out with paper and pencil, Small says. Then you can ask if those margins are affected by production (yield) or other factors. “It gives us a quick read from which to benchmark,” Small says. Look for long-term trends and benchmarks. Margins will vary quite a lot by region, and they will also vary by year, both because of yields and because of commodity prices. Overall, however, you should be looking for your increasing agronomic knowledge and productivity to give you higher gross margins with relatively little investment. Input costs do vary, of course, but gross margins often aren’t affected by an increase in direct variable expenses, like fertilizer or herbicides, especially if the efficient use of inputs leads to higher yields. “Rarely have I seen farm profits depressed by high inputs,” says Small.

words, you can make resource-based changes, which usually means getting bigger. Or you can make knowledge-based changes, such as improving your marketing and agronomic skills, or intensifying your analysis of your financial records. It’s time to get smarter, Kemp and Small say. So get ready to educate yourself, and also get ready to get into some new habits. On most farms, opportunities to boost your profitability are waiting to be found, including these six:

20 country-guide.ca

J an u ar y 2 0 1 3

business

2. Compare costs

3. Compare enterprise margins

If you want to understand profit, Lisa Kemp suggests you dig into your income statement with a particular focus on expenses. Also called a profit and loss statement, this is your gatekeeper of what’s left over. “An important part of profit is cost control, but that doesn’t mean cost minimization,” Kemp says. Comparing expenses item by item between years can spark discussion of changes, investments and potential opportunities. “This is not a one-year decision, it’s a place to see trends that are ongoing,” says Kemp. When Kemp compared the financial results of her office’s large cash crop clients, variable costs per acre were close to the same among farms. However, how they handled fixed costs varied extremely. On some of the larger operations, the differences in profitability came down to the number of bodies the farm was paying salaries. It can be difficult to track labour costs on many financial statements — especially with partnerships and sole proprietorships — but it can also be enlightening. People don’t see themselves or their family members as a cost that eats away at farm profits. Conversely, is the farm profitable enough to hire more staff so management can focus on expansion or improving margins? Keep production and financial records and review them. “You’ve got to understand your farm inside and out,” says Small. Take a hard look at your cost structure, and look for a better understanding of the main drivers of your costs. Also take a hard look at average years, says Small, “not just the disasters and the home runs.”

Knowing the winners and losers on your own farm can be a game changer for your profitability. By drilling down to analyze the profitability of each enterprise — don’t forget to add in overhead — you can identify the most profitable enterprises and determine how best to focus your resources on them. The results can be surprising. For example, many livestock producers don’t include fair market value for their feed. Instead they look at their own costs, says Lisa Kemp. Although for short-term analysis this takes some of the price fluctuation out of their choices, it doesn’t give a complete picture for long-term decisions. Jonathan Small also advocates focusing rotations on the most consistently profitable crops. A few years ago, he looked at historic yields converted to gross margins per enterprise on some very diversified farms in Saskatchewan (growing 10 to 15 different crops). He found that 80 per cent of the time the top four crops were significantly more profitable and, with amazing consistency, the bottom crops profited poorly. The farmers had diversified in part to reduce risks, but by growing the poorly performing crops, they actually drained profits away from the farm, thereby increasing total risk levels. “How many millions have been left on the table because of perceived risk aversion?” asks Small. As a note of caution, however, Small recommends long-term decisions based on many years of enterprise analysis. The reality of farming is that profit predictions based on the previous year aren’t very trustworthy. Of course, financial analysis has to work hand in glove with an understanding of your overall objectives. Diversification may be used to reduce farm income variability, not just to increase profitability in any one year. As well, diversification can also be part of an evolution as farmers move into higher-value crops, or use new crops to help rotations or fill new marketing opportunities.

January 2013

Continued on page 22

With today’s volatile commodity prices and rapid asset inflation, many older financial tools just aren’t up to the job

country-guide.ca 21

business

Continued from page 21

4. Improve marketing skills

6. Maximize resources

Farmers must excel in the field or in the barn. There are no exceptions. Good skills in other areas can’t make up for poor performance where it counts the most. “You’ve got to have green thumbs, or be great with livestock,” agrees Jonathan Small. “But,” he’s quick to add, “poor marketing can undo a lot of hard work.” Typically Small sees two-thirds of crops being sold into the bottom third of the price range in any given year. Although many farmers are getting more sophisticated at marketing, the majority still seem to do reactive sales, he says. It has a real cost. With today’s volatile prices, the gross margin spread for farmers with good versus bad marketing habits can easily be $100 per acre on the major western crops, says Small. “It’s colossal, and yet many of them put so much effort into it trying to get into the top third,” he says. “Swinging for the fence is just not a long-term successful strategy.” A small improvement — for instance, developing strategies to sell more of the crop into the top half of the price range — can make a huge difference to overall farm profitability. “Marketing is a process not an event,” says Small. When Kemp studied her larger cropping clients, she found that they all had similar yields with fairly similar costs, but had huge differences between revenues. The difference, she believes, is that some are better skilled at marketing, and some have grain storage. Those who could hold inventory seemed better able to manage some sales around pricing and tax implications.

“Efficient use of your assets should lead to more profitability,” says Lisa Kemp. Assets and liabilities are listed on a net worth statement and can also be found on the balance sheet, a financial snapshot showing how much your business is worth after debt. “Some of our really profitable operations are the most highly leveraged,” Kemp says. Although they don’t reflect direct profits, your asset turnover ratio (gross sales divided by total assets) and return on assets (net farm income plus interest and minus unpaid labour and return to management divided by total assets) are standard ways of quantifying how well assets are being used. Be forewarned though that with the swings in commodity prices and escalating asset values and high capital requirements, such tools may have reduced value on farms. Moreover, asset accumulation usually depends on what stage of farming you’re in. Still, that doesn’t mean they should be overlooked. On supply-managed farms, these ratios can be used to analyze quota or barn space investments. If there’s been an investment in new technology, the expense part of the income statement will certainly remind you. “Profitable farming operations tend to reinvest and pay down debt,” says Kemp. Look in the last 10 years to get a picture of how much priority the farm has given to investing in new technology. If it hasn’t invested, its efficiency has probably already started going down. As well, looking at trends in the farm’s gross margins statement over the same years should help identify which types of investment decisions were successful. “It’s about maximizing your assets,” says Kemp. “However, each farm should value if the investment in technology was worth it.” Kemp encounters some farmers who look at their bank account and forget about the capital expenditures, principal payment and draws they took, and then they wonder where their profits went. “Some people don’t give full credit to how profitable their farm is,” she says. “They just look at their (bank) balance and forget what loans they’ve paid off, what assets they’ve accumulated, off-farm investments and increases in living costs.” Gross margins often look pretty good until you add in overhead. Typically on most western Canadian grain and oilseed farms, 60 per cent of fixed costs are in machinery capital. The more equipment you have, the more you spend on finance costs and repair bills, and this drives depreciation. Depreciation on machinery is indicative of these costs and is the big swing factor in fixed costs. Farms of equal size often have markedly different levels of investment in machinery, Small cautions. “When we encounter a problem, it’s usually not because the farm is suffering from old equipment.” To get a better understanding of this key decision, Small suggests tracking depreciation of equipment or facilities per unit of production. CG

5. Manage tax position Paying income tax is a lagging indicator of profitability. Small says it’s important to always link income tax to the event year, even though it’s paid the following year. Secondly, even though the old saying is that you never go broke paying income taxes, some pre-tax planning can go a long way to increase profits on farms. So get your books up to date well before your year-end. Managing purchases around taxes just makes sense, but it does take some forward thinking. To take advantage of the lower corporate tax rate, more farms are incorporating, says Kemp. If you’ve had a profitable year, she says it may be a time to use profits for non-farm investments, such as RESPs or RRSPs. “This may be a good time to invest off of the farm,” says Kemp. Deferring sales to fight tax bills can work. However, be aware that deferring sales can result in snowball of inventory. “A growing inventory indicates a looming tax problem,” says Small. Small says the change in wheat and barley marketing in Western Canada means more due diligence is needed when choosing which companies you want to defer sales with. The Canadian Grains Commission only covers 90 days.

22 country-guide.ca

January 2013

Photo credit: Kari Fortune

business

Family deal

As the inside story on the succession for this machinery dealership shows, farming isn’t always unique

By Leeann Minougue here have been a lot of new hats showing up on the boss’s peg in Saskatchewan in the last few years, especially in farm country. Interest in farm succession is booming, and a whole generation of new farmers is reaching for the reins, anxious to take charge. But not all those new hats belong to farmers. Since last June, there’s been a new one hanging in Weyburn too, just inside the door of the branch manager’s office at the Young’s Equipment location. It’s a white cowboy hat, and it belongs to Sean Young, the oldest son of Tim Young, founder and general manager of Young’s Equipment, a Case IH farm machinery dealership with seven locations across the southeast of the province. When you hear that 26-year-old Sean has a business degree from Queen’s University, you might not expect him to be wearing a logo shirt and jeans and boots, sporting a bushy brown beard and taking calls from his rugby buddies. But then, how long ago was it that we learned we need to put away our stereotypes about farmers too? So already, I’m thinking there might be some serious similarities at play here. Realistically, too, you also might not expect Sean to be livJanuary 2013

ing in Weyburn, a town of 10,000 about an hour from Regina. As the locals will tell you, many young professionals who take short-term jobs in Weyburn choose to live in Saskatchewan’s capital and commute that hour instead. But Sean looks surprised when I ask him about it, as if he would have considered living somewhere else. The cowboy hat, by the way, belonged to Sean’s grandfather. “My granddad bought the hat when he was down in Arizona, right before he passed away,” Sean tells me. Until shortly before he died, Sean’s grandfather spent his summer days helping out at Young’s Equipment’s Regina dealership. But that isn’t really why I’m here. Instead, it’s because Sean is comfortable taking his place in the family business, and he has a clear vision of his path to the general manager’s office, as well as respect for his family’s legacy. It sounds exactly like what a lot of farm families are trying to achieve. While there are myriad differences between managing a major machinery dealership and running a farm, there are sim-

Continued on page 24 country-guide.ca 23

business Continued from page 23 ilar challenges any time a family business is passed on to the next generation. As I find out, too, the learning can go both ways, and in this case, the Young family has a strong family business succession strategy, with articulated goals and objectives, good communications and a proven commitment to education and planning.

Young’s Equipment Sean’s father, Tim Young has worked in the machinery industry all his life. He was a Case demo operator by the time he was 18, and after he graduated from the University of Regina, he became a Case product specialist. Tim then spent several years working in various positions at Case IH and with independent Case dealerships before he had an opportunity to take over the Regina Case dealership when the previous owner’s business went into receivership. That happened 25 years ago. Young’s Equipment began as a one-location dealership with investment from Tim as well as Tim’s father, uncle and cousin. Today, Tim Young has built up that single dealership, operating in Regina, Moose Jaw, Raymore, Weyburn, Assiniboia, Windthorst, and Davidson. At 58, Tim Young is far from ready to retire. But he’s been very proactive about developing a succession plan to keep Young’s Equipment in his family for at least another generation. Meanwhile, like many farm kids, Sean had shown an interest in his father’s business, and when Sean was 13, Tim and Sean sat down to talk about Sean’s future. They discussed Sean’s goals and how they could make them happen. So far, Tim says, that plan “actually came to pass exactly as written.” “That’s the way a lot of Sean’s life goes,” Tim says. “He’s always been extremely focused.” Once Sean decides what he wants to do, his father says, “you might as well get out of the way.” As a teenager Sean was successful in both sports and academics. He maintained good school marks while travelling with the provincial ski team, captaining the football team and playing rugby. His summers he spent at the dealership. “I started working sweeping floors,” Sean says. “I’ve driven our parts van. I’ve done all the nasty jobs.” 24 country-guide.ca

As with many farm kids, the plan for Sean’s future included university. Education is important to Tim. At 43, Tim enrolled in the Executive MBA program at Queen’s University. Tim enjoyed his time at Queen’s. “He loved the program,” Sean says. So maybe it isn’t surprising that when Sean went to Queen’s at Kingston, Ont. for his father’s convocation in 1999, he felt attracted to the campus too. That, and his father’s endorsement, made Sean’s decision to go to Queen’s an easy one. After he graduated with a degree in business, Sean moved on to the next item on his list, “getting experience outside the company.” Just as many farm families encourage their children to spend time at off-farm jobs, learning new skills and having some new experiences before they go back to the farm, the Young family believed it would be useful for Sean to gain experience in another business environment. Sean returned to Regina and spent 2-1/2 years working for FCC. He spent the first 18 months in customer service, then a year in business process management. This experience gave him some good insight into agricultural financing and farmers’ businesses.

