WESTERN EDITION
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January 2012 $3.50
From field to flask Building an on-farm Scotch distillery
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JANUARY 2012 PG. 22 FARM RX Which parts of your farm are so strong, you should actually make them work harder? Which are most at risk of turning bad and damaging the whole operation? Now these business diagnostic tools help you monitor your farm health for optimum results.
EVERY ISSUE
FEATURES
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Pull-type sprayers are the first choice on many farms, and new technology is likely to keep them there.
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HANSON ACRES Dad and Mom aren’t sure, but the kids seem to think the farm simply must have a vision statement.
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GUIDE LIFE If you aren’t ready to retire for you, maybe you should do it for your spouse.
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GUIDE HEALTH Everybody gets occasional headaches. Do yours mean you should head to the doctor?
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PETUNIA VALLEY The stranger who’s scooping up the grain you spilled could be our Dan Needles.
OUTLOOK 2012 We ask eight ag insiders to polish their crystal balls and show us the biggest farm opportunities of 2012.
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BOOK REVIEW The hottest theory in today’s business schools is the lean startup. Can you make it work on the farm?
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AN END TO HUNGER A woman near Maggie Van Camp swoons as Raj Patel speaks. Maggie’s stomach churns. Here’s why.
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FIELD TO FLASK Grain farmer Patick Evans is the proud, if nervous, owner of the West’s only single-malt scotch distillery.
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THE RIGHT CHOICE The numbers prove that staying on the farm means you’re earning more than if you went to town.
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FROM THE BRAND UP For the Horns, success started when they learned to profit as much from their brand as from their ground.
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SELL IT NOW If you’ve got equipment to sell, set your auction date today. Then sell it all.
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A NEW WAY TO RENT The new “cash with bonus” rental system may be your best choice for volatile years.
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 2012
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BUILT FOR SUCCESS Yes, incorporation can solve some of your problems. But it can’t solve them all.
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BRAVE NEW SKILLS You can teach young farmers many skills, but can you actually teach them to handle risk?
CONTENTS
MACHINERY GUIDE
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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: Gord Gilmour (204) 294-9195 Fax (204) 942-8463 Email: gord.gilmour@fbcpublishing.com Maggie Van Camp (905) 986-5342 Fax (905) 986-9991 Email: bmvancamp@fbcpublishing.com Production Editor: Ralph Pearce (226) 448-4351 Email: ralph.pearce@fbcpublishing.com ADVERTISING SALES Cory Bourdeaud’hui (204) 954-1414 Cell (204) 227-5274 Email: cory@fbcpublishing.com Lillie Ann Morris (905) 838-2826 Email: lamorris@xplornet.com Head Office: 1666 Dublin Ave., Winnipeg, MB R3H 0H1 (204) 944-5765 Fax (204) 944-5562
Tom Button is editor of Country Guide magazine
Here’s why 2012 will be different 2008 revolutionized our expectations for commodity prices but it didn’t put an end to sleepless nights on the farm. 2012 will see farmers taking more control. Here are three of the ways they’ll do it. 1. Roughly one-third of our farms have no successors. On another third, there’s a chance that the children might want to farm, but only a chance, and on large numbers of such farms Mom and Dad have real concerns about whether their children have what it’s going to take to protect and grow the family’s assets. At the same time, there are large numbers of dedicated, bright young people who want to farm but lack the capital. Today, we still lack good matchmaker services to help the farmers connect with such young people, let alone to help the two sides structure agreements that would see the farm survive and at least a portion of the ownership transfer to the young person over coming years. That will begin to change this year. Governments might get involved, but either way, significant numbers of farmers will find ways to involve non-family members in their succession strategy. 2. Farm values will also change. Until now, our family focus has been directed at creating a nurturing environment for our children, respect for our mid-career farmers, and an honoured and respected old age for our seniors. Now, there will be more emphasis on a healthy marriage and a rewarding life for Mom and Dad. There will be trouble in the countryside for farms that don’t make 4 country-guide.ca
the transition. We’re already hearing anecdotal evidence that divorce rates on farms are rising, and this time it’s Mom and Dad who are going their separate ways. Mom wants to reap the rewards of a lifetime of hard work. She wants to travel and to taste all sorts of new experiences. Meanwhile, Dad’s life and identity are tied up in the farm. Despite financial success, he doesn’t want to let go. 2012 will be a year of turmoil on many farms that don’t decide to recognize and deal with this issue. It’s simplistic to say that on farms where the opportunity for change is embraced as an opportunity for the farm couple, there will be growth and happiness. Still, there is truth in it, with wide implications for the farms themselves. 3. More farmers than ever will invest in business opportunities off the farm. No one will count the number of apartment buildings that get built with farm money in our rural towns, and no one will know the number of new retail outlets and businesses that will be set up, but farmers will drive our rural economies. Farmers know how to make decisions, they have capital, and they have a nose for business opportunities. One upshot, though, is that we will see even more blurring of the definition of who is and who isn’t a farmer. Are we getting it right? Let me know at tom.button@fbcpublishing.com, or phone me at 519-674-1449. Is 2012 the start of something different? Tell me what you think.
Advertising Services Co-ordinator: Arlene Bomback (204) 944-5765 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 Assistant Production Manager: Farrah Wilson Email: farrah@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 — $33.60 for one year, $51.45 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.
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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. 131 No. 1 Internet address: www.agcanada.com
ISSN 0847-9178 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 2012
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Machinery
By Philip Shaw
For most of us, it’s this simple. If you plant crops, you spray crops. Getting herbicides and crop protectants down uniformly and on time is essential. There’s no other word for it. Still, it doesn’t have to mean a self-propelled sprayer. Today’s new generation of pull-type sprayers provide an unbeatable blend of cost and performance for many farms. You also get myriad choices, including these.
Fast 9500, 9500T, 9600, 9600N High-Clearance Sprayers Fast Equipment offers the 9500, 9500T, 9600 and 9600N Series sprayers. The 9500 Series has 1,800- and 2,400-gallon compact Stealth tanks while the 9600 Series offers Stealth tanks with 1,050- and 1,350-gallon capacities. The 9500T has a lighter and stronger round tube truss-style boom with widths of 120 and 132 feet. The 9600 Series has boom widths of 60 to 100 feet while the 9500 Series has boom widths of 60 to 132 feet. Boom options on the 9600N include widths of 60 to 90 feet. Fast sprayers maintain a short-coupled advantage for reduced crop damage. In the 9600N, Fast has redesigned the centre section allowing for narrower transport width, and the company has changed the boom configuration to simplify storage. An extendable hitch available on the 9500, 9500T and 9600 has been eliminated on the 9600N to keep costs down. Fast says its sprayers start with farmerinspired design. Load stations on the sprayers are operator friendly with easy-access tanks and simple-to-use valves. As well, all components manufactured by Fast Distributing are powder coated with Peridium coatings for long-term protection. www.fastsprayers.com
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MS Gregson N1000 and N1250 Sprayers MS Gregson Novation sprayers come in N1000-gallon and N1250-gallon models, with a Novation design that is targeted toward operators who want a simple, clean sprayer with a rate controller and 60- to 90-foot booms. Gregson representative Lyle McLean says the Novation sprayer is the very first pulltype sprayer equipped with air-ride suspension. This suspension, unique to the industry, senses the amount of load placed on the axle and automatically adjusts the air pressure within the Firestone airbags. With the sprayer fully loaded the on-board self-contained air compressor senses the extreme load and pressurizes the suspension to compensate, giving a soft ride and an ample amount of axle travel. As the sprayer empties and the load on the airbags decreases, the compressor automatically lowers the pressure to maintain the same consistent ride. www.msgregson.com J an u a r y 2 0 1 2
Demco 850 and 1250 Sprayers Demco’s 850- and 1,250-gallon sprayers have a unique tank shape that permits one of the shortest hitch pin to axle lengths in the industry. This design adds excellent manoeuvrability in the field. The tank has a 16-inch lid and two high-volume jet agitators, and its moulded bottom ensures drainage to the rear of the sprayer. Boom sizes can range from 45 to 90 feet. A “live” hydraulic control block means you need only one set of remote hydraulic outlets to perform all boom functions. Independent wing folding, hydraulic height adjusting, wing levelling and outer wing breakaway enhance field performance. On the wider booms, guide wheels ride above the ground surface on flat terrain. When the glide wheels contact uneven field terrain, they automatically raise the boom wings. www.demco-products.com
Ag Shield 1000 and 1500 gallon with 7700 Series Boom
Brandt Suspended Boom Sprayer SB4000
Ag Shield from Benito, Man. describes its sprayers as “on target, on time, every time.” The company produces 1,000- and 1,500-gallon carts sizes that come with 7700 series booms for widths of 60 to 134 feet. The Ag Shield 7700 series floating boom is encased in a solid shield for better control of drift. It also improves coverage by opening up the crop canopy to get coverage of even low-lying weeds, thanks to a rounded front edge of the shield that pushes plants to expose the lower reaches of the crop. Ag Shield uses a hydro-mechanical (no sensors or computers) ground following system (GFS) to maintain boom height, and a Wilger flow tube nozzle monitor system tells the operator whether a nozzle is even partially plugged, so you’re on top of nozzle performance at all times. www.agshield.com
Brandt’s SB4000 offers fully adjustable wheel spacing, a highcapacity tank and ground level chemical handling. The spray boom comes in 80-, 90- and 100-feet widths and tilts 15 degrees up and five degrees down, spraying at heights between 15 and 72 inches. Brandt uses their patented “Windcone” technology to maintain spray pattern without limiting visibility or putting stress on the boom. The Windcones protect the nozzle bodies and tips inside and avoid the chemical residue buildup which can affect windscreens. Brandt uses high-flow plumbing with flange fittings and pressure side filtration. This allows for higher application rates and field speeds, with 24 U.S. gal./acre at 40 psi and 15 U.S. gal./acre at 90 psi travelling at 10 m.p.h. www.agricultural-products.brandt.ca
January 2012
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BUSINESS
2012 By Madeleine Baerg
For Canada’s farmers, 2012 is shaping up as the most unpredictable year in a generation. We asked eight ag insiders to polish their crystal balls for us. What they see goes way beyond change at the wheat board. Most important, all eight see ways for farmers to take charge. Here’s how:
The change
Richard Philips Executive director Grain Growers of Canada
The rail service review will affect the entire grain sector, almost all Canadian industries, and on a larger scale, the entire Canadian economy. Today’s service is inexcusable. If Canada Post can tell you where your parcel is, the rail companies should be able to tell us where a train is. We’re expecting a very favourable outcome and reciprocal rules where both sides — the shippers and the rail lines — have to perform or pay penalties.