Who’s the boss? For most farmers, non-family employees aren’t a big factor when it comes to succession planning. But for corporations with longtime employees used to making key decisions, things can be different. Hundreds of TV movies start with a boss’s son floating to the top of the family business, with chaos and grumbling co-workers in his wake. When Sean moved to Weyburn, he took over the office that had been filled by the previous branch manager, who remains a member of the Weyburn staff. “I wasn’t planning on him (Sean) going to Weyburn for another two or three years,” Tim says. But the timing was right. The current branch manager had “been wanting to slow down a bit.” This turned out to be the ideal opportunity for the former branch manager, for Sean, and for Tim. With Laurie Johnson still working at the dealership and on hand to provide advice as needed, Sean’s “kind of got an on-site mentor,” Tim says. “They’re both enjoying the relationship.

Making the choice Here’s another farm similarity. Farm succession plans, just like intergenerational plans for any family business, can become complicated quickly when more than one sibling has an interest in the operation. Sean has two younger brothers but, so far, he is the only member of this generation involved in the family business. “I was first in line,” he jokes. Tim says the decision to bring Sean into the business was simple. For him, knowing which son has the desire and the ability to work in the business “was pretty easy, actually. Sean always wanted to be involved in the business.” Sean felt the same way. “Right from a young age I liked being around the dealership,” he says. Both of Sean’s younger brothers are still in university. Chris, 24, is in his second year of medical school. Patrick is 22, and finishing his final year of a chemical engineering degree at the University of Saskatchewan. If either of the brothers was to become involved in the family business later on, Tim believes it would likely be Patrick. “He’s always wanted to be a chemical engineer,” says Tim, “but I don’t see that precluding him from coming into the business.” If that does happen, if seems likely that the Young family will work it out, in part because — unlike many small businesses — Young’s Equipment has grown to a point where, as Tim points out, “there’s more than enough to keep two brothers busy.” But also because both Tim and Sean place such a high value on communication. Sean is taking a long-term view of his future. Soon, he says, “I’ll start buying in.” This will ultimately make estate planning easier with respect to his brothers. But as Sean points out, “fair” isn’t always about money. As with most farm children who stay on the farm, Sean’s everyday work with his father means that he gets much more than his fair share of Tim’s time, something he values highly. When it comes to farmers, there’s a general perception that the older generation will retire when you pry their cold, clammy hands off the steering wheel of the combine. An older generation with a reluctance to pass on control can cause problems in January 2013

business

any family business succession plan — farming or otherwise. Tim is well aware of this. “I’ve seen a lot of businesses where the father can’t let go,” he says. Tim’s own father, Lloyd, was heavily involved in Young’s Equipment until shortly before his death. But the relationship between Tim and his father was a little different than a typical family business situation, mainly because Tim was the primary decision maker from the start. “I was always in charge,” he says. While his father had been involved in the farm equipment business, Young’s Equipment was Tim’s venture from the beginning, and his father viewed Tim as the expert. “I actually had a lot more recent and relevant experience.”

When it’s time to go Although he didn’t have a bad experience with his own father, Tim has already made arrangements to pass decision-making on to Sean gracefully. “We have a set plan,” Tim says. Sean will take on various roles within the company until Tim is 65 (seven years from now). Says Tim, “I’ll be a bit of an adviser, but (Sean) will be making all the decisions.” Sean is on board “My dad’s done a lot of things right and he’s done a lot of planning,” he says. “It’ll be a transition into me taking over as general manager, and him still being involved.” The two generations work together very well. Sean says, “My dad is very keenly aware of some of the ways that little disagreements can grind on us.” When something goes wrong, the two know it’s important to talk things over and make sure things are smoothed out, rather than let small problems fester. “We’re pretty open with each other,” Tim says. It’s also helpful for communications that Sean’s father treats him like an equal. “He knows he’s not always going to be right,” Sean says. They both believe that if the transition plan works out as planned and Sean becomes the next general manager of an ongoing, ever-expanding Young’s Equipment, it will be because of the importance both of the Youngs place on communication. The very fact that this plan is in place and that father and son have had such open discussions about the future, they also think, puts them ahead of many family businesses. January 2013

Future plans Young’s Equipment has just moved into a new building in Weyburn. They’re planning to expand their business in Raymore. And in Davidson, Tim plans to put up a new building within the next two years. They’ll need more staff. They’re already bringing in foreign technicians to help fill their labour needs, and doing their best to retain current employees. “Each and every person involved is an integral part,” Tim says. In January, as part of the celebration of Young’s Equipment’s quarter-century anniversary, the company is flying 300 staff and their spouses to Mexico for a week. “We’re taking every member of staff that can get away,” Tim says. Tim is also making sure everyone on his team has the right training. Sean and the branch managers from two other Young’s Equipment dealerships are enrolled in a three-year training program through Jerkins Creative Consult-

ing, an Illinois-based consulting firm that specializes in training for this type of business. The specialized program is giving the three of them a chance to learn about each other’s strengths and weaknesses so they can work well together as a team in the future. The three are also gaining, as Tim says, “a total overview of the whole business.”

Earned respect Sean realizes he’ll have to work hard to maintain and build on his father’s success, and to earn the loyalty of Young’s employees. “I don’t expect people to respect me or do what I ask them to just because my last name’s on the building,” Sean says. For now, he adds, “It’s still my dad’s company.” Over the next few years, Sean will stay on as branch manager in Weyburn, learning as much as he can about this aspect of the family business. The best part? Sean answers quickly, “I get to do something new every day.” CG

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business

An honest wage Paying yourself a salary can be a crucial step toward a healthier farm, for now and for the future By Amy Petherick

ou might think it was because Tamina Miller used to be a banker. But then, you’d have it backward. It was actually life on the farm that convinced Tamina and husband Norm that drawing salaries is the right thing for their operation. Nor, with their new ability to separately understand and manage both their farm and their personal financial status, have they had to second guess that decision since they adopted it. Together with their two sons and with Norm’s parents, the Millers farm about 5,000 acres of grain at Halkirk, an hour and a half east of Red Deer, Alta. They have their own corporation and their own land, separate from Norm’s parents. Norm has been farming full time for nine years and Tamina says that in that time, no matter how bad things were, they have always drawn enough of a monthly wage to live on. Before she came home to farm full time four years ago, she also started to draw a smaller salary for incidentals. But really Tamina says it was a low point in their family life, when Norm was working full time in the oil industry and was never home, that started them setting aside enough to keep Norm on the farm. Like the Millers, many farmers recognize that they get more out of farming than just money. But unlike the Millers, many don’t take personal draws for a rainy day or keep as close a watch on both their personal and business finances. According to David Rose, a farm business adviser with CIBC, people like Tamina and Norm are on the rarer side of the farmers he sees daily. “Agriculture isn’t a bad place to be if you bring the right attitude to the table,” says Rose. The question is, what can your approach to paying yourself a salary tell you about whether you’ve got that attitude? Jim Snyder is a farm business adviser with BDO Canada and has been a proponent of the “pay yourself first” philosophy for many years. He sees farmers determine what they will draw from the business through three main methods. The most common method is to look at what number will result in the lowest personal income tax. But Snyder warns everyone faces a day of reckoning with the taxman, and he suggests it can be a wiser to pay a little now than get caught later. Many families take a regular draw based on their personal needs, Snyder says. Again, though, this means making decisions based on external factors rather than on the health of the farm. The best approach is the third, Snyder says. It is to evaluate individual contributions to the farm, and pay accordingly. This can be particularly important on multi-generational farms, Snyder finds, especially when the incoming generation has no real control over the level of their earnings from the farm. 26 country-guide.ca

By turning the discussion away from how much each individual is worth and more towards the value of the jobs that each individual is responsible for, it can help head off disputes or resentments over whether everyone’s cheque is fair. It’s also important to have an open process, Snyder adds, because too often, the older generation doesn’t fully appreciate the value that the younger generation brings to the farm, and he sees too many young farmers getting raw deals as a result. “If we want to have a young, healthy and vibrant industry, we need to recognize the people coming into the industry for the contributions that they’re making to our business,” says Snyder, adding “the yardstick that we use to determine their compensation has to be relative to the job market that we’re in, not the job market that their parents were in.” Of course, every farm goes through business cycles, and it isn’t always easy or good to try to take money out in salaries. Brianne and Chris Brown of Beslea Farms Inc. in Yarker, northwest of Kingston, Ont., would like to pay themselves based on what the work they do is worth, but say it just isn’t in the cards for them right now. As dairy farmers, their milk cheque should be enough to take care of both their business and personal needs, and Brianne says she remembers her father and grandfather taking salaries and even bonuses in good years out of their corporation. When Brianne and Chris got involved, they earned the same full salaries as Brianne’s father and uncle. “Right off the bat we were making the same salary as my dad and uncle were, but for many years before that, we put in a lot of hours and we weren’t paid,” said Brianne. “If Chris and I didn’t enjoy what we’re doing this could be considered torture.” Since taking over in 2009, Brianne says they haven’t been able to afford to take any more than just what they need because of the higher amount of debt they’ve incurred. Plus, just when things were starting to get more comfortable, they moved their whole operation in 2011, which Brianne says made the most sense according to the many cost analyses they conducted, but also has them experiencing some short-term growing pains. Indeed, most farm business advisers understand that taking a personal draw isn’t always practical. Cedric MacLeod, a fulltime farm business adviser and part-time beef farmer in Centreville, N.B., says he hasn’t take a personal draw from the farm for seven years and has even invested in the farm using part of his off-farm salary. But that’s according to plan, he says. “I’ve justified not taking a salary because I’ve been growing equity.” “Understand your finances, understand your total compensation package, and understand what it really costs to have a manager on the farm,” suggests MacLeod. That way, when it’s time to turn the reins over to the next genertion, you won’t be dealing with out-of-date expectations from when you started. In other words, if you aren’t collecting a regular paycheque from your farm, don’t expect a gold star from MacLeod, because you aren’t necessarily doing anyone any favours. MacLeod suggests though that compensation packages can help deliver value where salaries don’t make sense. Not only do these packages offer the opportunity to add personal value with pre-tax dollars (for things like housing, utilities, etc.) but they also supplement wages earned by reducing living costs. “It’s important too, to recognize that there’s more to agriculture than just money,” says Heather Watson of Farm Management Canada. “But then it’s not something to be ashamed of to say, ‘I want to make sure I can be profitable so I can keep doing what I love.’” CG January 2013

TOOLMAN

How far forward should you market? By Errol Anderson t’s late January and you’ve just run into the house to warm up and check the grain futures. The market is strong. Oilseed futures are rolling higher. Strong gains in the U.S. soy complex are driving prices in the East, and they’re also giving western Canadian canola bids a boost. Plus there are rumblings of fresh export business in Vancouver. You pause a moment. These are profitable prices and it would be a shame to miss out on them if markets suddenly sell off. Is it time to start booking some cash sales for delivery next fall? But there’s work to do and before you answer that question, you’re jumping into the truck. You need to haul another load to the local cattle feeder this afternoon. Feed prices have jumped with this cold snap. Even new crop bids have firmed up. Making a plan to price is no easy chore. But the Achilles heel of many producers is their inability to control bullish emotion. Strong feelings, strong markets and logic don’t always go hand in hand. The most common farm selling strategy is the wait-and-see approach. How can you sell at the top if you sell too early, right? Often, producers store grain on farm until cash flow needs dictate grain must be priced. Procrastination and greed can team together, distorting sound marketing judgments even through the most bullish times. Remember that market cycles are magnified by human emotion. A commodity market traces the natural cycle of greed, then hope, fear and finally panic. You must be aware of the human psychology rippling through markets at all times. Once you understand the nature of a market and how it reflects human emotion, you’ll be better able to anticipate swings in grain and oilseed prices, and you’ll be in better control of your own egos. The typical human impulse in a rallying upwardtrending (bullish) market is to make the most money possible. You might call it plain old greed. Let’s say new-crop prices are racing higher. The tendency is to hold back in an attempt to sell at the top. But that strategy often doesn’t work out so well. Instead, once the market backs off a bit, selling erupts, followed by a period of hope that prices will regain their highs, followed in turn by the fear that you’re missing your best remaining opportunity, and then panic. There is opportunity in markets at all times. You can gain not only from rising markets, but falling markets as well. It is a two-way street. Realizing this, you have just as much to gain from falling prices as from rising prices, but it takes knowledge of your marketing alternatives to make profitable business decisions whether the market is a raging bull or a snarling bear. January 2013

A key to new-crop marketing is to start gradually. Mother Nature can derail your yields and also hurt quality, yet a variety of pricing tools can be used in your forward pricing program to help you capture profits before they disappear, which they have a nasty habit of doing. But first a tip… Don’t commit more than 20 to 25 per cent of your expected grain production prior to spring planting. Nor is it advisable to lock in more than half your production prior to harvest. Forward pricing 30 to 50 per cent of expected production ahead of the combine guarantees that the sales needed to meet your fall cash flow needs are priced profitably. Be prepared though, because this will require different marketing tools depending on the crop. You may start gradually signing deferred delivery contracts (DDCs). By starting new-crop pricing using DDCs, there is no need to provide upfront margin money if hedging through a commodity broker. But don’t aggressively sign DDCs. Inability to provide grain or proper quality to meet contract requirements could produce financial hardship after harvest. Payout penalties take a toll. Use DDCs up to your personal grain production comfort level. This production risk tolerance varies between farm operations. Individual farm pricing programs will pre-price from 10 to 50 per cent of expected harvest production using cash contracts. So let’s say you have contracted a portion of your expected production and you are reluctant to commit any more bushels. That means it’s time to add put options to your pricing portfolio. Put options are essentially price insurance policies. “Puts” guard against price spills. An advantage is that puts don’t commit you to delivery. Also, there is no risk of margin call. These are two key pluses. In fact, all your expected production could be guarded with this tool. Selling futures outright as a hedge also doesn’t commit you to deliver. But margin call risk can threaten new-crop marketing discipline. If using futures as a part of your pre-pricing program, be prepared for margin calls. They are the inevitable. Forward pricing using cash contracts, board contracts and puts can safely guard your profits well ahead of the combine. It is this blend of tools that can strengthen your farm profitability. CG Errol Anderson is a Calgary-based commodity broker and author of the daily ProMarket Wire report. He can be reached at 403-275-5555, email prowire@ shaw.ca. country-guide.ca 27

management

Insure it better For 2013, maybe you should move to Alberta or Ontario. Or better, let’s all head for Illinois By Gerald Pilger he biggest risk this year for North American grain and oilseed producers isn’t hail or frost. It isn’t even drought. In fact, it hasn’t got anything at all to do with production or anything production related. Instead, our biggest risk in 2013 is falling commodity prices. It’s a bigger threat than weather, and much harder to manage for three reasons. First, a perfect storm of current high commodity prices, high input costs, and increasing commodity price volatility has increased the severity of the financial blow that producers are exposed to if prices fall. Ask yourself: would your farm operation be sustainable if prices were one-half of today’s prices given current operating costs, land rent, and debt load? Second, while growers have been able to insure their crops against production losses for many years, there is limited opportunity for most Canadian producers to purchase insurance against falling prices. Ontario and Alberta are the only provinces offering agricultural insurance programs that protect producers against losses resulting from falling markets. Third — and most important — is that price insurance policies may themselves distort price signals to farmers. This is an even greater concern given huge differences in the way insurance prices are set in Alberta, Ontario, and the U.S. Simply knowing the supply-and-demand fundamentals is no longer enough for making planting decisions. Growers must also assess the impact price insurance could have on planting intentions.

Betting against the experts In 2005, Alberta began offering a dedicated commodity price insurance program to farmers when its Alberta Financial Services Corporation (AFSC) introduced an option on its crop insurance coverage called the spring price endorsement rider. While the program has since been simplified, it still protects farmers if the price of a commodity drops by more than 10 per cent. The question many Alberta growers have about this program is, “10 per cent of what price?” James Wright, risk analyst with AFSC at Lacombe explains that the insured price is “a forecast of what the crop will be worth in the fall.” In fact, there’s a complex process for generating the price, with a clear directive from the province: “The spring insurance price is a forecast of the average market price for the coming year.” In practice, in late January every year the prov28 country-guide.ca

ince’s price review committee sets a price for each grade of designated crops based on the price projections from Agriculture and Agri-Food Canada. Wright says that world grain stocks, expected supply and demand, and projected planting intentions are all considered in setting the price. Then, if the average of the daily October prices for a designated crop is 10 per cent or more lower than the price the committee had set for that crop, farmers who had purchased the spring endorsement by the April 30 deadline would receive an indemnity payment to bring the price of the insured bushels of that crop up to the spring price. This program works very well if there is a drastic price drop in a commodity after seeding due to unforeseen circumstances. For example, in 2009 when commodity prices crashed, payments were triggered in 30 of the 39 price-insured crops. Growers who had the spring price insurance on barley pocketed an additional $1.35 per bushel over the market price, durum growers gained an additional $2.97 per bushel, and the policy paid hard red spring growers $1.77 per bushel. However, 2009 was the only year the price option has paid out on hard red wheat and barley, and the only year there has been a payment on canola, the other major Alberta crop, was in 2005. To a degree, that’s what you should expect. After all, the marketing experts at the provincial and federal governments are likely better trained and better resourced than individual farmers for predicting what the price of major crops will be in October. Still, it’s also no surprise that despite their training, the experts aren’t as good at predicting the fall prices of minor, more volatile crops. For example, even though 2012 will be looked back on as a very profitable year for farmers because of high crop prices, AFSC still paid out $2.4 million to growers who had taken the spring price endorsement on crops such as black beans, Kabuli chickpeas, and lentils. For farmers, the primary lesson is that the Alberta spring price endorsement doesn’t protect them against a drop in current prices. Really, it has nothing to do with prices today. Instead, the rider protects farmers against prices falling below forecast, but since prices must drop 10 per cent or more below the forecast before a payment is triggered, the experts have given themselves a 10 per cent cushion on their price prediction. If farmers perceive there is little risk of prices dropping, they do not buy price insurance. This is likely the january 2013

management reason why only five per cent of Alberta farmers opted for the spring price endorsement in 2012. However, current high commodity prices, high price volatility, and high costs increase the risk that farmers face and Alberta growers need to pay close attention to the spring prices, which will be announced January 27, 2013. A complete table of the forecast spring price for all crops under the Alberta spring price endorsement program can be found on the AFSC website under the Risk Management — Insurance heading.

Cost-based insurance Instead of trying to predict prices, Ontario offers its farmers price insurance based on an estimated cost of production. Using AgriStability data as well as producer surveys, the Ontario insurance agency Agricorp determines a cost of production for each agricultural crop it covers. Farmers then have the option of purchasing Risk Management that provides a price support level of 100 per cent of that cost-of-production price. This is called the support price. For a reduced premium, producers can choose a lower support price of 80 per cent or 90 per cent of the calculated cost of production. Risk Management payments are triggered if the market prices fall below the support price. Market prices are calculated twice a year (pre-harvest and post-harvest) and are an average sale price of that commodity over specific six-month periods. Interestingly, the 2012 support price levels based on cost of production in Ontario were higher than the spring prices Alberta farmers could insure at. For example, the 2012 support price for hard red winter wheat in Ontario was $5.38 per bushel, whereas the spring price for hard red winter in Alberta was $5.17. Similarly, the support price for canola in Ontario was $12.01 per bushel this past year, compared to the Alberta spring price that was $11.34. And remember, prices in Alberta must fall at least 10 per cent below these levels before a payment is triggered. A spokesperson from Agricorp reports that payments to producers under the Risk Management Program have totalled over $100 million from 2007, when the program was introduced as a pilot, until 2011. Numbers for 2012 have not yet been finalized. It is little wonder then that over 9,000 Ontario farm operations participate in the Risk Management Program, knowing their cost of production may be covered.

Revenue protection But even these participation numbers pale when compared to price protection the USDA offers to American farmers. William Edwards, extension economist at Iowa State estimates between 90 and 95 per cent of U.S farmers who carry federal crop insurance also insure against falling prices. “Income from crop production can be low even when yields are not,” Edwards says “Revenue Protection insurance guarantees a certain level of revJanuary 2013

enue rather than just production. It protects you from declines in both crop prices and yields. The guarantee is based on market prices and the actual yield on your farm.” Revenue Protection uses Chicago Board of Trade (CBOT) futures market prices and the farm’s individual average production history to compute revenue coverage and a guarantee for that farm, Edwards explains. A projected price is determined during February by using the monthly average newcrop futures prices for corn (December futures contract) or soybeans (November futures contract). In other words, U.S. farmers are able to insure against price drops based on actual futures prices. Before seeding, U.S. farmers who participate in Revenue Protection Crop Insurance know what the minimum price will be for the crops they will grow without either having to contract that crop or worry that production problems may leave them short for commitments made. Furthermore, if the futures prices go up between February and harvest, U.S. growers are guaranteed the higher of the two prices. The USDA Risk Management Agency has a very detailed website which provides breakdown of forecast and harvest prices and payments for all crops right down to the county level. It’s at http://www3. rma.usda.gov/apps/pricediscoveryweb/Main.aspx).

Price protection without insurance Many farmers still believe that commodity prices are determined by supply and demand. When the price of a crop falls, they assume less of that crop will be planted. This would then reduce supply and raise prices. However, when insurance artificially supports crop prices, the switch to different crops may not occur, so the impact on prices for those who do not have price insurance must be even greater. This is especially true for growers in Saskatchewan and Manitoba where no subsidized price insurance is offered by their provincial crop insurance agencies, in marked contrast to Alberta, Ontario and the U.S. However, this does not mean farmers outside Ontario and Alberta have no opportunity to protect current high prices. While forward contracting will lock in prices, production risk increases if you have to fulfil a contract. Purchasing put options is another option growers can consider to insure a price. You can set a floor price for a portion or all of your expected harvest by purchasing an equivalent amount of put options. Even farmers who have the opportunity to purchase price or revenue insurance should investigate the cost of a put option. It may be less than insurance. Experience in Alberta shows few producers tend to insure against falling prices when prices are high. However, given high costs and higher volatility, this may be the time when it is more important to protect prices than when they are low and less likely to fall. So we come back to the central question. Can you afford a large price drop? If not, how are you protecting yourself? CG country-guide.ca 29

management

Agritechnica, eh? Country Guide goes behind the scenes at Agritechnica to see how the world’s largest machinery show plans to do more business with Canada By Scott Garvey, CG Machinery Editor

armers in Canada and Western Europe aren’t nearly as far apart as they used to be. Only a few years ago, farmers on the two continents merely shrugged when anyone talked about farming on the other’s turf, and they certainly thought that anything farmers might do on the other side of the Atlantic was irrelevant to how they might farm at home. But that was then. Now, Canadian-built zerotill drills are seeding French and German fields, and demand for European tillage implements is growing among Canadian farmers. Here’s more proof. While waiting in the departure lounge at Regina airport in September, I ran into two executives from a Saskatchewan-based seeding equipment manufac-

30 country-guide.ca

turer. They were flying to Paris, they said, to visit French farmers who have bought their machines. Lately, machinery company executives from both sides of the Atlantic have found foreign market niches for their equipment, and the place they go to get their best look at overseas market opportunities is Germany’s Agritechnica machinery show, which is organized by DLG, the German Agricultural Society. “It’s more and more one world, technology-wise,” says Ulrike Schmidt-Machinek, manager of international exhibitor relations at DLG. Distant parts of the world are getting closer in terms of their farming practices, he tells me. “And Agritechnica reflects that.” It might be more accurate to say Agritechnica has caused that, or at least contributed to it. Since its inception in 1985, the show has grown to become the world’s central location for the exchange of technology in the ag machinery sector. In fact, information exchange is really at the heart of what DLG exists to facilitate. “The aim of DLG is to be at the pulse of scientific and technical innovations,” says Freya von Rhade, project manager for Agritechnica. “That’s what we show at Agritechnica.” There doesn’t seem to be any dispute among manufacturers that Agritechnica is the prime venue to explore growth in new foreign markets. When Saskatchewan-based Morris Industries created a narrow-fold seed drill with features meant to appeal to Western European farmers, it chose to introduce it at the last Agritechnica. “Because we’re something new (in Western Europe), we’ll need to find partners to work with,” said Garth Massie, corporate agronomist at Morris in an interview at the company’s display booth during the 2011 show. The company expected Agritechnica to bring the right people together to help make that happen. “If you want to expand into China, you don’t go to China,” said another Canadian machinery company executive. “You go to Agritechnica.” In September, management at DLG invited Country Guide to its corporate headquarters in Germany for an exclusive behind-the-scenes look at what it January 2013