The opportunity We’ll see a whole range of pricing options that haven’t been available in 50 years for marketing wheat
The change The big news in all likelihood will be the post-monopoly Canadian Wheat Board, which will create opportunity for progressive marketers.
The opportunity Ben Graham President AdFarm Canada
There will be an opportunity on every corner, including valueadded opportunities in areas like pasta, nutraceuticals, and potentially biofuels for on-farm production. Granted, the other side of this is that the wheat board provided a safe marketing resource, and the
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and barley, and we’ll see a revamping of the Canadian Grain Commission. The challenge will be to get organized to meet 2012’s new grain-marketing reality.
How to win The end of the wheat board’s monopoly has been very divisive. When the decision is finally out of the way, it will be time for people on both sides to make peace, which won’t be easy. It will be a real change. Do we want to be as successful at branding Canadian wheat as we have been with canola? There’s a lot of work to be done. If we don’t work together to put necessary structures in place, Canadian wheat will lose its place and reputation in world markets.
change may push some people out of their comfort zone. Maximize your cereal grain marketing opportunity by seeking out information and aligning with professionals. There will be a plethora of resources available, both government-supported and private industry. If you want to stay ahead of the pack, really think through your cereal production. Understand your costs, what variety you’re growing, its attributes, its end use — because there will be opportunities that you won’t want to let slip by quickly.
How to win Embrace information technology. Be open to new tools, whether social or digital opportunities, because those will be the best tools when you need to transfer information quickly. New technologies will allow greater information-sharing, giving you access to broader, more up-todate knowledge. The more information you have as a grower, the more successful you’ll be.
JANUARY 2012
BUSINESS
The change
Ranulf Glanville Vice-president DePutter Publishing
Non-ag markets including stock markets, major world currencies and bellwether commodities such as crude oil may be the big news story in 2012, since non-ag markets have the potential to significantly affect prices and farm profitability. The non-ag markets have previously been supportive of agriculture. Now I see underlying risks. Lots of markets started to wobble in late 2011.
The opportunity Non-ag markets provided strong support as they rallied out of the crash lows we saw in 2008-09. Now there are signs of
The change For Canadian beef producers the big news will be around our sector’s ability to supply our enduse customers and maintain global market share.
The opportunity Rob Meijer Executive director Canada Beef Inc
Our herd size isn’t as robust as we once enjoyed, and we as an industry will have to make some tough decisions on where we focus our efforts and with which markets and end-use customers we choose to do business.
The change 2011 was a good year for Canadian agriculture, and the economic prospects look very positive for 2012. Much of our growth will come from exports.
The opportunity Hon. Gerry Ritz Minister of Agriculture
JANUARY 2012
As part of our goal to modernize grain policy in Canada, marketing freedom will give farmers full control of the marketing of their wheat and barley. As well, investment, jobs and economic growth will create even more opportunities for Canadian farmers.
a change in that supportive framework. We are adopting a more cautious view of markets. Cash crops in general are in a boom stage. Take advantage of opportunities while also starting to make plans for the next cyclic downturn. Focus on basic marketing principles. Sell into rallies, recognize a profit when it is on the table, try to be objective rather than comparing prices against what they were yesterday. It remains to be seen how the legal and political wrangling will work out but the major changes proposed for the Canadian Wheat Board would have a dramatic effect on the way wheat and bar-
If we make the right decisions, our industry will flourish. If we miss the mark, our competitors will benefit.
How to win Don’t let the politics of agriculture dictate your business. 2012 will be a year of great achievement for those who best manage business risk. Global markets are becoming more competitive than ever, and at the same time, we have domestic systems such as the Canadian Wheat Board that are set for elimination.
We recently launched the new $50-million Agricultural Innovation Program to improve the productivity and competitiveness of the Canadian agricultural sector and help capture opportunities in domestic and global markets. Applications are open and businesses are already preparing to create new opportunities for farmers. It comes down to the simple fact that innovation is one of the most important tools to drive growth and prosperity for agriculture in Canada. Farmers understand this better than anyone.
ley are marketed. For farmers, I see challenges and opportunities as the transition takes place.
How to win Recent sky-high prices are not the new norm. Be careful about taking on too much debt. We’ve seen a lot of debt taken on at the farm level, especially in Ontario and Alberta. These are the good times for cash crop agriculture. This is when you want to pay down debt, not take more on. At the very least, sit down and do some analysis to ensure you have some cushion if the interest rates start ticking higher. With farm debt, it’s important to have a longterm time frame, and do some planning now during the good times.
In the beef industry, a producer’s ability to manage and mitigate risk in terms of feed costs, freight and currency exchange is critical. This will determine success or failure in 2012, especially as supplies are tight and consumers are less willing to pay more for food. It is vital that producers align themselves with trusted partners in the industry who are prepared to share risk with them and also share the reward of sound business risk management.
How to win Canada’s agriculture industry as a whole needs to be more proactive rather than reactive in order to succeed in new and emerging markets. This means anticipating change and staying ahead of the curve. Growing global population and incomes are driving changing demands. Canada’s innovative farmers can deliver world-class food to a global marketplace that is ripe with opportunity. But to meet these new demands and capture these new opportunities, we need to stay on top of our game and keep our gaze firmly fixed on the future.
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BUSINESS
The change Increasingly, Canada’s farmers are going to feel the effects of instability in the worldwide market and economic turbulence. At the same time, North America will need to start paying serious attention to the developing BRIC nations. They are achieving unrivalled growth, but they are also positioning themselves to give us competition like we have never seen.
Richard Robert
The opportunity
Grain and dairy farmer Board chair Canadian Farm Business Management Council
By sharing information and looking for opportunities to collaborate, farmers will help to collectively raise the bar and ensure a competitive advantage and continued prosperity for Canada. As well, the key to sustainability for your farm, your family and yourself is business management. Farm business management and the role of the farm manager cannot be taken for granted.
The change
Allan Mussell Senior researcher George Morris Centre
There are a number of big issues out there. Growing Forward agreements on policy expire in 2013, so 2012 will see the plan for Growing Forward II coalesce into a detailed plan. Meanwhile, the federal government has asked departments to trim five to 10 per cent off their budgets, so sharp changes are possible. On the trade front, 2012 has the potential for a conclusion of the Canada-EU trade agreement which could have significant implications for Canadian agri-food. Also, our status in the
CEO Agricultural Institute of Canada
Invest in management. Specifically, start with a plan, articulate your goals, and establish a strategy to get there. Then track your progress. Know your costs so you can benchmark against yourself and against others, and surround yourself with others you can learn from and in turn inspire. Seek and use experts to build your farm team, and also invest in human resources. External support could lighten the load and help you keep a strategic perspective. Also invest in your knowledge. Do not be afraid to assess your strengths and weaknesses.
The opportunity There is no single factor more powerful than farm management in influencing farm incomes, profitability, and longevity. Be aware of market, technology, and policy factors and then manage appropriately.
How to win Manage your farm business strategically, with the end in
Whether anything will transpire out of the quota issue currently brewing, I’m not sure, but I think at the very least, supply-managed commodities will come under increased scrutiny in 2012. Any change to supply management could directly impact Canada’s trade talks on many fronts. As well, based on history, commodity prices are going to come back to earth. Supplies will still be tight next year, but I don’t think we’ll be seeing the highs we saw this year.
The opportunity If you could encourage farmers to change a habit or attitude in 2012, what would it be? The
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How to win
Trans-Pacific Partnership negotiations will likely be more clear. Finally, the status of the Canadian Wheat Board will be more clear.
The change
Doug Yungblut
As development continues for the next agricultural policy framework set to launch in 2013, farmers should also be engaged in the process and pay close attention to the programming outcomes.
mind. To a large extent, your life objectives will be determined through or at least influenced by your farm business. What are you trying to achieve? Some want to build wealth through farming for a financially worry-free retirement. Others want an industry legacy, like contributing to the development of a livestock breed. Still others are focused on creating an opportunity for the next generation. Depending on your objective, the strategy of the business may be sharply different.
world is getting more and more complex, and because farmers can’t keep up with everything, they’ll need to rely on others for advice. But, make sure you seek advice from people who are competent and qualified. Make sure the people you rely on are giving science-based, professional advice.