management

takes to produce the show, and also of course to talk about their plans for the 2013 event. Planning and organizing is a non-stop process, even though the show is only held every second November. “You have to finish the last project,” says von Rhade. “This takes until February. Then, immediately the concept (planning) for a new Agritechnica starts.” Aside from the machinery displays, each event includes organized discussion events around central themes. However, predicting what topics will be relevant for a show two years into the future involves a little crystal-ball gazing. A variety of people, including executives at the major machinery manufacturers, are asked for their input to help make sure organizers get it right. “There are two people working full time on Agritechnica to come up with the new concept,” von Rhade continues. “We’ll have internal meetings first. Then we’ll meet with all the people involved to get to the experience of everyone.” By September, 2012, the technical theme for 2013 discussions had already been established. “It will be about taking information from various (digital) sources and putting it all together,” explains Malene Conlong, manager of international media relations. Aside from the technical discussions, the show will also host a marketing forum on Africa for machinery manufacturers. “They (major manufacturers) said it was a perfect time and the perfect venue to start with a discussion on the whole subject,” says von Rhade. “They know it’s going to be a hard market to get into. They see it as a new market, but they know they have to have a different solution for it. What they’re expecting of DLG is a neutral platform to discuss the markets there.” Getting input from manufacturers is key to making improvements to the show. “For example, I’m in contact with Claas and John Deere already since six months, discussing what they will do next year at Agritechnica,” von Rhade goes on. “(We want to know) what was good and what was bad at the last event. Do they need space? Do they need room for press conferences or for evening dinners?” But the focus isn’t entirely on the exhibitors when it comes to making decisions about the next show. Staff also consult with farmers who came to see the show to find out what they liked — or didn’t like — about the last event. “We have working groups with farmers too,” von Rhade adds. Walking through DLG’s headquarters in Frankfurt provided a look at the various kinds of skills staff needed to organize this and the other, smaller events that the not-for-profit entity manages. In one office, a licensed architect works on the constantly evolving plans for exhibit floors. But ensuring exhibitors get all the space in the locations they want can be like putting together a jigsaw puzzle. And competition for floor space is intense. “We’ll have definitely more applications than last year,” says von Rhade. “Everyone who hands in an application by the first of February will be more likely to get into Agritechnica. We’ll use the (size) range they give us to try and make sure everyone gets in.” But that won’t be easy. Last year’s show was a sellout and space for the 2013 show is already at a premium. In other offices at DLG’s headquarters, several staff members work on developing new interest in the show among potential visitors from all parts of the world. It’s common to find employJanuary 2013

ees who speak at least three languages. And those skills get put to use during regular trips around the globe, even to places like Iran which has already committed to sending a delegation to the next show. Sending staff around the world to talk about Agritechnica is DLG’s primary method of promoting what the show has to offer. So far, the approach has been pretty successful. “The international number (of visitors) has grown a lot, at 97,000,” says von Rhade. Taking a personal approach rather than only advertising makes DLG’s efforts unique in the industry. Staff prioritize target countries and set to work attending key ag events held in them to get their message out. Lately, Brazil and India are two places where staff are stepping up their efforts. “We have A and B countries, and in A countries we do more promotion,” adds Schmidt-Machinek. “In Canada and the U.S. in the past six years we have increased our efforts tremendously.” With so much success using the personal approach, there are no plans to revert to standard promotions. Meeting with “multipliers,” people who can continue the discussion about Agritechnica with others in their home country, remains DLG’s key publicity strategy. The list of potential multipliers is long, says Schmidt-Machinek. “It’s a mix of everyone, to be honest.” CG

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YOUNG FARMERS: AGRICULTURE’S FUTURE. country-guide.ca 31

Production

Inching along If RTK doesn’t fit the way you farm, maybe you should change the way you’re farming By Ralph Pearce, CG Production Editor

ore and more corn and soybean growers are asking why the evolution of GPS-based signal correction technology seems to have slowed almost to a standstill. They want to know, where are the incredible nextgeneration breakthroughs that we were expecting? But there’s another question too. Why does RTK technology seem to work better in the West than in the East? The difference in farm size is part of the explanation. But it turns out that it isn’t the whole answer. For a lot of eastern growers, in fact, the coarsescale technology that comes standard on just about any piece of farm machinery with an engine and a steering wheel these days may be all they really need. At least, that’s the word from Larry Prong, agricultural management solutions specialist with Premier Equipment’s location in Elmira, Ont. Prong has been working with RTK technology for eight years, and although he agrees that there will be new opportunities to improve on-farm efficiencies, he also believes that on many farms, it doesn’t make a lot of sense just now to shell out extra dollars for extra accuracy. Farmers already have access to WAAS (Wide Area Augmentation System) and John Deere’s StarFire 1 (SF-1), he points out. “These bring it down to plus or minus six inches over a 15-minute time period,” says Prong. “A GPS receiver could be tracking everything it sees in the sky, plus it’s getting that additional correction source (WAAS or SF-1) from a satellite.” The next level of accuracy requires a subscription and can be found under different brand names, including OmniSTAR, with accuracy that can be measured down to the plus or minus two- to fourinch range. John Deere has similar technology, sold under the StarFire SF-2 brand, with a service that is 32 country-guide.ca

almost identical to OmniSTAR, although it’s exclusively for use with John Deere equipment. “As you go higher in accuracy, the amount of GPS drift you experience decreases, and you get closer to what’s called a ‘repeatable accuracy’ where GPS positioning (e.g., guidance lines) is consistently in the same place, time after time,” says Prong. RTK technology was originally created by Trimble Navigation with the goal of achieving that kind of repeatable accuracy. Then in 2012, Trimble announced its RTX technology, which provides 1.5inch accuracy, delivered via satellite or wirelessly. RTX has become the best value in high-accuracy technology, providing accuracy at a price point rivalling the previous OmniSTAR and SF-2 services. The RTX service is now available worldwide.

Systems and technology Even with an inexpensive service, cost can become a limiting factor in a grower’s decision-making process. Instead of receiving a correction signal that comes from a satellite, the new services utilize a base station, consisting of a separate GPS receiver that’s mounted on the ground in a fixed spot. That base station tracks satellites and it compares the position they report to the co-ordinates where the base is physically located. Since it’s ground based, it avoids the GPS drift that comes with other satellitebased correction signals. That correction is then transmitted using a 900MHz radio signal — much like an FM radio station — to whichever piece of farm equipment is equipped to receive and use it. The limitations are similar to any FM radio signal. As well, GPS accuracy begins to degrade for distances greater than six miles from the base station. January 2013

production

“We’ve worked with that and prior to the past three or four years, that was the model for high-accuracy RTK systems. And because the base station is a pretty high-tech GPS receiver, it was expensive,” says Prong. Prong notes that in the beginning, prices of base stations ran as high as $20,000, on top of the cost of what was on the tractor. “What has changed RTK in the last three or four years is the concept of cellular RTK. Instead of sending a correction signal using that 900-MHz radio, we’re connecting the base station to the Internet, and the Internet to a cellphone system. Then the tractor is dialing in through a wireless connection and the cellphone is hooking into the server on the Internet and getting the correction signal that way.” It’s similar to the so-called “hot sticks” that cellphone service providers lease to their customers. There are a number of designs for this technology, and Trimble was the pioneer in the field. Its service is known as VRS (virtual reference station) and was designed and made available to construction, surveying and engineering industries before it was introduced to agriculture. Their fixed base stations were setup in major urban centres, and then connected using the Internet which created a large-scale network. In southern Ontario, Trimble has a VRS network that reaches from Windsor to Orillia. There’s also a network in the Ottawa area. “It has significantly changed things in terms of the delivery of RTK to the customer,” says Prong. “Now, that customer doesn’t have to buy a $12,000 depreciating asset in the form of the base station. The model has changed though to a subscription service, so you

January 2013

typically pay $1,500 per year, and you get your sub-inch accuracy. Cellular RTK is not limited by range, like a 900-MHz radio, so it’s ‘go anywhere’ RTK, assuming you have good cell coverage in your geographic area.”

Accuracy’s good, but… Of course, it’s one thing to have the technology, but another to determine its value. Mervyn Erb, a certified crop adviser from Brucefield, north of London, Ont., is quick to note that size and crop rotations can play a part in minimizing the need or the value of an RTK system. In 2000, Erb performed a survey of his clientele and found that the average-size field was 44 acres. “I know it’s bigger now,” says Erb, but then adds, “To use or justify GPS and RTK on a lot of small fields is usually the stumbling block. Most fields out west are 160 acres or 320 acres in size — you hardly see any 80-acre fields anymore.” In Eastern Canada, Erb says, most farmers can do without GPS or RTK for tasks such as spraying their corn. Instead, they’ll follow their 30-inch rows as guides. “So that’s one-third of our acreage out of the picture,” says Erb. Besides, that eastern scenario compares with a farmer from Carrot River, Sask., who recently explained to Erb why he values the system so highly on his home farm. Because he has auto-steer and RTK on his 15,000-acre operation, his 75-year-old father can do most of the field work while the son runs the fertilizer plant. “Auto-steer and RTK have Continued on page 34

country-guide.ca 33

Production

Continued from page 33 made life a real low-stress deal for his dad, who says farming is now easier than ever,” Erb says. “And since they’re all no till, it’s a breeze.” But that’s out west, where the larger acreages not only justify the expense but offer a quicker return on investment. Another grower from Saskatchewan estimated he would have grossed an extra $5,000 on his 1,700 acres of lentils if he had had RTK. The problem was that instead of using RTK, he was relying on WAAS correction signals, which just weren’t accurate enough. Because of WAAS, he was planting some of his seed between the stubble, but some was also going straight into the old rows, which cost him on germination. That’s the key to RTK’s efficiency, or what Prong refers to as “repeatable accuracy.” It’s also why RTK technology was more quickly embraced by the higher-value vegetable crops sector and among organic growers, where the cost of production is considerably larger, so any savings on overlaps or poor germination are correspondingly larger as well. Improvements in net income of three to five per cent just don’t translate into that many dollars for a corn or soybean grower, whether the savings be in the form of seed, inputs or spray applications. But in vegetable crops, the margins reflect the higher cost of production values, so a three to five per cent boost can make investing in RTK an easy choice. “There were growers who could get a return on investment after three years in a vegetable crop, whereas it would have taken a cash-cropper eight years with the same system, based on saving that three to five per cent,” says Prong. Even so, that kind of arithmetic may be a bit short sighted. If RTK won’t pay for itself the way you’re farming now, maybe the idea shouldn’t be to dismiss the technology, but to change the way you’re farming so you can exploit the technology’s benefits. That may seem like a bigger stretch, but it makes sense to Prong. “The second model for RTK is to leverage the technology by changing the cultural practice and changing your farming operation to take advantage of the benefits of sub-inch accuracy.” The repeatability can provide not only accuracy, but also a precise record of past procedures, Prong 34 country-guide.ca

says. That can be a huge benefit for field operations, he says, especially if you switch to something like strip tillage, where you could till the strips in the fall and then come back in the spring and plant right into the middle of them, thereby reducing crop inputs, passes over the field, horsepower needs — and the savings continue to grow.

Look to the future Prong sees more growers making the slow shift from conventional practices to those that require some form of GPS/RTK technology, but the move has to make sense — and cents, if not dollars. Prong points, for example, to some growers who are getting rid of their markers on their 24-row planters, because they’re expensive and they break. “Now we have those growers using guidance for that purpose, and we have that level of accuracy (with GPS guidance) to control clutches,” he says. “My customers tell me consistently that it’s less than a two-year payback for that technology, and with the cost of seed at well over $300 a bag, you can’t afford to be wasting it in the headland with double planting.” In fact, with newer technology — also from Trimble — growers can plant the entire inside portion of a field, and then plant the headlands afterwards. The technology is precise enough that the tractor and planter “know” where the edge of the headland is, which means the farmer can drive inside of that boundary, plant into the fit ground, then have the option of working up the headland and planting into a non-compacted seedbed. “Ultimately, it comes down to answering the question, ‘What does it cost?’” says Prong. “If you’re running 2,000 to 5,000 acres, maybe you can pencil it out strictly on the efficiency gains. There’s going to be a size of operation where that’s going to kick in. But even our largest customers only have a couple of RTK tractors that they use specifically for planting, because that’s all they need high accuracy for in order to get the rows straight and take advantage of this section control from all of the planters, and eliminate the need for planter markers. They still have to be pragmatic and realize where the value is, whether it’s with planting or seeding, and then take advantage of it.” CG January 2013

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Production

Precision ag’s

report card

In our first of two reports, precision ag gets top marks for engineering. But do we know enough agronomy to exploit it? By Ralph Pearce, CG Production Editor hat still seems frustrating to some of us is that the future looked so bright 16 or 17 years ago when satellite technology splashed down into agriculture with the GPS-based yield monitor. Then, close behind it, equipment manufacturers began talking about variable-rate technology and its enormous potential for precision applications, reduced costs, increased productivity and even traceability. Yet VRT, as variable-rate technology has become known, still seems to a lot of farmers to be somehow stuck in orbit. It just hasn’t come down to earth the way yield monitors have. Adoption rates have been lacklustre at best, and in the past decade especially, there has been a lot of talk about whether the whole approach has been overpromised and underdelivered. Maybe though, if we can use a much older phrase, we’ve got the cart before the horse. Maybe the technology isn’t what has underdelivered. Maybe it’s us, which when you think about it may be a good thing, because it means that unlocking the potential benefits of VRT would be something that’s within our power to work on. In fact, it’s the one thing that everyone seems to agree on. VRT may have been solved as an engineering problem, but not as an agronomic or field management phenomenon. To those who spend time working with farmers on VRT, the growing realiza-

Chart 1: Priority and practicality of precision ag applications Item

High

Variable seeding

Variable lime spreading

Variable nitrogen

Medium

Low

Not yet practical

Variable fertilizer

Variable fungicide

Economic analysis

Different hybrids

Weed control

Source: Pat Lynch, CCA-Ont.

36 country-guide.ca

tion is that the more we learn, the more we find out how much more we still have got to learn, in this case about biological processes, management practices, weather influences and technological advances. Pat Lynch, certified crop adviser from Stratford, Ont. is vocal about precision agriculture. He breaks the technology down into eight different management parameters, and he asseses the economical practicality of their applications individually (see chart). Although not included in the chart, Lynch also cites the availability of software and apps, plus scouting and ground truthing as the key economic benefits.

One step at a time Far from believing that farmers are having trouble coming to grips with the technology, Lynch argues the opposite view, and again cites the mantra of “the more we learn, the more we realize how much we still have to learn.” Farmers are world class at adopting technology, Lynch says, and precision ag isn’t really any more complex than a lot of the genetics, chemistry and mechanical engineering that growers have already mastered. “There are a lot of reasons why something like variable-rate fertilizer doesn’t pay,” says Lynch by way of example. “A lot has to do with soil testing — it’s not nearly as exact as we think, and until we can get a better handle on available nutrients, variablerate fertilizer will always be a big question mark.” Another example from Lynch is how the big three nutrients — N, P and K — are tested, sold and absorbed by plants. “We sell our phosphate as P2O5, but we measure it in the soil based on levels of sodium acetate and in organic matter as straight phosphorus,” says Lynch. “Then we do a math calculation to come up with the amount available to the plant, which is taken up as H2PO4.” That might work in the lab, but in the real world, those reactions and interactions can be a lot messier and they are heavily influenced by conditions in the soil, such as heat, moisture and the presence of various soil micro-organisms. On top of that, nitrogen and potassium follow January 2013

production

much the same sort of model and list of influencers. So if variable-rate technology is going to work on the farm, somehow someone first has to wrestle with those complexities and their variability across the field. “Then when you go to look at yield maps to draw some conclusions, we know there are a lot of (additional) interactions,” says Lynch, noting for instance that one hybrid may respond to nutrients differently than another hybrid, and that the two may also differ in their responses to factors such as plant populations and weather. “And when you get a yield map, who’s capable of interpreting it?” says Lynch. “Area A yielded well in corn this year, but not three years ago, and Area B yielded well in soybeans but poor in wheat. Oh, and did I tell you that there was compaction in part of Area C which overlapped into Area B but the insects on the wheat only affected part of Area B?”

Get the team together David Swain believes farmers need a dedicated team of individuals who know what they’re doing. That team will have to include equipment dealers who know their machinery, agronomists who know their crops and soils, and even data analysts who know how to pull the numbers all together. Most of their time in that process will be spent figuring out how to ask the right kinds of information from the available data, says Swain, manager of ATS Marketing for North America, a division of AGCO. “We have to know how to ask the question to be sure we get the answer that’s needed, not just the answer we want.” It’s easy to get caught up in the toy-like “new iron” nature of equipment, notes Swain, but he contends that the search for useful variable-rate information has to focus on what the farmer needs, not on what the machinery can do. “What’s the value the farmer is looking for? Is it to avoid being completely wiped out at the end of the day? If so, then steering is one of the most wonderful things for the grower,” says Swain, who is based in Duluth, Georgia. “Is it efficiency, so I can get home sooner and spend more time with my family, even in season? Or is it just profitability? Or is it more land?” Continued on page 38

In corn, uniformity is a key goal. The question is, if uneven early growth due to uneven seed placement, poor-emergence environments and poor singulation causes these symptoms, does that mean GPS-based variable rate planter technology will automatically pay for itself? Don’t be surprised though if there isn’t an easy answer. Technology always leads agronomy, says Dale Cowan. And stay tuned. Next month, Country Guide focuses on variable-rate planters. January 2013

country-guide.ca 37

Production

Continued from page 37

The value statement

There’s another question too, Swain adds. Are farmers willing to make changes to their operation once they know what they did and what needs to change?

Finding the real value and the payback is a critical piece of the puzzle for precision ag. But so is patience, because the payback simply doesn’t come in one or two years. Swain points out that vari-

Too much of a good thing. The only difference in these rows was down pressure at planting.

Working it out Dave Gillespie knows he isn’t exactly on the cutting edge of buying precision ag technology. Farming near Thamesville, Ont., Gillespie works 1,200 acres, but doesn’t have autosteer or a lot of complex variable-rate equipment. Gillespie does have a yield monitor, but it’s now 10 years old and runs with an uncorrected signal. He also lays down his own test strips and incorporates his yield maps to show response to nitrogen or planting or hybrid selection. “What I’ve been doing since I’ve been yield mapping is, I go out and lay down strips every year,” says Gillespie, who works with agronomist Dale Cowan of Southern Co-operative Services on specific aspects of production information, always trying to tweak, justify and learn. “You can put a strip anywhere you want in the field and I’m logging planting, spraying, fertilizer. Then I can leave a strip, and look at a yield map and see what it did in that strip. Or do a split planter on varieties,” Gillespie says. “Ever since I went to a 16-row planter, I’ll put two varieties in it and go plant. Then at the end of the year, I take a yield map and I can see across the field how each variety did.” From his generated data, Gillespie has seen, for instance, that some areas respond to nitrogen, but others don’t. Then he’ll do a high rate or low, and see how specific areas respond. That gives him the opportunity to do some variable-rate applications, and gather more information about what works best in his fields. And in the end it becomes a simple equation: If it works, he keeps doing it. “We can do all we want,” Gillespie says, “but I think it’s about fine tuning the economics, and that’s really how I base my decisions.”

38 country-guide.ca

able-rate fertilizer failed, largely because farmers didn’t want to have to wait three or four years to see if they made any progress. But with variable-rate lime, it provided a quicker benefit. “That should have been the foundation because nutrients don’t function if pH isn’t in the right place,” says Swain. “But they (farmers and agronomists) saw immediate progress with variable-rate lime, so it took off. And the same thing happened when we got to light bars. Yes, they probably made us more efficient but as a whole, I don’t think they gave us the incremental gain that everybody expected them to.” In the past 10 to 15 years, there’s been no question that farmers are ready to adopt technology to improve their operations. For example, farmers have adopted yield monitors to see where their yields are highest and lowest. Many have added a light bar to steer straighter, and added a planting monitor to ensure the crop is planted to a consistent depth. On their own, such technologies can increase efficiency, but not likely to the level that many people expect them. Sue Gray is an agronomist who works with John Deere and is based in Geneseo, Illinois. She attends workshops and seminars and hears growers talk about expenses and cost savings, but often without some sort of benchmarking to put their claims into perspective. During her presentations, Gray develops a scenario in which to calculate how much a grower can save from the kinds of capabilities, for example, in the John Deere Section Control and Autotrac systems, based on how complicated the farmer’s field is. Gray maps out the field, including the overlaps that typically occur at planting, but that gets her into the first challenge. How much do those overlaps cost? “I might estimate it at four per cent if I physically plot that out in a field or map,” Gray says. “But the values will vary on the field size, the angle of the drainage ditch that goes through the field, or how many curvy borders they have. It will also depend on planter size, because obviously, if you have a four-row planter, you can minimize overlaps on angles versus one that’s 16 up to 48 rows, if you’re not using something like Section Control, although on the other hand, the larger planter will eliminate possibilities for overlap on adjacent passes through the field.” January 2013

production

There are some estimates that overlaps at planting can run as high as 10 per cent, but as Gray is quick to illustrate, those values are hard to quantify, in part because of the lack of benchmarking but also because of a little wishful thinking. Gray attended one conference in which a farmer spoke of the expectations many of them have of their agronomists. “He mentioned that he did recently invest in guidance for his equipment, and the specific benefit to him financially,” relates Gray. “But my question was, ‘How do you calculate that?’ I mean, of course you’re saving time in overlaps and you’re saving on input costs relative to overlaps, but from one year without guidance to the next when you do have it, how can we precisely compute those savings?” It reminds her of a university researcher who suggested it’s only natural a farmer would say their operation improved with the purchase of a new system or a new unit or a new piece of technology. They want to believe they’re getting value from that purchase, and hopefully, that’s the result. But how is that defined?

Hatchet roots could be a prime target of precision ag technology as we continue our reporting on variablerate planting.

Putting it all together A bit of perspective goes a long way in coming to grips with the past, the present and the future of precision ag. Part of the challenge is to define precisely where the trend will help the grower. The difficulty is understanding how the different impacts of the technology will all work together. For instance, Dale Cowan nods his head as he looks at the chart that Pat Lynch produced, but like Lynch, he also knows that it can be tempting to fixate on one parameter at a time, without thinking about how all the different aspects and field complications will work together. “Hardware and software have always outpaced the understanding of how to use it,” says Cowan, senior agronomist with Southern Co-operative Services in Rodney, Ont. “Somebody comes out with a new product that can do variable-rate seeding, but we haven’t done any research to say this is why, where and when you do variable-rate seeding. “I’m not saying it’s bad technology,” Cowan says. “But you need an expert system around it if you’re really going to make money with it, and a lot of that stuff is still in its infancy.” Some of the confusion comes from reliance on the technology, or the colour of the hardware, which Cowan insists is beginning to fade in its importance. But there is still a lot of knowledge that just isn’t there, partly because our understanding of what’s happening deep in the soil profile is also in its infancy. Yet Cowan also sees tremendous opportunity. “If you’re buying this technology to continue to farm the way you farm, then you’re going to have a hard time getting the payback,” says Cowan. “But if you’re buying the technology with the idea of ‘I genuinely want to improve, I’ve identified several areas of my farm where I really want to do a better job,’ and if you work down that path, I think that’s where the paybacks will start.” It will take commitment, Cowan says. In the final analysis, he believes, you have to look at the benefits as coming from the decisions that the farmers make, not from what the machinery is doing, and you have to consider those impacts over a realistic time frame. “If I improve my production by two per cent per a year,” Cowan says, “in 10 years I’m 20 per cent better than I was 10 years ago, and that’s a huge improvement.” CG January 2013

Here’s the R7 If you haven’t heard about it yet, you can expect to. The R7 is coming, and as just one sign of the buzz that’s growing around it, in late October, the U.S. Agricultural Retailers Association named the new management tool from Winfield Solutions the year’s best new technology. According to Croplan/Winfield agronomist Colin Smith, the R7 provides a surprising wealth of data collected using satellite imagery and soil maps with performance details based on hybrids, population rates, fertilizer response rates and other agronomic conditions. The maps can also blend in the impacts of weather, topography and geography, maturity zones and soil textures. “The goal that Croplan has set out to achieve with all of the data is that hybrids get turned over so fast in the industry now that when a new hybrid comes out, we want to be accurately forecasting or predicting the maximum potential,” says Smith. The computer program is now available in Canada. In the simplest of terms, it can take the geographic location of the area, combine it with the soil type and variability (based on temperature reflection off the soil, which should correlate to organic matter), and show the distinct zones in a field, and suggest how they should be managed accordingly. The program won’t make specific recommendations, but it will provide a foundation for a farmer and an agronomist to build a plan for that field, based on available information, right down to the number of bags of seed that will be needed. Most importantly, this is not a tool exclusive to Croplan genetics. The system tests the leading hybrids from Dekalb, Syngenta, Mycogen and Pioneer. It’s also adaptable to other precision ag applications. “It’s set up so you can export a shape file for variable rate and these different application rates for fertilizer or if you want to do a chemical application,” says Smith, adding that a grower can also import yield maps, adding more information for future discussions.

country-guide.ca 39

PRODUCTION

#PestPatrol

with Mike Cowbrough, OMAFRA Have a question you want answered? Hashtag #PestPatrol on twitter.com to @cowbrough or email Mike at mike.cowbrough@ontario.ca.