How to win Remember history and remember the basics We’ve seen high commodity prices before and they’ve always come back down to earth. I remember huge highs and lows in commodity prices in the 1970s, all within two years. Prices go up and down, so producers need to remember that you can’t count on anything staying high. Remember the basics of good crop rotations. Soil is still soil. It needs to be treated well. CG
JANUARY 2012
Your farm equipment. + Our technology solutions. + Your John Deere dealer. = John Deere FarmSight™
You, your machines, your operators, and your dealer — all working together to improve your business. Welcome to John Deere FarmSight, a strategy designed to help you improve your efficiency, uptime and profitability. For instance, by automating unloading on-the-go with the new S Series Combine and Machine Sync, you can further improve your harvesting efficiency. With John Deere Machine Sync, the combine operator can vary the speed and change the location of the tractor to evenly fill the grain cart. When the combine is done unloading, the tractor operator resumes control. Machine Sync is also compatible with select older model combines and tractors. And when multiple combines are harvesting, Machine Sync allows tractor operators to see the combine bin fill status so they know which combines need unloading. Operators can also see location and direction of travel of every machine with Machine Sync so they can prioritize machines when multiple combines are harvesting. The combine operator can also send a ready-tounload request to grain carts in the Machine Sync network. With Machine Sync, you get improved harvest efficiency and reduced operator stress and more time spent harvesting. It’s just one of the available tools in a comprehensive John Deere FarmSight solution. Visit your dealer to learn more. Nothing Runs Like a Deere.
JohnDeere.com/FarmSight
Book review
The Lean Startup How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses Eric Ries Crown Publishing 290 pages $30 Reviewed By Tom Button, CG Editor You can tell that Eric Ries has a lot of experience as an entrepreneur when he sums up his two decades in business by saying, “Our productive capacity greatly exceeds our ability to know what to build.” You can also tell that his will be a book that may have lessons for farmers, who know at least as well as anyone else in business that if you just grow corn or canola, or if you just seed wheat or soybeans, the world is going to catch up with you and threaten your survival. Instead, farmers always need to push the frontiers on grain quality in order to stay out of a race-to-the-bottom pricing battle with the rest of the world, and they always need to be introducing new end-use traits and new customer programs to differentiate our crop and animal products from what buyers can get elsewhere. The whole point of T h e L e a n Startup is to show that businesses outside of agriculture have decided that the old way of deciding how to push those frontiers and how to identify those enduse traits are obsolete. More important, Ries would tell most farmers that our business plans are all based on business strategies that should have been tossed on the scrap heap at the same time we tossed out our rotary phones. It’s a shocking idea in agriculture, where if farmers know anything it’s how to put a sharp pencil to paper to figure out how to put an extra dollar in the bank. You mean, we’ve been getting it wrong? Ries’s audience is huge. T he L ean Startup is a best seller, and he is hugely influential elsewhere too. He’s a top 12 country-guide.ca
business speaker in the U.S., and he’s “entrepreneur in residence” at the Harvard Business School, where he talks about all the things he did wrong during the tech boom in Silicon Valley. His basic premise is this. The number one characteristic of today’s entrepreneurs isn’t that they know how to engineer a better widget, or how to cut the cost on a whatchamacallit. It’s that they must deal with uncertainty. From Ries’s point of view, this means that manufacturers need to throw out all the old rules about how to develop new products. By extension, the same could go for farmers. Is it all smoke and mirrors, the latest in an endless stream of bizspeak? Or is there something here that farmers can learn too? You decide. Ries agrees with other business academics that the most influential business book of the 20th Century was F. W. Taylor’s The Principles of Scientific Management, first published in 1911. It’s the book that made Henry Ford’s assembly line possible, basically by carving a complex job into a lot of smaller jobs, and then hiring someone for each micro-job and setting them up for maximum efficiency. The same model gets used for innovation and product development. The business world put engineers in one room, marketing people in another room, and HR people in a third room, and then tells them to come up with new ideas. Toyota was the first to break the model in the 1980s when it developed the system that got called lean manufacturing. Don’t keep your skilled players separate, Toyota said. Put them all together to share their skills.
Now, instead of an auto industry that produces a few models with a few options, car makers basically produce platforms that are almost infinitely customizeable. In 1968, the Chevrolet Impala had a 13 per cent share of a U.S. car market that had 40 different cars, basically with a choice of standard or automatic, and with radio or without. Today, there are over 250 models, with only 10 having a market share of more than a half per cent. Ries would tell us that the same is going to happen to agriculture. Or at least, it’s going to happen to the farmers who are going to earn the top per-acre incomes, and therefore be able to outcompete other farmers for land. How will these farms be different than today’s? Mainly, they will be crossfunctional. To follow Ries’s thinking, individual farmers will form partnerships and joint ventures with food scientists and dietitians, much like the way the computer startups hire the best and brightest from MIT and Stanford. Of course, sometimes it won’t be an individual farmer. It will be a cluster of farms, or perhaps a somewhat larger incorporated framework, but it won’t look like the commodity boards created in past. It will be smaller, tighter, and far higher in energy. In an industry that has heard predictions about nutraceuticals for well over a decade, and that feels like we’ve been promised 10 new end-use traits for every one that materializes, we can be forgiven if we’re sceptical. Still, if your son or daughter is planning a farm career, maybe you should watch to see if their eyes light up at the thought of what this future could hold. CG January 2012
FarmTech 2012
Global Perspectives... Local Knowledge
Join us... Jan. 24-26 Edmonton EXPO CENTRE at Northlands
FarmTech 2012 Speakers General Rick Hillier Former Chief of the Defence Staff Canadian Forces
Glen Hodgson Senior Vice-President and Chief Economist Conference Board of Canada
John Shmorhun President & CEO - Harmelia Holdings 73,000 ha farm in the Ukraine
James Peck Managing Director & Nuffield Scholar P.X. Farms Ltd. Contract farming agri-business in England
Gerry Dee Award Winning Comedian FarmTech 2012 Banquet
FarmTech 2012 is Proudly Hosted By:
FarmTech 2012 promises to be bigger and better than ever. The Edmonton EXPO Centre is allowing FarmTech to grow to meet the demand: more participants, more educational sessions, bigger meeting rooms, and a bigger tradeshow. The new agenda has expanded to include 60 concurrent sessions covering the latest in technology, environment, agronomy and farm business management.
www.farmtechconference.com For complete details and the latest updates,
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ACTS II
ALBERTA CONSERVATION TILLAGE SOCIETY II
business
An end to hunger When Raj Patel begins speaking, I scan the audience at the Bring Food Home conference hosted by Trent University. This is clearly a crowd that loves food, and not just food, but the idea of food. So what’s this knot in my stomach? By Maggie Van Camp, CG Associate Editor
t the podium Raj Patel shines. He is the definition of charisma. His hair is sexy, his British accent is sexy and his message is sexy. He’s like a movie star of social justice. Food is his stage. The dignified-looking woman sitting next to me actually sighs. I find out later she is a faculty member at Toronto’s Ryerson University.
This is a conference about how consumers can and should connect with the people who grow their food. So it seems a good signal that the conference is being held in a rural part of Ontario (Trent is in Peterborough) and also that it is being held in midautumn, the peak of the corn harvest, although I seem to be the only farmer here. In the room, all eyes are on Patel. He is an international bestselling author, and he is both a researcher at the University of KwaZulu-Natal in South Africa and a visiting scholar at California’s Berkeley. Patel talks about rooting out the cause of poverty and he points a big finger at global capitalism. The bottleneck of distribution, he tells us, is caused by the few multinational food companies dominating the food industry. In the half-hour of his wide-sweeping, left-bending presentation, he manages to bash every major seed and crop protection company, and all the major grain-processing and -handling companies too. “There are only five to six corporations per sector that dominate each commodity,” says Patel, pausing for effect. In his book, Stuffed and Starved: The Hidden Battle for the World’s Food System Patel links rural poverty with government food policy and also 14 country-guide.ca
with multinational agribusiness. Although broad, his thoughts are both provocative and thoroughly researched, and he uses specific heart-wrenching situations and statistics. After all, Patel does have global academic and work experience. He grew up in England, raised by immigrant parents, and he has worked for the World Bank, the World Trade Organization and the United Nations. His education includes degrees from Oxford, the London School of Economics and Cornell University. This conference’s message, which Patel shares, is that the public needs to control food policy instead of leaving it up to untrustworthy lobby groups and politicians. Existing North American farmers seem to be classified somewhere between victim and foe. The power of consumers can change the system by food choices and discussion. “Our communities joined through eating are going to flatten the hierarchy of our global food system,” says Patel, pumping his fists. Few in the audience seem to understand how modern farms operate, and as they respond to Patel, most seem to be politically motivated. Patel is clearly preaching to the choir here. This conference is all about empowering consumers to sidestep large food companies. It’s about connecting with farmers directly and eating locally, and even about urbanites growing some of their own food. Increasingly, however, Patel’s message is also spreading beyond the walls of this room and other rooms like it. His message is appealing to a much more diverse audience, and his latest book, The Value of Nothing is a national bestseller. In it, Patel explains why you’d have to pay over $200 for a Big Mac hamburger if you added in the costs of environmental damage, health care, slavery in agriculture, and even hidden subsidies. It’s more of the same of his first book just shorter, more poignant and a little more readable. January 2012
PHOTO CREDIT: MARCO FLAVIO MARINUCCI
BUSINESS
For Patel, conventional farmers are somewhere between victims and foes, and his audience agrees “We are not merely consumers of democracy. We are its proprietors,” says Patel. Patel started his presentation by saying that the problems with most current food aid go beyond multinational food companies and government policy. Societies and culture also impact food insecurity. The solution, he says, is about gender empowerment even in wealthy developed countries. Food is about power. To make his point, Patel tells us poor women are the largest group in Canada that consume less than 1,900 calories a day and don’t know where their next meal will come from. From there, Patel glides smoothly into the world’s inequity. Even though we produce more food than ever before, more than one in 10 people are hungry. Some 800 million are malnourished, mostly in the global south. But then the world also has one billion folks who are overweight. How will be be able to feed the world? Patel says the solution for all these problems can be found in democratically resolved food policies. “Food sovereignty,” Patel calls it. “On a base level this means a community’s right to shape its own food and agricultural policy.” Patel is excited by the Occupy protest movement and was in attendance with former NFU president Nettie Wiebe at Occupy Saskatoon. He agrees with Wiebe that de-monopolizing the Canadian Wheat JANUARY 2012
Board will be detrimental to farmers, and that it will only help large grain companies. What Patel likes about these general assembly protests is their communal nature. “They want people to come to the planning meeting,” he says breathlessly. “What’s new about this is that they’re looking to build a safe space for politics to be discussed, ideas to be respected.” He talks about an HIV hospital in Africa that spawned a community farm and garden. It has become a sort of community meeting place with both men and women working in it. “People around the world are looking for a safe space to realize the future and recolonize their minds,” says Patel. “Talking about food sovereignty is the beginning of the conversation.” The room fills with applause. Everyone nods over their empty dinner plates, and it crosses my mind to wonder if any of them has ever gone hungry, and to ask if I’m the only one who wonders whether they’d be willing to pay the actual price of Patel’s food freedom. The applause continues. My stomach lurches. How much will these ideas influence our country’s future food policy? CG If you’re interested in finding out more about Raj Patel’s perspective check out www.rajpatel.org. country-guide.ca 15
business
Field to flask Shelter Point Distillery
By Madeleine Baerg, CG Contributing Editor
P
atrick Evans is a farmer through and through. For proof, there’s the firm handshake, the well-worn boots, and the tireless
work ethic half hidden behind a self-deprecating sense of humour. There are also the local roots — Evans was born and raised on a dairy farm not 20 kilometres from his current farm. But it isn’t dairy cows that Evans is nurturing today. It’s whisky. And not just any whisky at that. Evans is the proud — if slightly nervous — owner and operator of Western Canada’s only single malt distillery, Shelter Point on Vacouver Island. The nervousness is justified. Evans and his wife Kimm have invested a lot in this dream. After three years of planning, and then a year or two of jumping through government hoops and miles of red tape, plus hundreds of hours of back-breaking and wallet-draining building, they finally have their spectacularly beautiful, touristfocused distillery chugging into production. But they’re not home free yet. Yes, whisky finally hit barrels in July last year, but it needs to age for a minimum of three years before it can be bottled and sold. Evans is sure about his strategic direction, though. He’s confident that value added is where opportunity lies for the future of agriculture. Now, if only he and Kimm can hold out the next three years before money starts rolling in, they’ll be in on the start of something big. Continued on page 20 16 country-guide.ca
J an u a r y 2 0 1 2
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“Scotland is 30,000 square miles and they export $7 billion worth of scotch a year,” says Evans. “Vancouver Island is 12,000 square miles. Why can’t we add that kind of value?”