With research from Peter Sikkema, Francois Tardif, Joanna Folling and Holly Byke

Why are pre-plant herbicides so critical in soybean production? If you grow soybeans and have glyphosate-resistant Canada fleabane, common ragweed or giant ragweed growing in your fields, the use of pre-plant herbicide tank mixes will be your best chance for achieving good control of these weeds. Once the soybean crop has emerged, management options for these three weeds are either limited or do not provide acceptable control.

A little bit about giant ragweed

Canada fleabane size on May 24, 2011. This is beyond the ideal stage to effectively manage with either herbicides or tillage.

Why are these weeds so difficult to manage?

Pre-plant management options for Canada fleabane

Populations of all three species exist in Ontario that are resistant to glyphosate. In addition there are also populations of Canada fleabane and giant ragweed that are resistant to both FirstRate (cloransulam) and Classic (chlorimuron).

Table 1: Visual control of glyphosate-resistant Canada fleabane when herbicides with different modes of action were tank mixed with glyphosate and applied prior to planting soybeans.

The basics about Canada fleabane (a.k.a. mare’s tail and horseweed) • Total field sites in Ontario where glyphosate-resistant populations exist: 84 • Essex (56), Kent (19), Elgin (7), Lambton (1), Niagara (1) • Tall plants (1.5 m (4' 6") or higher) can produce more than one million seeds • Majority of seeds (i.e. 80%) will germinate upon dispersal • Seeds are dispersed by wind and will move several hundred metres

Glyphosate tank-mix partner

Rate

% Control

Sencor

600 g/ac.

Eragon + Merge

14.4 g + 0.5% v/v

FirstRate*

17 g/ac.

Amitrol 240

3.36 l/ac.

2,4-D LV Ester 700**

0.32 l/ac.

1 l /ac.

Liberty

* populations of Canada fleabane are also resistant to this herbicide **must be applied a minimum of seven days prior to planting

A giant ragweed plant past the ideal stage for control with a herbicide. Source: Peter Sikkema

• Total field sites in Ontario where glyphosate-resistant populations exist: 64 • Essex (64), Kent (5), Lambton (5), Lennox & Addington (1), Middlesex (1) • Considered one of the most competitive species in Ontario • Female plants (seed producing) are wind pollinated by male plants • Wind-borne pollen can travel several kilometres

Pre-plant management options for giant ragweed Table 2: Visual control of glyphosate-resistant giant ragweed when herbicides with different modes of action were tank mixed with glyphosate and applied prior to planting soybeans. Glyphosate tank-mix partner 2,4-D LV Ester 700* Eragon + Merge FirstRate**

Rate

% Control

0.32 l/ac.

14.4 g + 0.5% v/v

17 g/ac.

Data based on seven studies, except FirstRate data which was based on eight studies A small seedling fleabane plant shown in late August, 2011 that germinated after cereal harvest. 40 country-guide.ca

A two-leaf giant ragweed seedling.

* populations of giant ragweed are also resistant to this herbicide **must be applied a minimum of seven days prior to planting

JANUARY 2013

ÂŠ 2012 Advanced Drainage Systems, Inc.

LAND IMPROVEMENT CONTRACTORS OF ONTARIO

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www.drainage.org

MANAGING SOIL MOISTURE How sub-surface drainage benefits crops and the environment The objective of cropland sub-surface drainage is the management of air and moisture in the crop root zone while conserving as much useable water as possible.

table to replenish moisture in the crop root zone. The amount of movement is determined mostly by soil type and the continuity of connected pores. Tillage can damage these pores.

Healthy, productive soil is typically made up of 45 per cent mineral material (sand, silt or clay), five per cent organic matter (more is better), 25 per cent air and 25 per cent water (soil moisture). Pore space available for air and capillary water may be reduced by soil compaction from equipment activity on wet soil, soil structure degradation from too much tillage and poor crop choices, and in the humid Great Lakes Region, excessive soil water fills the space needed for air.

Hydroscopic water also remains after sub-surface drainage. It forms a thin, tight layer on soil particles and cannot be removed by drainage or by crops.

To achieve good air-water balance, subsurface drainage can be used to remove free or gravitational water from the crop root zone. This is water that fills soil macropores such as earthworm holes and cracks. As the water is removed air enters the soil. Gravitational water cannot be used by most crops and because of soil conditions that contribute to the water surplus it has very limited potential for groundwater recharge. In spite of sub-surface drainage, the soil continues to hold capillary water. This is the water, i.e., moisture, that can be used by crops and makes up the 25 per cent water that healthy soil needs. It is held cohesively in a layer around soil particles and in small spaces called micropores in the capillary zone – the soil between the water table and the soil surface. The capillary zone becomes the crop root zone. Water can move up from the water

The air and water balance is important to grow healthy crops. Adequate air is needed to allow soil to warm up quickly for early plant growth. It also makes possible large, deep root systems that can reach sufficient capillary water in dry weather and permits the necessary oxygen-carbon dioxide exchange. Various forms of soil life such as earthworms and mycorrhizae (fungi) can flourish only if they have access to air. Soil life is important for nutrient retrieval by plants, for organic matter breakdown and for maintaining healthy soil structure. The depth of drain pipe installation establishes the water table elevation through periods of excess soil moisture, Forms of soil water

Illustration credit: Queen’s Printer for Ontario

Further sources of information • Best Management Practices – Cropland Drainage, Ontario Ministry of Agriculture, Food and Rural Affairs: http://www.omafra. gov.on.ca/english/environment/ bmp/series.htm#22 • Handbook of Drainage Principals – Publication 73, Ontario Ministry of Agriculture, Food and Rural Affairs: www.drainage.org

such as periods of heavy rainfall and during cooler seasons when evaporation from the soil and transpiration of moisture from plants is less than the precipitation that adds to soil moisture. Shallow sub-surface drains placed close together provide the most uniform drainage and minimizes the volume of soil drained aiding water conservation. This kind of installation requires precision equipment and skilled operators. Drainage design is important. In addition to improving soil health and reducing food production costs, sub-surface drainage reduces the runoff of sediment and nutrient, e.g., total phosphorus. It results in the filtration of water as it moves to drain pipes. Because water can enter air-filled pores during rainfall events, this extends the time required for water to leave cropland and often results in more uniformity of stream flows.

The Land Improvement Contractors of Ontario (LICO) is an association of professional drainage contractors and suppliers of drainage pipe and equipment. The focus of their business is soil moisture management to enhance crop production in Ontario.

LAND IMPROVEMENT CONTRACTORS OF ONTARIO

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12-12-10 4:17 PM

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• Farm Drainage

When working too hard is a disease Of course it’s important to work hard, but what do you do if someone you know takes it too far? By Pierrette Desrosiers, psychologist and coach

t’s good to be a hard worker, but sometimes people actually suffer from an addiction to work, known as workaholism. For instance, Carole criticizes Martin for only thinking of work. “The best years with the kids are passing him by,” she says. “He’s never there. Even when he’s in the house, the farm is all he thinks and talks about. That’s all he lives for.” With a bit of pride, Martin replies, “That’s what it takes to succeed as a farmer.” Is Martin a hard worker, or a workaholic? Workaholism is a pathological relationship between people and their work characterized by a compulsion to devote ever more time and energy to their occupation at the expense of other aspects of their lives. It persists even when there are negative consequences for their health, family life, and social relationships. This dependence, which seems positive and often attracts admiration, can have very serious consequences. Workaholism is the only addiction that is praised. Workaholics are characterized by three distinct traits of varying intensity: a great need for control, perfectionism, and egotism. Experts agree there is a difference between hard workers and workaholics. Hard workers do everything necessary to accomplish their work. They can work long hours for a short, intense period, such as during seeding and harvesting, but the goals and deadlines are clearly defined. When the work is over, hard workers easily disengage from their tasks. They also set aside some time for their family and friends. In contrast, workaholics live only for work, sacrificing sleep, food, exercise, family, friends, leisure activities. Their lives are out of balance. They also set high performance standards for themselves and do not easily accept weakness, criticism or failure. Unlike hard workers, if workaholics do not have work or lofty goals, they feel depressed, anxious, and worthless. During a vacation or time of rest, Martin might say, “I feel like a caged wolf. I have to be doing something. I hate wasting my time.” This addiction can have severe consequences on health, families, and businesses.

Health Workaholics are chronically stressed, which can lead to serious physical problems including headaches, ulcers and chronic fatigue. They may also suffer from psychological problems such as irritability, impulsiveness, anger and anxiety. 46 country-guide.ca

Workaholics are also excellent candidates for burnout as well, and will often adopt behaviours to reduce suffering, such as taking medication or abusing alcohol or drugs.

Families Workaholism causes suffering for all of the workaholic’s family members. Spouses are usually very dissatisfied with their marital relationship, leading to a higher incidence of divorce than among the general population.

Businesses You might think a business with a workaholic boss would thrive, but this isn’t what happens. As bosses, workaholics are typically very difficult and aggressive. They are poor team players and burn out their employees. So here is some advice for workaholics: • R espect your need for seven to eight hours of sleep. Lost sleep cannot be regained. • Set aside one day per week for family and friends. Only make exceptions for true emergencies. Answering those emails because now seems like a good chance to get at them doesn’t count. • Take a balanced approach to eating. Don’t skip meals or rely on fast food. If you don’t take time to be healthy, you will have to take time to be sick. • Separate work and family life as much as possible. Get interested in other things, including what others around you are doing. • Plan your day with a beginning and an end. Establish a list of priorities and concentrate on one task at a time until it is done. • Work to live, don’t live to work! Always keep in mind that you run a business so you can live comfortably. Don’t confuse who you are with what you do for a living. You are more than your business. • Lastly, leave this column out where your family and even your friends and employees will be sure to see it. Then screw up your courage and say, “Does that remind you of anyone?” Just be sure to listen to what they say. CG Pierrette Desrosiers is a work psychologist, professional speaker, coach and author who specializes in the agricultural industry. She comes from a family of farmers and she and her husband have farmed for more than 25 years. (www.pierrettedesrosiers. com) Email: pierrette@pierrettedesrosiers.com. January 2013

w e at h e r MILDER THAN NORMAL

s C pe no old rio w y ds

able Vari rmy sto ods peri

PR E

CI P

IT AT I

NEAR-NORMAL SNOWFALL COLDER THAN NORMAL

M s to ild per rmy iod s

RNO R

NEAR-NORMAL TEMPERATURES AND SNOWFALL

s C pe no old rio w y ds

Va sn riab sp ow le ell y s

NE A

M AV ILD ER ER AG T E HA PR N EC NO IP RM ITA A TIO L N

NEAR NORMAL

COOLER THAN NORMAL

ONTARIO

January 20 to February 23, 2013 January 20 to February 23, 2013

Jan. 20-26: High pressure brings in several settled days with seasonal to cold temperatures but look for squalls with heavier snow near larger lakes. Jan. 27-Feb. 2: Expect a few bright days with seasonal readings but milder winds usher in snow on a couple of occasions, chance heavy in places. Cold, flurries north. Feb. 3-9: Fair weather dominates the week with changeable temperatures. Blustery at times. Scattered heavier snow on a couple of days mixed with rain in the south. Feb. 10-16: Milder southerly winds bring thawing to several southern areas. Seasonal to cold elsewhere. Fair skies interchange with some snow, mixed rain south. Feb. 17-23: Mild spells and bright skies prevail on a few days this week. On a couple of windy days expect heavier snow or rain in the south. Seasonable, flurries north.

QUEBEC Jan. 20-26: Mostly fair skies prevail but expect two or three periods of snow, chance heavy in a few regions. Temperatures vary but trend to the cold side with higher wind chills. Jan. 27-Feb. 2: Pleasant on a few days as sunny days combine with seasonal temperatures. A disturbance brings in snow, chance rain in the south on two days. Feb. 3-9: Temperatures fluctuate from mild to cold under blustery winds. Generally settled but disturbances bring snow January 2013

on a couple of days. Possibly heavy in places. Feb. 10-16: Fair skies are interrupted by occasional snow this week. Cold but milder days bring occasional thawing to the south and a chance of rain on one or two occasions. Feb. 17-23: Milder spells and sunny skies bring pleasant weather and thawing on several days this week. Periodic snow or rain south. Seasonal with flurries north.