JANUARY 2012
country-guide.ca 17
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On the island, the Evans farm goes back to the early 1900s, and for Patrick and father Norm, the distillery is a natural part of its evolution. In fact, he’s not just unconcerned about competitors, he actively welcomes them. “We are one distillery on Vancouver Island. Ten would make us a destination, 20 would make this an industry,” says Evans. “Even 10 would be brilliant. Farmers need each other.” It’s not just farmers who need farmers. Communities need this kind of innovative, value-added agriculture as well. The man-hours and predominantly locally sourced building materials that went into creating the facility helped support a chronically underemployed valley. And building up the region’s tourism industry now that the fishing and lumber industries are mostly gone will make a difference looking forward. “What we’ve spent on this building, we’ve plowed it all right into our community. Maybe we don’t need big mills, maybe we need big distilleries,” says Evans. While creating Shelter Point has taken a ton of work and a fine measure of perseverance, there’s been luck in the equation too. Mike Nicholson, Master Distiller for 30 years at some of Scotland’s finest distilleries, happened to marry a Canadian and
subsequently (semi)-retired down island in Victoria, B.C. Evans retains him on a contract basis to teach James Marinus, Evans’ right-hand man through 23 years of farming, the fine art of distilling. “What Mike would tell us is, ‘Well, you haven’t made anything that smells bad. You haven’t made shyte.’ That’s Mike saying a compliment,” says Marinus with an appreciative laugh. Adds Evans, “We got lucky getting Mike on board, and we’ll keep him as long as he’s willing.” To date, Shelter Point has about 200 filled casks aging, and Evans anticipates building that number to about 600 by the spring. But, it’s hard to know what the final product will be like, given that whisky derives 100 per cent of its colour and about 75 per cent of its flavour from the barrels it ages in — single-use bourbon barrels in Shelter Point’s case. “Off the still at 70 per cent alcohol, it’s great moonshine,” says Marinus. “It’s nice, complex, fruity. But, how that will come off in three years or five or 10, we don’t know. We hope — no, we believe, it’ll be really good.” January 2012
Photo Credit: Island Life Photography
ocated midway up B.C.’s picturesque Vancouver Island, Shelter Point Distillery hunkers right against the ocean, buffeted by a stiff breeze on this cold, pre-winter day. It’s the smell that first draws you in. Warm and golden, smoky and sharp edged, Shelter Point steeps in the unmistakable aroma of whisky: the perfect antidote to the swirling snowflakes. There’s not a lot of dainty at Shelter Point. After all, whisky is the ultimate man’s drink (about 80 per cent of all whisky is consumed by men). Inside heavy custom doors, rough-hewn cedar timbers, rich leather armchairs, and slate-coloured fireplaces are designed to impress. And that’s just the lobby. Beyond is the touristfriendly distilling room, with giant copper distilling pots taking centre stage, though Evans says the Harley parked in the corner draws almost as much attention. The rustic class and the West Coast warmth are entirely intentional. Evans knows ambiance, and he knows “feel” makes a big difference when it comes to convincing tourists to buy into the experience with their hearts and their wallets. “We could have done this in a barn for a quarter of the price,” Evans tells me, “but we wanted to invest in the warm fuzzies because we think agri-tourism is a key part of what will make us successful. That, and we really believe in investing in the region.” Shelter Point grew out of Evans’ fundamental belief that innovation, combined with sustainability and environmental responsibility, is agriculture’s future. “I’ve always been pushing. We have all this unused land, let’s increase the valueadded sector. But the question is how? We don’t have the heat units like the Okanagan (in British Columbia); we don’t have vast tracts of land like the Prairies. What can we do to make the highest value add? The answer, for me at least, is a distillery. “If you go some places in Scotland where they have distilleries, they’re in some of the least likely places. Scotland is 30,000 square miles, and they export $7 billion worth of scotch a year. Vancouver Island is 12,000 square miles. Why can’t we add that kind of value on our land?” There’s no room for protectionist thinking in Evans’ view of the future.
BUSINESS For a process as old as the making of whisky (which was first recorded back in the mid-1400s), today’s high-tech equipment allows a surprising amount of control over the final product. Evans, Marinus and Nicholson are experimenting with a variety of processes and ingredients — including homegrown barley — and each tweak will put a slightly different spin on the final flavour. Already they’ve been planting 200 acres behind the distillery to Metcalfe and Copeland varieties of barley. Though Vancouver Island might not be a grain farmer’s most obvious choice, Evans reports that the cooler summer weather and 12-plus feet of drainage make for ideal growing conditions. At 1,000 acres in total (including a mile of incredible oceanfront), the farm has more than enough land to handle the growing requirements of the distillery into the future. In fact, points out Evans, the woods to the side of the distillery are slated to go into barley production when Shelter Point steps up production and needs more acres. That said, quality reigns supreme over
quantity here, and this artisan distillery has no plans of going large scale. Nor should you expect Shelter Point’s product to taste like other single malt whisky you’ve tried. “I would hope that we’re as good as scotch, but we don’t want to be the same. We’re a traditional single malt distillery with a Canadian flare,” says Marinus. “The salt water from the ocean right beside us will give our product a different flavour profile. So will our homegrown malting barley.” To date, Evans’ most frustrating stumbling block has been political, not operational. “The biggest challenge anyone in the alcohol industry has is the monopoly of the LDB (B.C.’s government-controlled Liquor Distribution Branch). If we sell whisky out of our own building, say for $40, we have to ship all $40 to LDB and they send us back the profit. The markup that they have for alcohol is 170 per cent, which doesn’t leave us a lot of margin to play in,” he explains. “It would be really sad if we had to exclude B.C. from our market and instead just sell to the rest of Canada and Asia. The LDB’s rules make B.C. a very tough market to get into.”
To say Evans is making money would be a stretch. His current aim is to sell 10 per cent of his casks in advance of bottling to finance ongoing operations. Groups are welcome to make a joint purchase. If 20 people buy in, the cost is reduced to $250 per person. Bought as a cask, the liquor translates to about $30 per bottle — relatively cheap in the world of whisky. Given that Marinus anticipates pushing $90 per bottle once the whisky has aged for a decade, today’s $30-per-bottle price tag might even be seen as an investment. While Shelter Point hasn’t reached the magic 10 per cent, they’re doing well to date and expect that, as their reputation grows, they’ll enjoy more tourist interest and sales. “We’re working on a long-term economic perspective,” Evans says. “The short term sucks. But that’s the way it always is in agriculture, isn’t it?” “We’ve built it. Now we need the people to come. We need people to take part in the inaugural West Coast whisky adventure.” He’s expecting to be here for the long term. “I put on a copper roof. It’ll last 400 years,” he says with a confident smile. CG
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country-guide.ca 21
business
W
hen your doctor puts you through a battery of tests, you learn exactly how much
heavy lifting it’s smart to do. Otherwise, that bit of pain you think you felt last week might keep you in the house. Or you might ignore the pain as a fluke, and end your day in the back of an ambulance, or worse. It’s the same with putting your farm through a series of simple health tests. The point isn’t to find out how sick you
Farm
might be (although that’s important too), it’s also to find out how strong you are. Should you buy the farm down the road, despite the price? Can you make room for your son or daughter to come back to the farm with their family? Equally important, are you getting the right advice? “Farmers need to know their numbers well enough to sense when they can push back,” says Harold Froese, a Manitoba egg farmer who is also a loans agent for Sanford Credit Union. “The banks don’t always have a consistent message.” Of course, it’s vital to see the red flags too. It isn’t good enough to let your lender
How healthy is your farm? Check these vital stats to really know — not just guess — your farm’s fitness level By Maggie Van Camp, CG Associate Editor
calculate ratios and tell you if something is wrong, says Froese. “Over my 35 or so years, I’ve had to sit across the table from families who have lost their farms simply because of timing decisions.” It turns out you don’t need to be a bean counter to get to the vital takehomes, says Jonathan Small, farm management consultant with MNP out of Red Deer, Alta. By knowing a few definitions and where to find the important stuff, you can ask and answer some pretty earth-shattering questions. So blow the dust off that stack of balance sheets and income statements. What are your numbers telling you?