ATLANTIC PROVINCES Jan. 20-26: Generally fair skies with flurries but heavier snowfalls along windward coasts. Variable temperatures with a few milder days. Windy at times. Jan. 27-Feb. 2: Fair but expect two or three blustery days with intermittent snow, heavier near windward coasts. Seasonal temperatures with highs above 0 on the coasts. Feb. 3-9: Fair and bright days interchange with some snow. Chance of heavy snow, mixed with rain on the coasts. Blustery. Seasonal with a few mild days and thawing. Feb. 10-16: Variable conditions as milder southerlies and thawing alternate with windy, colder days. Occasional snow on two or three days mixed with rain on the coasts. Feb. 17-23: On a couple of bright, sunny days temperatures climb well above 0. Windy at times. Intermittent heavier precipitation with a chance of heavier snow in places.

NATIONAL HIGHLIGHTS Winter is expected to maintain its icy grip on much of Western Canada well into February. In contrast, relatively mild conditions are anticipated in far eastern areas of the country in this same period. A storm track is likely to be set up between these two temperature extremes. As a result, a changeable and unsettled weather pattern is forecast from southern British Columbia, through the northern United States and northeastward through southern Ontario and Quebec. Snow, high winds and fluctuating temperatures will become common in these areas. Although precipitation totals may remain close to normal, some regions could receive heavier-than-usual amounts in the above noted areas. Otherwise snow and rain over the rest of the country are expected to average close to longtime normal values.

Editor’s note:

Where’s my weather page? Look in every second issue for your month-long Country Guide weather forecast during the winter months when we’re publishing every two weeks. Prepared by meteorologist Larry Romaniuk of Weatherite Services. Forecasts should be 80 per cent accurate for your area; expect variations by a day or two due to changeable speed of weather systems. country-guide.ca 47

ACRES

By Leeann Minogue

Schedule that! Sometimes, having two bosses is just the way it has to be round two o’clock on Friday, Ron Anderson pulled his blue Freightliner truck off the weigh scale and over to the bins to unload his wheat at the Hansons’ cleaning plant, just in time to clear the way for Brian Miller’s red Ford grain truck. Brian had already driven into the Hanson’s yard and was heading straight for the scale. “What the heck?” Jeff Hanson wondered, walking through the snowdrifts to see what was going on. Brian Miller hadn’t cleaned grain for seed for years, at least not at the Hanson Acres cleaning plant. “Good to see you,” Brian said. “Hope I’m not too late.” Jeff smiled and nodded, not quite sure what was going on. Brian kept talking. “Ran into your dad in town a few days ago. He said if I got my flax here by the end of this week you’d have time to get it cleaned before you switched over to wheat. Guess I’m cutting it pretty close, showing up here on Friday afternoon, hey?” “Oh. Uh… sure. No problem. Not too late. Grandpa’s in the office,” Jeff said, pointing toward the cleaning plant. “Why don’t you head in there 48 country-guide.ca

for a couple of minutes. Get him to pour you a coffee while I move the auger around and empty out a bin so we have a place to put that flax.” An hour later, Ron and Brian had dumped their trucks and gone home. Jeff’s grandfather had taken his coffee drinking across the yard, relocating from the cleaning plant to Jeff’s parents’ kitchen table. Jeff’s wife Elaine had also made her way to Donna and Dale’s house, so Jeff’s whole family was around the kitchen table by the time Jeff threw open the door and stomped in, much louder than technically necessary to knock the snow off his boots. “Did something break down out there?” Jeff’s mother, Donna asked, while she arranged some homemade bran muffins on a plate. “Wouldn’t that have been great?” Jeff said. “Trust me. I had enough going on.” “I was wondering why you told both those guys to come by at the same time,” said Grandpa Ed. “Seems like things’d go a lot smoother if you spread things out a bit.” “You think?” Jeff said. “Geez Dad. We talked about this.” “Not you too,” Dale said, putting his knife down. “It’s bad enough your mother’s been harassJANUARY 2013

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ing me all day. Look, I didn’t have dessert yesterday. I only had one sandwich for lunch. I really don’t think it’s anybody’s business but my own if I want to put butter on this muffin.” Jeff rolled his eyes. “I don’t care what you eat. This is about Brian Miller. “Oh, good,” Dale said, picking up his knife again. He reached for the margarine, but his wife Donna pulled the plastic container away from him just in time.

Donna shook her head. “Maybe this isn’t the best way to run things.” “Really?” Jeff said “I don’t know why you put that stuff on the table if you don’t want people to use it,” Dale said to his wife. “Dad,” Jeff said. “Brian Miller just showed up here with a truckload of flax. Says he’s coming back with another load before supper.” “Oh. I’ve been down in the basement trying to do something about that furnace filter. Didn’t see him come in. Sorry about that.” “We finished cleaning flax yesterday. Maybe you noticed? I spent all morning switching all the screens and indent cylinders in the cleaning plant so we could clean wheat. I thought that was the plan.” “Yeah. Sorry,” Dale said. “I ran into Brian at Peavey Mart last week. He said something about cleaning some flax. I told him he could bring it on over.” “Dad. If we’re going to make this work, you have to tell me when you line up business. It’s going to take me half a day to switch things back. And he only has 25 tonnes to clean in the first place. Then I’ll be another half-day switching everything again. We’re just lucky we had an empty bin he could put the stuff in.” “I guess I should’ve mentioned something about Brian. But I thought he was January 2013

just talking about cleaning flax to be polite. He hasn’t cleaned seed here for years. I never thought he’d show up.” Donna shook her head. “Maybe this isn’t the best way to run things.” “Really?” Jeff said, letting out one last sarcastic comment before he gave up being angry and settled into a chair next to his father. “We’re going to have to figure out a different system,” Jeff’s wife Elaine said. “Do you think it might work better if just one of you booked grain for the cleaning plant?” “That’d be pretty funny,” Ed said. “If somebody at the Peavey Mart told Dale he had seed to clean, Dale would have to phone home and get his kid’s permission first. Sort of like inviting a friend over to play.” “All right then, Ed,” Elaine said. “Do you have a better idea?” “Well, yeah,” Ed said. “You guys could use that calendar thingy on your phones you’re always talking about. Set up a system for the cleaning plant so both of you know what you’re cleaning when. Keep it up to date. You all seem to like sending those damn text letters to each other. You could just use one of those to let each other know when you add somebody new to the list.” Jeff and Dale looked at Ed, open mouthed. “I figure, if you’re going to keep pulling those damn phones out and staring at them when you could be working, you might as well use them for something useful once in a while,” Ed said. Jeff and Dale had spent the whole fall trying to find a solution for scheduling the cleaning plant. Something had to change. Two bosses were too many, but neither of them had wanted to cut the other completely out of the picture. “You’re right Ed. That might work,” Elaine said. “Jeff and I use an app to run our schedule at home. Play school. Meetings. It works really well. I’m sure we could figure out something like that for the cleaning plant.” All of a sudden, Elaine’s phone buzzed, Jeff’s made a high-pitched dinging sound, and Dale and Donna’s house phone rang. While Donna went to pick

up the phone, Elaine and Jeff picked up their smartphones and looked at the screens. Their jaws dropped, their eyes widened, and at the same time, they looked at each other and said, “I thought it was your turn to pick up Conner!” “That was Joanne, from the play school,” Donna said. “She says you must have forgotten that play school ends at 3:30 today. Conner’s waiting to be picked up.” “Oops,” Elaine said, turning red. “When I put play school on the calendar, I didn’t account for the driving time.” “I’ll go get him,” Jeff said. “I have a few things to pick up in town anyways. Thanks for the phone idea Grandpa. I think that can work.” “Never mind,” Ed said. If those fancy phones make you forget your own kid, it’s not going to be safe to use them for the cleaning plant.” CG

Trait Stewardship Responsibilities Notice to Farmers Monsanto Company is a member of Excellence Through StewardshipSM (ETS). Monsanto products are commercialized in accordance with ETS Product Launch Stewardship Guidance, and in compliance with Monsanto’s Policy for Commercialization of Biotechnology-Derived Plant Products in Commodity Crops. This product has been approved for import into key export markets with functioning regulatory systems. Any crop or material produced from this product can only be exported to, or used, processed or sold in countries where all necessary regulatory approvals have been granted. It is a violation of national and international law to move material containing biotech traits across boundaries into nations where import is not permitted. Growers should talk to their grain handler or product purchaser to confirm their buying position for this product. Excellence Through StewardshipSM is a service mark of Excellence Through Stewardship. ALWAYS READ AND FOLLOW PESTICIDE LABEL DIRECTIONS. Roundup Ready® crops contain genes that confer tolerance to glyphosate, the active ingredient in Roundup® agricultural herbicides. Roundup® agricultural herbicides will kill crops that are not tolerant to glyphosate. Acceleron® seed treatment technology for corn is a combination of four separate individually-registered products, which together contain the active ingredients metalaxyl, trifloxystrobin, ipconazole, and clothianidin. Acceleron®, Acceleron and Design®, DEKALB®, DEKALB and Design®, Genuity®, Genuity and Design®, Genuity Icons, Roundup®, Roundup Ready®, Roundup Ready 2 Technology and Design®, Roundup Ready 2 Yield®, RIB Complete and Design™, RIB Complete™, SmartStax®, SmartStax and Design®, VT Double PRO™, VT Triple PRO™ and YieldGard VT Triple® are trademarks of Monsanto Technology LLC, Monsanto Canada, Inc. licensee. LibertyLink® and the Water Droplet Design are trademarks of Bayer. Used under license. Herculex® is a registered trademark of Dow AgroSciences LLC. Used under license. Respect the Refuge and Design is a registered trademark of the Canadian Seed Trade Association. Used under license. (3701-MON-E-12)

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LIFE

SAFE on the ROAD The statistics are sobering. Motor vehicle crashes are the leading cause of death and injury for 16- to 19-year-olds By Helen Lammers-Helps or farm kids, a driver’s licence can be independence. And let’s not kid anybody — it can make life a whole lot easier for Mom and Dad too, especially when they no longer have to make those 6 a.m. treks to the arena, or those midnight taxi runs on weekends. However, with this new-found freedom comes increased risk, and more than a bit of worry. And there’s good reason for that worry.

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During the first six months after getting a driver’s licence, young drivers are eight times more likely to be involved in a fatal crash than more experienced drivers, according to the Traffic Injury Research Foundation (TIRF), a national independent road safety research institute. If that isn’t bad enough, each year in Canada 30,000 teens are permanently disabled by head or spinal cord injuries due to car crashes. Driver inexperience is one reason for the increased risk. Driving not only requires learning the rules of the road and developing the skills to operate the vehicle, but also the ability to recognize hazards and to react appropriately to the unexpected. Not surprisingly, teens tend to overestimate their ability at these skills. Nor is driver inexperience the only reason teen drivers are more at risk. Studies show the human brain isn’t fully developed until a person reaches the age of 25. And the last part of the brain to develop is the pre-frontal cortex which is in charge of planning, impulse control, and reasoning. This then contributes to teens driving recklessly and making irrational decisions. In some ways, they simply aren’t yet wired for some of the decisions they may have to make as drivers. Driver distraction is a major cause of accidents and teens are also more easily distracted than older drivers. According to the Insurance Bureau of Canada (IBC), eight out of 10 police-reported accidents are due to driver distraction. If you talk on the cellphone while driving you are four times as likely to be in a car crash, and 23 times more likely if you text while driving, according to IBC. While cellphones are a huge distraction for JANUARY 2013

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people of all ages, they’re not the only thing distracting drivers. Other examples of distracted driving include eating, drinking, smoking, adjusting the radio, opening a bottle of water or putting on makeup, says Kelly Calar, Vancouver regional director of Young Drivers of Canada driver education program. Young people seem to be getting the message about drinking and driving, but driving under the influence of drugs has been increasing, she adds. After witnessing a young driver weaving in and out of traffic recklessly, Ontario social worker Gary Direnfeld developed the “I Promise Program” to help encourage teens to drive safely. At www.ipromiseprogram.com you can download the nine-page Parent-Youth Safe Driving Contract, which outlines the risks, expectations and responsibilities of safe use of the car. Direnfeld says the contract, which was developed with the input of police, driving instructors, parents and youth, helps parents and kids have the conversation about safe driving and set specific limits. Of course, enrolling your child in an accredited driver’s education program will help instil good habits from the beginning. Not all parents are aware of the newest rules of the road, such as how to properly negotiate a roundabout. To ensure their knowledge is up to date, Calar suggests parents take their written road test which is usually available free of charge online. Parents may also want to take a brushup lesson from a driver training company, she adds. When choosing a driver education program, Leonard Sharman, media relations adviser at The Co-operators Insurance Company, recommends looking for a program that’s been accredited by the government. He also recommends asking friends and family for their recommendations. TIRF has a driving school checklist to help you compare driver education programs available at http://yndrc.tirf.ca/downloads/YNDRC_DriverEducation_FactSheet_1.pdf. But just enrolling your son or daughter in a driver training program is not enough. TIRF recommends at least 50 hours of supervised driving, with at least 10 hours of night driving and 10 additional hours in winter conditions. Direnfeld warns parents not to simply shrug their shoulders when it comes to their teen drivers, saying that because their teen is responsible in other ways, they’ll be safe drivers too. It doesn’t always work that way. And if a teen proves irresponsible at the wheel, Direnfeld urges parents to take away the keys. “Better for you to absorb their anger than have to deal with their death,” Direnfeld says. In this situation, Direnfeld recommends parents tell the child to buy his or her own car rather than using the parents’ vehicle. If the child has to buy their own car with their hard-earned money, they will be more likely to respect it, he explains. Direnfeld also recommends all teens be required to pay a portion of the car insurance and gas. Take a hard look at your own behaviour as well, Direnfeld recommends. Parents will buy the best equipment to keep their kids safe while playing hockey, but then send them out on the road with only a few hours of training onto roads that are much, much more dangerous than the ice. CG J an u ar y 2 0 1 3