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January 2012
business
1. Profits
So if profit isn’t just what’s left in the bank at the end of the year, then what is it?
Every business should generate profit over time, including farms. It’s standard business theory. If net income isn’t positive for an extended period, it’s time to assess your business model and look for opportunities to either increase revenues or to reduce expenses, or to do both. Or maybe it’s time to move your assets somewhere else where they will be productive. On the farm, however, profit isn’t always so easy to define. At the very least, it’s more difficult than for your relatives in the city who can simply add up all their pay stubs. Instead of a drawback, however, the fact that profit on the farm can be measured a multitude of ways can actually generate additional insights into the health of your operation. Start by comparing your net farm income to previous years. This will tell you if the trend is going in the right direction, and it will also give you a preliminary assessment as to whether the business is meeting your needs and goals. It’s easy to find your net income numbers. Net income (or loss) for the year is given on the bottom of the statement of operations, which is also sometimes called your income or profit and loss statement. If you’re looking at a statement generated with cash accounting versus accrual, be forewarned that net farm income can be misleading since it won’t take into consideration inventory, pre-payables, receivables or payables. “Looking at cash reporting can lead farmers down a blind alley as to whether your farm is functioning well or not,” warns Small. When looking at net farm income, Froese also considers how the farm is managing depreciation and inventory. Even within an accrual system, however, looking at net farm income can only take you so far. One problem is that it doesn’t relate the income to the size of the investment. Nor does it take into account how salaries and draws are managed. For
example, paying wages to your teenage children may be an excellent strategy for your family but they can actually make your net farm income look worse. Comparing draws, wages, and depreciation between years may help tell a more complete story. “Are these incomes always taken out, and does the statement include direct wages year-to-year?” asks Froese. Another check is to consider your farm business as an investment. When Froese looks at a corporate balance sheet his eyes immediately go to the retained earnings. “This give a snapshot of the earning capacity of the business over the year,” he says. “But it can be negative if you’re managing the business for the future.” Whole-farm return on investment is simply net income divided by equity. Profit should yield returns commensurate to the business’s risk, says Small. A farm with higher inherent risk should yield a higher return on its assets and equity.
The ultimate business question is, what else could you have done with that money? In the Western world, the return on investment for farms generally averages from two to four per cent. That includes the many Hutterite colonies that MNP serves in Western Canada. “When hard times hit the colonies, you know it’s hard times,” says Small. “Eighty per cent of the colonies have $4 million or more of debt.” It’s also important to track operational analysis of a mixed farm so you stop investing into the wrong parts of the company. Small advises. There can be huge ranges within and between sectors in the industry.
GuideTip Watch your operating profit margin • Start with net farm income and return on investment, but also crunch a number called operating profit margin to tell how well your farm generated profits. • O perating profit margin factors in your time and capital. Essentially, it tracks how much of each dollar of revenue trickles down the income statement to become profit. To calculate your operating profit margin, take the net farm income (plus interest but minus unpaid labour and return to management) and divide by gross farm revenue. • If this ratio is less than 10 per cent, you need to consider why. Probably, it’s time to benchmark with other farms in your sector to see how you compare. • R eturn on assets is another measure of efficiency and how well the farm assets are being used. Return on assets is calculated as net farm income (plus interest expenses minus unpaid labour and return to management) divided by total assets. If you own most of the assets, anything less than one per cent is considered weak. If you’re renting more, a ratio below three per cent is a red flag. • Such calculations can expose a fundamental weakness, says Scott Dickson, livestock lead for MNP. “Profits are often plowed back into farms, so when a farm business is mature it has lots of fixed assets but the profitability of those assets is low compared to the total value of them.”
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January 2012
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GuideTip Watch your working capital • One indicator that a change in debt structure might be helpful is a little calculation called working capital. Working capital is current assets minus current liabilities, taken directly from the balance sheet compared to your total (fixed and cash) business expenses. • T he neat thing about the working capital calculation is that it’s very personal to your own farm. There’s no right answer — except of course that continually negative can be bad — but working capital can help measure if you are actually achieving the objectives that you think you are managing toward. • W orking capital and current ratio should both have positive values, although a value that seems too good may not actually be healthy. It may mean you’ve got too many lazy assets. However, having some working capital helps give you flexibility to take advantage of growth opportunities and it gives you a cushion to fall back on. It’s sometimes recommended that working capital divided by cash expenses should be more than 25 per cent of next year’s projected requirements. • “Working capital is the juice in the orange,” says MNP adviser Jonathan Small. • For many businesses, having working capital boils down to matching long-term purchases with short-term cash needs. Farmers tend to want to pay down debt as quickly as possible but structuring their loans this way may limit short-term growth and expose their business to the risk of unexpected expenses. It’s better to have slower repayment and leave some of your long-term debts with flexible payback so you don’t want to get caught having to refinance purchases. • “ Some assets are better financed over a longer term,” says Small. “That doesn’t put you in a compromised position for short-term operating loans.”
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2. Gross margins and overhead A key diagnostic tool, gross margin is simple too
When Jonathan Small looks at the financial statements of a struggling farm, he tries to isolate whether the root cause is a production issue or if it’s more related to marketing. Gross margin is a strong indicator of the success of the production and marketing management. “If the farm is struggling but the gross margins indicate that production is good, then we know our problems lie in the fixed costs,” says Small. There’s an extra advantage to learning how to interpret gross margin. “Gross margin is simple to use and once most farmers understand what’s included, they realize they carry that information around in their head and they routinely measure its components.” Gross margin is the extra revenue over the cost of goods sold. These funds are what’s available to cover unallocated fixed costs, returns to unpaid labour, and returns to owner’s or shareholder’s equity. Remember though that gross margins fluctuate more in farming than in other industries so multi-year trends are essential. If your income statement doesn’t have a line for gross margin, you can calculate it as the value of the production (yield multiplied by price) minus the expenses directly incurred to generate that production, for example seed and chemical costs. Don’t include variable expenses such as fuel and repairs since they vary according to the size of the operation and don’t directly drive the production per acre or per head. Moreover they usually don’t get measured on an enterprise-by-enterprise basis, which is where analyzing gross margins really shines. Most telling is to compare each enterprise’s gross margin. Looking at a number of years of gross margins for each enterprise is a good start to optimizing the mix of crops or livestock. Smalls says if farmers who grow many crops looked at their gross margins, they’d likely find a strong correlation between specific crops and their overall farm performance.
The expenses that you measure with your gross margin calculations are expenses that change quickly. Again, seed and crop protection costs are good examples. However we all know that there’s a lot more to farming than your cash production costs. Fixed costs and overhead don’t change very quickly and include critical numbers such as capital investment, the main source of interest, depreciation and repair costs. “Accrual statements are a good guide as to what fixed costs will be in the future and a good indicator of current or past problems,” says Small. Small suggests looking at trends in fixed costs along with gross margins. “If the fixed costs are steadily rising but gross margin is not, then the end is in sight,” he says. Gross margins have to exceed fixed costs to make a profit. Some statements show contribution margin. Gross margin includes indirect variable costs like fuel, some custom work fees and repairs. Contribution margin only includes direct costs. With contribution margin, the indirect costs typically get allocated between enterprises in an arbitrary fashion because they are not measured, so caution is needed because they can cloud the analysis, says Small. Even if the allocation could be 100 per cent accurate you would not be any wiser about enterprise performance than you were when you had the gross margin, says Small. “Often a good deal of work goes into the contribution margin for minimal gain in insight.” “Perhaps in the western provinces those indirect variable cost differences are not that pronounced but equipment, drying and labour costs can be quite different for corn versus soybeans versus edible beans versus wheat, strong margins (with direct costs only included) in corn versus other crops could be remuch less prominent when you factor in these indirect variable costs,” says OMAFRA adviser John Molenhuis.
January 2012
business
3. Liquidity
Balance your loans by calculating your current ratio and working capital
Liquidity is simply a measure of whether your farm can pay the bills as they come due. The common litmus test for liquidity is called the current ratio, which you can crunch right from information on your balance statement. “There’s a big variation between farms in current ratio,” says Harold Froese, farmer and farm financial analyst from Manitoba. “Current ratio only indicates whether we need to drill down the specifics in the individual farm.” Don’t sell it short, though, our analysts advise. Sometimes knowing that there might be a red flag is exactly what we need to hear. Current ratio is current assets divided by current liabilities. A value of less than 1:1 could indicate a developing cash flow problem, although it does vary for individual situations. For example, on supplymanaged farms with inflated asset values, lenders may consider a 2:1 ratio as acceptable. “Sometimes banks don’t pay as much attention to current ratio for farms in supply management,” says Mike Terpstra, former manager with the Ontario Soil and Crop Improvement Association, which delivers Growing Forward business management programs.
A current ratio with a very high value may indicate that too many assets are tied up in conservative investments with low rates of return. Comparing receivables (a current asset on balance sheet) to payables (under current liabilities) can also give a quick picture of how well you’re managing cash flow. It helps to extend repayment terms from suppliers. “To preserve or build liquidity, it helps to collect receivables quickly,” says David Rinneard, national agriculture manager for BMO. Bankers say that asking questions about liquidity numbers can also help spur a change in how the debt is structured. Structuring the debt so that long-term assets are matched with long-term debt can help the current ratio and cash flow. “Purchasing long-term capital assets with financing as opposed to with cash lessens the strain on liquidity and spreads the repayment out over a protracted period,” says Rinneard. Of course, it isn’t healthy to lean too far in the other direction. If the timelines of assets and liabilities get out of whack, you could find you’re left servicing debt on assets you should be replacing.
4. Leverage — compare debt to equity/assets Here’s the million-dollar question. What’s the best way to leverage your equity to grow your business without harming your business? This may not sound like something you want to do on a Saturday night, but the good news is it can be empowering. The other good news is that you if talk to your banker about these numbers, they’re sure to be impressed. The top part of the balance sheet lists the use of the funds — all the assets. The bottom part details where the funds were sourced from — all the liabilities. Leverage then can be calculated with debt-to-equity or debtto-assets ratios from numbers off the balance sheet. “Successful farm managers monitor leverage and sensitize their farm business to a host of variables,” says BMO’s national agriculture manager David Rinneard. While high leverage should generate higher returns on equity for the farm business, it exposes the farm to more risk in an already high-risk business. Also, being highly leveraged means more exposure to rising interest rates.
“As a farm’s debt-to-equity ratio grows so does the farm’s inherent risk,” says Rinneard. The debt-to-asset ratio is often talked about in general terms of weighing risk. That means the financial position of each farm and each situation is different. Many new farmers are very efficient and can service their debt but are highly leveraged, with a debt/asset ratio often greater than 70 per cent. Others have a high return on assets, but by the time they make their interest and principal payments, so little income is left for living expenses that they rely on off-farm income. Being in a strong leverage position (often defined as a debt to asset ration of less than 30 per cent), means you can borrow new debt if needed by re-leveraging, or you can borrow against existing assets and provide a needed capital injection to rebalance the farm’s balance sheet. If the farm is already highly leveraged, you simply don’t have that same chance. Continued on page 26
January 2012
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business Financial Fundamentals By Maggie Van Camp, CG Associate Editor
Reading your farm’s financial statements is like looking over the technician’s shoulder when they’re getting computer readouts on your tractor. Knowing what the numbers mean can keep your equipment in peak condition. But who can make sense out of what’s written? Financial advisers say getting the big picture on your farm’s financial health isn’t nearly so complicated. “Everyone needs to understand their financial position better to make more informed decisions,” says Mike Terpstra, former manager with the Ontario Soil and Crop Improvement Association, who helped deliver Growing Forward programs. The reality, however, is that most of us really only want to earn a decent living and not pay income tax. We leave sorting through the mess of financial information and crunching ratios to accountants and bankers. Scott Dickson, director of livestock services and accountant for MNP, estimates only one in 20 of his farm clients really understand their numbers. He says that’s about to change. Terpstra agrees. “Farmers want to learn how to use the programs better, to get better information out of their financial statements.” The most popular farm choice among the one-on-one training options available through the business development portion of Growing Forward in Ontario is to learn more about financial software. Farmers can get up to $500 or half the cost of having a person teach them how to use their financial software better. New farmers can get 75 per cent cost coverage up to $750. There are only a couple of important statements in that stack of papers you get back from the accountant at year end, says Dickson. The balance sheet basically shows what you own and owe at a given time. An income statement (also known as a profit and loss, income and expense or a statement of operations) summarizes the result of the activities of the period. Thirdly, a cash flow statement is sometimes generated. It’s the link between the balance statement and income statement, and often the missing link for farms. “A cash flow statement tells where you spent your money,” says Dickson. “Now you’re talking farmer language.” Often cash flow statements are used to forecast how a change will impact your farm’s performance. For example, how will net income will be affected if you buy an asset? 26 country-guide.ca
These statements usually show year-overyear comparisons to help detect financial anomalies or trends. Determining the cause of this change is the first step in understanding them and, in the case of negative events or trends, taking steps to remedy the problem. “When assessing financial performance, the past is often a great indicator of the future,” says David Rinneard, BMO national manager of agriculture. All three statements should also be prepared on an accrual basis so that inventory and receivables and payables are included. If you’re in the AgriStability program, you’ve had to track your inventory anyway and then it’s often linked with a personal income tax statement to make it pseudo-accrual income statement. Dickson estimates that only about a quarter of his farm clients use true accrual accounting in their reporting. “Most farmers still do manage by their bank account,” he says. Although it’s sometimes beneficial to manage your taxes with cash accounting, if you want to do financial analysis, the statements need to include inventory, pre-paid inputs and any bills that are outstanding or owing. “Tax management on a cash basis can be fantastic,” concedes Dickson. “A farmer I know says that the people who don’t manage their taxes in this industry are the ones who are missing out.” Reports on an accrual basis cannot be as easily manipulated. Nor are they as potentially deceiving — and being honest with yourself is what financial analysis is all about. With cash accounting, all you have to do to make your statement look better is not pay your bills. In other words, reviewing tax return information only makes it difficult to get a good understanding of inventory or payables and receivables. “For our purposes, advisers need to adjust to make it accrual,” says Terpstra. “Over time it gives a clearer picture.” The farm financial assessment costshared through the Growing Forward program covers a professional farm adviser to review a farm’s finances. At the least, the adviser must look at the income tax return information for two consecutive years and create a profit and loss (or a revenue and expense) and a current market value balance sheet, along with crunching some pre-determined rations. They also include and explain a net worth statement and net farm income and project for the year an estimate of the current year’s revenues and expenses and convert these into accrual values.
Continued from page 25
5. Debt-servicing capacity A debt-servicing ratio below 1.25 may mean danger ahead
Not surprisingly, lenders like to track a farm’s ability to service its loans. Debt servicing capacity is the ability to repay term farm debt from farm and — in the case of some loaning agencies — nonfarm income. On your income statement, look at the non-cash items. Adding the depreciation (also sometimes noted as capital cost allowance or amortization) with the interest and net farm income tells you how much is available for debt servicing.
“ Everyone needs to understand their financial position better to make more informed decisions.” — Mike Terpstra Dividing that total by the interest payments for the year is the debt-servicing ratio that some banks use as an indication. The higher the ratio, the greater the capability a farm business has to weather any revenue or expense volatility. Also look at your debt-servicing ratio across a series or years. Is the ratio getting better or worse? “Generally, the ratio between free cash flow and a farm’s debt-service obligations should exceed 1.25 times,” says David Rinneard. For example, a farm with an annual debt-service obligation of $100,000 should generate free cash flow exceeding $125,000. When this ratio drops below 1, it can often be immediately detrimental. CG
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www.pioneer.com/yield 2-year (2010-2011) yield data collected from large-scale, grower managed trials across Western Canada as of December 1, 2011. Product responses are variable and subject to any number of environmental, disease and pest pressures. Individual results may vary. Multi-year and multilocation data is a better predictor of future performance. DO NOT USE THIS OR ANY OTHER DATA FROM A LIMITED NUMBER OF TRIALS AS A SIGNIFICANT FACTOR IN PRODUCT SELECTION. Refer to www.pioneer.com/yield or contact a Pioneer sales representative for the latest and complete listing of traits and scores for each Pioneer® brand product. Roundup Ready and Roundup are registered trademarks used under license from Monsanto Company. ® CLEARFIELD is a registered trademark of BASF. Pioneer® brand products are provided subject to the terms and
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BUSINESS
The right choice With strong farm incomes in the last two years, Canada’s farmers are moving ahead of their cousins who chose the city's bright lights By Gord Gilmour, CG Associate Editor anadian farm families aren’t just catching up to other Canadians these days. More and more, they’re pulling ahead. Of course, it’s as hard as ever to generalize about agriculture. There are differences between sectors, there are differnces between regions, and most importantly, there are differences between age groups. Even so, it looks like it’s time to park the old stereotypes. For instance, back in Dad and Grandpa’s day, when you said you were from the farm, it raised a picture of a family that prized lifestyle over money. Farm families were generally pictured as borderline disadvantaged. At school, there were jokes about no electricity or indoor plumbing, and there was a general assumption that being from the farm meant you had less access to modern amenities as well as to recreational and educational opportunities and the like. It was a big enough problem that rural sociologists and agricultural economists had a special term for it — the “farm problem” — and in the 1940s through the early ’60s they spilled barrels of ink writing about it. But then things slowly began to change. Rural areas began to arrive on the electrical and telephone grids. Roads got better and vehicles more reliable. Today, outside of a few minor issues, says one agricultural economist, you’d be hard pressed to tell the difference in experiences or opportunities between a farm family and urbanites. Al Mussell, a researcher with the Guelph, Ont. based George Morris Centre, lives in a rural and predominantly agricultural area, and says that today a farmer can be standing in the middle of one of his fields, whip out his Smartphone, search the Internet for the most obscure fact and shoot off an email to get further clarification. It’s so far removed from the isolated old days of party lines and snail mail as to be almost unrecognizable. It’s not that life on the farm isn’t without its own difficulties — hockey rinks are a long drive away, and hospitals even further. But long gone are the days when Uncle Frank had to drop out of school in Grade 8 because there wasn’t bus service to the local high school and he couldn’t afford to rent accommodations in town. 28 country-guide.ca
JANUARY 2012
business These days the costs of farming are going down, at least in relation to small towns, and today the costs mainly amount to a bit more time on the road. There are other costs, of course. Rural depopulation makes it harder to form neighbourhood social networks, but that’s true in town too, and in both cases it can be at least partly compensated for by today’s electronic communications. “At the end of the day what we’re talking about is all generally small stuff — inconveniences,” Mussell says. “It’s not going to condemn my kids, or my neighbours’ kids, to a life where they don’t have the same opportunities as everyone else. That was not always the case.” It begs the question — if today’s farm families aren’t the supposed backwater hicks of yore, where do they fit in Canadian society? To use an economist’s jargon, what is their socio-economic status? If the numbers are to be believed, farmers’ status is getting better by the year, while other Canadians stagnate or even lose ground.