What can you do to help prevent Getting that awful phone call? • Model good driving behaviour. Research shows parents are the leading source of influence on teens’ risk-taking knowledge, attitudes and behaviour — more than their peers, according to the Traffic Injury Research Foundation. • Make sure kids follow the graduated licensing laws. When provinces set up a graduated licensing system, they saw an immediate drop of 30 per cent in accidents involving new drivers because the riskiest situations were targeted. For example, a young driver is more likely to be involved in a car accident between midnight and 5 a.m., and the more companions a driver has in the car, the higher the risk of a car crash. • Ensure young drivers wear their seatbelts (and set a good example by wearing your own.) Studies show you are 38 times more likely to be killed in a car accident if you are not wearing your seatbelt. • Insist your new driver is prepared before leaving home. For example, they should check the weather forecast, know how to get to where they are going (use Google maps, GPS or take a road map along). Make sure their cellphone is fully charged and that they have extra money or an Auto Club card. • Take them out for practice sessions in all kinds of weather. • A lso include extra practice in difficult conditions, such as snow, fog, wind and rain. • Keep vehicles equipped with an emergency kit (water, blanket, flashlight, etc.). • Make sure your kids know the equipment is there. Not only will it help in emergencies, but it will be a continual reminder that driving involves risks.

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The multiple vitamin maze By Marie Berry

p to 25 per cent of Canadians take a vitamin or a multiple vitamin every day, and you may be one of them. Or, you may be wondering whether you should be joining them. If your friends or relatives are taking a multiple vitamin, does that mean you should be taking one too? Vitamins are organic substances usually obtained from some of the plants and animals that already make up a healthy diet. Ideally, you want to obtain your vitamins from your food because those sources are the most compatible with your body. However, if you are considering a supplement, it means you will be faced with shelves and shelves of products. Vitamins are grouped according to their solubility. Some are soluble in water. Others are fat soluble. It’s an important distinction because water-soluble vitamins are excreted in your urine, so you may need a daily dose. Fat-soluble vitamins by contrast remain in the body stored in fat cells, and thus you do have a “reserve” of these vitamins (although in excess amounts they can cause toxicities). The B group of vitamins and vitamin C are water soluble, meaning they readily pass through your kidneys. The B vitamins include B1 or thiamine, B2 or riboflavin, B3 or niacin, B6 or pyridoxine, folic acid, and B12 or cyanocobalamin. Most of these vitamins are involved in metabolism, which leads to them being marketed for stress. The idea is that if your metabolism works well, stress will have little effect. However, these claims are unproven. In some instances, B vitamins are used therapeutically. Folic acid is an important vitamin for women planning a family because taking 0.4 to 0.8 milligrams daily will help prevent birth defects, most notably neural tube damage. Vitamin B12 is essential for red blood cell formation, with low levels of B12 resulting in pernicious anemia. Higher doses of niacin meanwhile are used to treat cholesterol conditions, although the high doses can cause flushing, burning, and tingling in your face and neck. Vitamin C or ascorbic acid is important for Drug misuse and addiction are not only costly to the health system but have personal and social consequences as well. Sometimes people seek drugs in order to achieve a “high.” Other times drug misuse develops over time with routine prescription medications. Next month, we’ll look at drug tolerance, dependence, and addiction. 52 country-guide.ca

healthy skin, bones and teeth. Scurvy is caused by vitamin C deficiency, but luckily this disease is no longer common. Vitamin C is also touted as an antioxidant that reduces substances called free radicals in the body. Free radicals are thought to be involved in aging and damage such as that to the retina in macular degeneration. Vitamin C is also promoted in prevention of the common cold, although researchers have not been able to prove this use. Too much vitamin C on the other hand can cause stomach irritation and kidney stones. The fat-soluble vitamins include A, E, K, and D. Vitamin A includes substances such as beta carotene and retinol, both of which are used as vitamin A by the body. Vitamin E or tocopherol is involved in healthy skin and acts like vitamin C as an antioxidant. Vitamin K is an important part of blood clotting, and is usually prescribed. Vitamin D is essential for healthy bones and teeth. However, recent reports have claimed it can be useful in a variety of conditions including heart health, blood pressure control, cholesterol lowering, diabetes management, and cancer prevention. It is too early to be certain of any of these claims. Sun exposure prompts your skin to manufacture vitamin D, but at the northern latitudes of Canada, you may not have sufficient sun exposure, especially in winter months. Dietary sources are key to ensuring your vitamin intake is suitable, and a good place to start is with Canada’s Food Guide. The guide is available via the Health Canada website at www.hc-sc.ca, and in addition to its food recommendations, it also lists the recommended daily intake for vitamins. Many foods are fortified with vitamins, but fruits and vegetables are usually good sources. Choose brightly coloured ones for the richest content. If you do choose to take a multiple vitamin, you need to read the label and be aware of the vitamin content. A great idea is to track your diet for several days or weeks to see what its vitamin content is, then supplement where you notice gaps. Specialized multiple vitamin formulas tend to be a marketing tool, and your better option might be to choose the specific vitamins that you are “short” as single-ingredient tablets. Of course, also remember that once you swallow a multiple vitamin, your body can’t tell the difference between a brand name product and a generic or store product, but your wallet sure knows! Marie Berry is a lawyer/pharmacist interested in health and education. January 2013

It is a new year and most of us are waiting on something. We may be waiting to see how an important relationship will develop, what our children will accomplish, or if we will have children. Perhaps we are waiting to see what will happen with commodity prices, what will happen at work, or if we will find a job we truly love. Others are waiting to see what will happen with their health. Some are waiting to see if they will survive their diseases. The real question is: what do you do while you are waiting? Someone has said, “Life is what happens while you are waiting.” Choices we make may seem insignificant at the time, but the cumulative total of many choices determines who we will love, what relationships are important to us, what kind of work we choose, and how we spend our time and money. Inevitably, life presents uncertainties. The weather is unpredictable. The person we love may not reciprocate. Our children may choose a path we would not choose. Life is easier when taken with a healthy dose of realism, avoiding cynicism and despair. Nothing makes us as anxious as uncertainty. Uncertainty does not bring out the best in us. When we fear the future, we are at our worst. When we listen to voices saying, “It is bad now, but it will get really bad,” we give up on civility, generosity and mutual support. A downward spiral develops. We see it in organizations and churches. If you believe your church will close, and you persuade enough people, your church will probably close. The antidote to anxiety and despair is hope and faith. If we believe there are better ways to live, we will try to find them. If we believe God is good and God has a purpose for life, we will live more positively. The Rev. Fred Craddock is a remarkable preacher in the southern United States. He tells the story of an imaginary conversation with a dog. Craddock was visiting in the home of his niece who kept an old greyhound, like the dogs who race around a track chasing mechanical rabbits. Craddock’s niece had taken the dog into her home to prevent it from being destroyed because its racing days were over. He claims to have had a conversation with the greyhound: Craddock said to the dog, “Are you still racing?” “No,” the dog replied. “Well, what was the matter? Did you get too old to race?” “No, I still had some race in me.” “Well, what then? Were you not winning?” “I won more than a million dollars for my owner.” “Well, what was it? Bad treatment?” “Oh, no,” the dog said. “They treated me royally.” “Did you get crippled?” “No.” “Then why?” Craddock pressed. “Why?” The dog answered, “I quit.” “You quit?” “Yes,” the dog said. “I quit.” Craddock asked again, “Why did you quit?” “I quit because after all that running and running and running, I found out that the rabbit I was chasing wasn’t even real.” Craddock concludes, “I expect most of us know how that old greyhound felt. How many times have we gone around and around the track, chasing a false rabbit, only to discover that the real rabbit was under our nose, waiting to be discovered all along?” Jesus talked about searching for the pearl of great price. I believe he was urging us to search for meaning and purpose, the kind of life that brings us close to God and to one another. Suggested Scripture: Matthew 13:44-50, John 6:25-34

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Rod Andrews is a retired Anglican bishop. He lives in Saskatoon. January 2013

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Va l l e y

Birds of a black feather Dan Needles is the author of “Wingfield Farm” stage plays. His column is a regular feature in Country Guide

ILLUSTRATION: RICK KURKOWSKI

hen you’ve got time on your hands, as a lot of us do in the depths of January, the Kingbird Cafe in the village is the last place you should go for your mental health. Who needs to sit in the corner booth with a bunch of pessimists, sipping thin coffee and imagining fresh disasters for the coming season? But we always do. “So do you think we’re gonna get another drought?” asked Bert Pargeter, of no one in particular. His brother Bob frowned. “I think the real question we should be asking ourselves is whether we’ve broken the mould. Are these prices here to stay or are we just at the top of the same old cycle?” Young Matt Bunton slid into the booth. “Nothing is ever new to you guys. My question is, would an old guy even recognize a new thing if he saw it? Honestly, if you believed half of the gloom and doom in here you’d go home and slit your wrists.” “Just sayin’,” said Bob. “You gotta be prepared for what’s coming.” Matt is a new recruit to our table. He started an onfarm dairy-processing plant on his dad’s farm last year, a move that lowered the average age of farmers in Petunia Valley by about 20 years. His energy and optimism act like a tonic in the half-light of a Petunia Valley winter. I’ve been quietly encouraging the “old guys” to lighten up a bit in the hope that he becomes a regular. “It is probably not useful to use a lot of brainpower trying to guess what will go wrong this year,” I said. “I think the trick is to be robust in the face of uncertainty.”

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Bert and Bob looked at me like two cows watching a train go by. Then Bob glanced at Matt. “What did the professor just say?” he asked. “He’s quoting a guy named Nassim Taleb,” explained Matt. “He’s a big thinker who says all the important events that changed history came right out of the blue. He calls them Black Swans. A Black Swan is something that nobody has ever seen and so we assume it doesn’t exist or can’t happen. And then it does. Whether it was the printing press or the Internet or the banking crisis of 2008, Black Swans always catch everybody by surprise and turn the world upside down. Taleb says you can’t predict these things. All you can do is prepare yourself robustly for the next big surprise.” Bob turned to the others. “Another professor! Who knew that we had two in the valley?” He turned back to me. “So if I’m worried about a drought, or corn back down to $2 a bushel… how am I supposed to prepare robustly for that?” “The obvious thing you can do is lower your debt,” I said. “Figure out what kind of reserve you would need to cover yourself if you lost the whole crop and put that amount aside.” “Yikes,” said Bob. “Every year I go out there I’m betting the farm. I can’t set that aside in a TFSA.” “Fair enough. But Taleb says it goes beyond that. There was a Roman named Seneca the Younger, who was a very rich and powerful man, but he was also a Stoic philosopher. He went around pretending to be poor, just in case he lost everything.” “I know how to do that!” said Bert. “There’s a difference between crying poor and convincing yourself you have lost everything. Seneca wasn’t trying to improve his image. He was determined to be mentally prepared for a Black Swan. So he did this little trick every night before he went to sleep. He would pretend that he had been shipwrecked with all of his possessions — and he knew how to do this because he had actually survived a shipwreck in real life. The next morning he would wake up rich again and he always felt great.” “So did things work out OK for Mr. Seneca?” asked Bert. “Not really. He got on the wrong side of a palace plot and the emperor sentenced him to death. So he went home, ran a warm bath and slit his wrists.” Matt looked at the ceiling and pushed his chair back. “This has been very helpful,” he said. “If I’m looking for strange birds, I know I can always find them in the Kingbird.” J anuar y 2 0 1 3

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