Incomes diverging Last month, two very different sets of headlines appeared almost simultaneously in Canada’s newspapers. The first said “Farm income rises” and the story went on to quote the latest farm income report from Statistics Canada. The second headline offered a more subdued “Wages failing to match inflation” and the story cited another StatsCan report on Canadian payrolls. Boiling the numbers down, what the two reports essentially found was a tale of two solitudes. Canadian farmers were seeing double-digit growth in their incomes, StatsCan said. At the same time, working Canadians weren’t even holding their own any more and there was some evidence that real wages — actual dollars earned, not inflation adjusted — may be poised to fall for the first time in many years. The farm trend might be a newish one, depending on the sector. Grain growers struggled through a long period of stagnation in the 1980s and most of the 1990s before really getting some wind in their sails over the past four years. But the national trend is a long-established one, according to a labour economist that many Canadian capitalists love to hate. Jim Stanford, an economist with the Canadian Autoworkers, says that there’s been no increase in nominal wages in Canada — wages adjusted for inflation that is — since 1979. There are a number of reasons for that, Stanford says, led by increased competition from manufacturing in low-wage centres like India and China. Stanford sees something more structural at play. He says the squeeze on the middle class is proof that the social contract that was forged in Great Depression and Second World War has been disappearing, even in sectors that aren’t grappling with global competition. “I’m not sure that employers ever really wanted to sign that contract. Circumstances forced them January 2012
to,” Stanford says. “Since about 1980 we’ve seen it being rolled back again and again.” Whatever theory you use to explain it, the upshot is that a group of working Canadians are just hanging on by their fingernails in the face of forces that most economists say are almost completely beyond their control. To illustrate that point Stanford cites the newest chapter in the story of Ford, sometimes credited with making a major contribution to the growth of the middle class in North America by paying wages that were high enough that the guys on the line could actually dream of buying the cars they were producing. “Look at Ford today — the new assembly line worker at Ford is starting at $15 an hour, and Ford is the company that everyone says the others should be more like,” Stanford says. “I would say that at $15 an hour, not very many are going to be able to buy a new Ford.”
The professionals At this point, a free-market economist is sure to pop up and say that while it’s true that low-skill jobs are under the gun, it’s just part of a movement to a knowledge economy that will reward people for their education and abilities. If the assembly line worker at Ford is the loser, in other words, other categories are winners. Indeed, for the workers that do have those skills and credentials, not only are their lives better because their wages are growing, but also because cheaper goods and services give them more spending power. Pete Holle heads up the Winnipeg-based Frontier Centre for Public Policy, a Libertarian-leaning think tank that examines questions of public policy. He and his colleagues have another less flattering term for this trend — credentialism. Holle says the growth in the number of jobs that require a credential and membership in some sort of organization has been growing rapidly since the 1960s when just five per cent of all jobs required one. Today that’s become more than 20 per cent. It’s hardly surprising. Credentialing limits the number of people who can get into a job or profession, which in turns does good things for the wages of the anointed few. Various groups have taken note of this trend and there’s been a movement towards “professional” status by groups as diverse as insurance adjusters and public relations practitioners. But Holle cautions that the ride may be coming to an end, and he says that the same Internet that allows farmers to look up answers in a remote field also likely means increased competition for many professionals. “We’re increasingly seeing things like medical images that are being sent to lower-wage jurisdictions like India, over the Internet, for analysis,” Holle says. “Even those skilled jobs can be outsourced.” Continued on page 30 country-guide.ca 29
business
Continued from page 29 Nor is that the only threat for this sector. The jobs that can’t be physically outsourced to another jurisdiction may be outsourced to another domestic group, Holle says. He gives the example of a minor cut that requires a trip to an emergency room where a physician will clean it, stitch it up and apply a tetanus shot. “We’re not talking about something terribly complex here — do you really need a full-fledged doctor and an emergency room to handle it?” he asks. “Or would we all be better off if we could go to a small privately run clinic in a local strip mall, where a technician who’s been trained to handle exactly these sorts of things takes care of us and refers us for further treatment if warranted?” Given the expected pressure on the public purse from an aging population, Holle says he suspects it’s just a matter of time before some hard conversations start to happen. Either way Holle says he has little doubt that what we’re really talking about is the disruptive power of the Internet, where it’s all but impossible to limit access to knowledge, information and even goods and services. “I think of my kids and how they’re used to finding what they want, when they want it on the Internet,” Holle says. “If you were to try to tell them that you’ll only get the services we want to offer and you can’t get the same things that are being offered over there — well, they wouldn’t be very happy about it.” As this new generation of wired citizens gets older and wields more power, expect things to change even more quickly, Holle says. From the opposite end of the political spectrum, Holle finds some surprising support for this worldview from Jim Stanford, who says he suspects it really is just a matter of time before middle class professionals in their quasi-unions feel some of the wrath of falling wages. He even reaches into the world of agriculture for something he says is a better analogy than a professional union. “I call it supply management for accountants,” Stanford says, and then chuckles. The main point appears to be a growing consensus, across the political spectrum, that the days of the professional sitting in the sweet spot of the economy appear to be drawing to a close. 30 country-guide.ca
The big question is, will AgriStability and government programs get cut when politicians start to figure out that today’s rise in farm incomes isn’t just a blip? A farmer’s place So should Canadian farmers let out a self-satisfied sigh that their day is finally coming? While most farmers don’t control the price of their products, there appears to be plenty of evidence that ag commodities are firmly in a steady upward trend, albeit with an occasional retrenchment. And while individual farms may face challenges, it’s a sector as a whole that can’t be outsourced — land is where it is. And the new technology of a farm may actually make life just a bit easier for the farmer of tomorrow, lowering the skill bar for field labour as more and more automation appears. Yes and no, says George Morris’s Al Mussel. Farmers are enjoying relatively good times, he agrees, but he also cautions not to read too much into headline numbers, since they’re muddy at best. For example, he points out that the StatsCan farm income report only provides averages that encompass the largest and smallest farms alike, across all sectors. In fact, he and his colleagues at the George Morris Centre feel so strongly that the complexities of the issue of farm income need to be recognized that they’ve jointly authored a lengthy report on it. In Understanding the Structure of Canadian Farm Incomes, they’ve detailed many of the issues that need to be addressed to get a clear picture of farm income in Canada. For example, they illustrate that farm income can vary greatly within sectors, and that good times for one ag sector can mean hard times for others — such as higher grain prices that are good for grain growers but put the squeeze on livestock producers. But they also detail that in many ways, farm wealth may be under-calculated, because farm income is only a small part of the picture. To really drill into the numbers, you need to look at a combination of income and accumulated wealth. For farmers that largely means the increasing value of the assets of their operations, Mussell says. “In this way, farming really is a bit different than any other business,” Mussell says. “In other businesses you’d be looking
at the value of the business itself — the products, the customer base, the marketing plan. In farming you’re really talking about the value of the assets — what you’d get if you ceased operations and sold out.” Even there, it’s tough to calculate some of the factors that go into determining those values. For example what about the effect of farm income support programs — don’t they almost immediately get capitalized into things like higher land prices? The answer is fairly unequivocal, Mussell says. “I think there’s been plenty of evidence over the years that, yes, programs are capitalized quite quickly,” Mussell says. So if things are tough all over — and getting tougher if economic forecasts are to be believed — what does that mean for farmers? Can they expect to see programs like AgriStability or supply management fall out of favour with hard-pressed taxpayers? Perhaps, but here again an unexpected voice shows that support for farmers may run deeper than most appreciate. Detailing some of the economic challenges for workers going forward, the CAW’s Jim Stanford paused a bit to consider the reality of the Canadian farmer and ventured to offer an opinion. “Farming is a bit different — it seems to be a really brutal business,” he says. So does that mean that soon we’ll all be linking arms and singing Kumbaya? Not likely. There’s always that old gremlin human nature to take into account for. So that loudmouth at the curling rink who thinks farmers work four months of the year and go to Arizona for the winter is probably always going to be around. But then again, farmers can and do play that game too — say an apple producer or a grain and oilseed farmer who complained about autoworkers during the 2008 bailout, likely without ever having met one. It’s just the way of the world, says Mussell. “That’s human nature — to think that someone else has it better, especially if you’re facing challenges,” Mussell says. “I don’t think we’re going to be able to do much about that.” CG January 2012
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10/11-17142-3G
business
From
the brand
up By Maggie Van Camp, CG Associate Editor
Starting a new farm got a lot more practical when Shayne and Vicky Horn saw they could profit as much from their brand as from their ground
n the video blog Vicky Horn’s red hair bobs along as she pushes a baby stroller and at the same time rolls out fencing for their rotational pasturing system. It’s one image, but with it, the camera captures both the heart of the Tangle Ridge brand — pastoral family farming — and the solid core of the Horns’ business plan. This isn’t necessarily the farm that every farm kid goes to bed dreaming about. It’s clearly on the small side, it’s built around sheep, and there aren’t any sheds crammed full of gleaming, high-horsepower machinery. But it is a success, and the more I find out about it, the more impressed I become. As a business, the thinking that has gone into Tangle Ridge is far from simple. There isn’t any way in which this farm’s progress has been serendipitous or arbitrary. It was planned even before Vicky and her husband Shayne bought their 160-acre farm south of Edmonton four years ago. “All we started off with was a blank quarter of land and our vision,” says Vicky. They wanted to start farming but didn’t have the advantage of inherited assets. Instead they leveraged their own skills and an emerging market opportunity. The Horns built their farm’s business plan around their own needs, strengths and vision, fulfilling both the soft issues and monetary needs. They wanted to use sustainable practices and have their children grow up on the farm but they also knew they would have to continue working off farm. Vicky works full 32 country-guide.ca
By using brand strategies to get consumers asking for their Tangle Ridge lamb, Shayne and Vicky Horn are beating their financial targets.
time mostly from her home office and Shayne spends a day a week in the oilfield. In 2008 the Horns started by buying 30 lambs from “hair” breeds for the 160 acres that they had purchased, seeded down and fenced a year earlier. They chose hair sheep — katahdins and dorpers — so the meat was mild. As well, the breeds are hardy and don’t require shearing. The Horns soon decided to sell once a year at an open house on their farm near Edmonton in November, with pickup spots in Edmonton and Calgary where customers meet them. Their customers are happy to connect with the family who raised the lamb, and even happier to see the farm. The Horns also made the strategic decision to direct market whole frozen lamb in order to minimize waste from unpopular cuts, reduce handling January 2012
Photo Credit: Carmen Williams Photography
business
and eliminate retail margins, farmers’ markets and daily deliveries. Astonishingly, it is the Horns who set their own selling price, not the retailers, market auctions, processors, and not even their customers. Tangle Ridge lamb is priced on the margins their family farm needs to survive, currently $7.50/lb. They sell whole carcasses based on carcass weight, with the total weight before it’s cut up averaging 35 to 50 pounds.
Leveraging themselves When Shayne originally crunched the numbers, the returns in sheep production were decent and demand outweighed supply. Additionally, startup costs were lower for sheep than cattle as the handling equipment was less expensive. “Lamb was a bright spot in the industry,” says Vicky. January 2012
Vicky knew rotational grazing, and she had some experience creating a brand for local meat. She works for the renowned Alberta ranchers, the Kotelkos, who market beef under the Spring Creek Beef brand and recently linked up with XL Foods to expand their business. There, Vicky saw first hand that customers will pay extra for the story behind food. Vicky also learned from her Spring Creek experience about the cost and complexity of certification. Instead of going for organic certification, the Horns decided to sell what they call natural lamb, grass fed and raised without antibiotics and hormones. Organic certification is too expensive for a small farm like theirs so their customers have to trust that they don’t use antibiotics. But for the Horns, “trust” Continued on page 34 country-guide.ca 33
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Continued from page 33 is more than a word. It’s a characteristic that they can grow and monitor. Explains Vicky: “Our brand is based on our integrity.”
Brand basics This young couple is undeniably likable and they ooze trustworthiness. It’s a core strength, and it’s the makings of a perfect brand for food. Vicky is like a very smart Strawberry Shortcake of the sheep industry. You just want to hug her. That’s exactly what their customers want — to connect with a local, wholesome family farm who raise meat without hormones or antibiotics. This year, only their fourth in business, the Tangle Ridge Ranch flock cannot keep up with demand and they’ve had to turn away customers. From the beginning, Vicky knew the key to the success of their business plan was building a brand. “What we wanted was not for people to buy lamb, we wanted them to buy Tangle Ridge lamb and think that if it’s not Tangle Ridge, it’s not the same,” she says. Instead of putting time into farmers’ markets or into elaborate, time-consuming delivery systems, the
Pastoral Perfect Pitch Vicky Horn was one of six finalists recently competing in Perfect Pitch, a kind of rural “Dragons’ Den” and the brainchild of the FarmOn Foundation partnered with the Alberta Business Family Institute at the University of Alberta School of Business. In Perfect Pitch, young entrepreneurs from various sectors pitch their idea to a panel of judges to compete for business coaching, support and $25,000 to invest in the business. Contestants have three minutes to describe their business either in person or on Skype. Then six finalists are chosen who get help from mentors to develop their business plans over the summer. Finally one winner is selected in the fall. You can check out all the contestants and the winner at www.StartPitching.com. Although their farm didn’t win the money, Vicky says that during the process she learned about a new financing option, met business mentors and discovered some online resources. She was also proud to represent the only farm among this year’s finalists. During the Perfect Pitch, the Horns were also encouraged to produce a video blog to add to their website. It’s helped them further build their brand based on their own personalities. Those videos have been picked up by foodie Twitter, blogs and Facebook pages. “We’ve been embraced by this community,” says Vicky.
34 country-guide.ca
Horns focused their marketing efforts on brand development. They also decided from the beginning that it would take much more than being a nice family on a picturesque farm. The same year that they invested in their core flock, they also hired professionals to design a logo, business cards and a website (www.tangleridgeranch.ca) complete with online ordering and a blog. Now the farm is also on Twitter and Facebook. Building the brand means vigilant use of their logo, including tagging each bag. It also means Vicky does some legwork building a local clientele of highend independent restaurants. These restaurants feature the Tangle Ridge logo and sometimes the farm story on their menus. When Tangle Ridge lamb is the feature item at one restaurant, wait staff wear T-shirts featuring cartoon characters of their family. This hard work paid off big time when Vicky met a reporter from the Edmonton Journal this summer while serving at a restaurant event. The reporter came out to the farm and the story was picked up by several other papers. The telephone started ringing with orders, too many to fill. “The response was amazing. I bet we instantly had 100 more customers,” says Vicky. “We’ve met our goal of proving that in five years you can make a profitable living from a quarter section,” says Vicky. On their farm they currently have 200 ewes and want to carry 250, which would then allow for 350 to 400 market lambs. That would boost their gross sales up to about $142,000 a year. “As we grow closer to that goal, we’ll have to look at ways to expand beyond,” says Vicky. That could mean expanding their land base or contracting out production. Alternatively, they might have other producers join their brand, the business model used by Spring Creek.
Financing follies To do their original land purchase they had some help from their parents but went to banks to get some operating financing. When they showed their business plan to the first bank it was ignored and the loan rejected. Eventually, they found a loans manager who read and understood their business plan and was willing to back them even though their parents weren’t farmers. “Don’t take rejection personally. There are other options out there,” Vicky advises other farmers. “Always have a business plan to fall back on, and oh yeah, start slow.” Having a business plan also kept them focused when they were first building fences and plowing their paycheques into the farm. “It’s the reality of starting any new business,” Vicky says. “It’s hard. No matter what business you start, you’re going to have personal sacrifices and personal money to get it going.” Like a true entrepreneur Vicky keeps the risk in perspective. “You’re risking your family’s financial stability,” she says. “But if you keep your assets bigger than your liabilities, you can always sell it if things go bad.” CG January 2012
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Sell it now When you’ve got equipment to move, follow these rules to sell it fast and generate the best net outcome for you and your farm By Scott Garvey, CG Machinery Editor e all love that new-cab smell. As great as it feels to take a new farm machine home, however, one thing is inevitable. Some day you’ll have to figure out how to get rid of it. That raises the question, how and when should you sell equipment after you retire or cease farming operations? It can be a tough challenge with lots of dollars riding on it, so the Western Canada Farm Progress Show lined up the experts last summer and put them on the hot seat. “It’s a legitimate question,” agrees Dean Klippenstine, an agriculture specialist at MNP (formerly Meyers, Norris, Penny). Farmers are often reluctant to sell, he points out. There might be tax issues, and even if there aren’t, the tractor might come in handy some day, and who knows, maybe the children will change their minds and want to get more involved in the farm. If the next generation has to replace the equipment line, maybe they just couldn’t do it. Besides, farmers need to make so many decisions just to get to the point of retirement, it looks awfully inviting to park the machinery decisions for another day. First, though, you need to know the cost, Klippenstine says. “Machinery loses value.” Holding on to that machinery even one year is probably going to reduce the amount of investment you can recoup from its sale. On average, says Klippenstine, expect to lose 15 per cent per year in obsolescence.
Lower taxes... really? “If you’re retiring, retire and get rid of your equipment,” echoes Kenneth Gareau, a senior investment adviser at Dundee Wealth. “Don’t secondguess yourself.” At first, it can seem obvious that your tax bill is going to be a lot easier to swallow if you can spread your equipment sales over multiple years. In reality, the tax professionals say, that isn’t always the case. “Tax is never a reason not to have a wholesale farm liquidation,” Klippenstine says. “The tax is there next year anyway. That’s the key.” 36 country-guide.ca
The best way to sell Gareau and Klippenstine agree that an auction sale may be the best way for most farmers to quickly and efficiently sell their machines. Many farmers, however, cringe at the fees charged by auction companies and think they could net more money by trying to sell their own equipment. Klippenstine says his experience indicates things aren’t likely to work out that way. “If clients try to do it themselves, they lose 15 per cent of their auction sale value,” Klippenstine estimates. “When we advertise it individually, it doesn’t all get sold and it takes four or five years. You’re not going to advertise every $2,000 or $4,000 item. No matter what happens, an auction is the right answer.” Still, it’s critical to choose the right auction company. Make sure it has an Internet presence, Garneau says, since e-bidding greatly increases the pool of prospective buyers, feeding buyers from widespread locations into the process to help drive up prices. E-bidding minimizes the impact from regional economic slumps, Garneau adds. “Just because the economy here isn’t great doesn’t mean the equipment is going to go cheap.” Brennan LeBlanc of Ritchie Bros., the international auction firm, agrees Internet sales are key to getting the best value for machinery at auction, adding they now make up a significant part of that company’s sales. “I’d have to say that 25 to 35 per cent of items you sell at your auction go over the Internet,” LeBlanc says. “The logistics and technology today allow people to purchase items that are miles away.” Nor is it only the faraway buyer who bids electronically. “We’re seeing an increase in the number of people using the Internet to buy even though their farm is right in the local area,” says LeBlanc. “It provides some privacy. “You want to deal with a company that is trustworthy,” LeBlanc says. After all, you’re trusting them with a pretty large amount of money. But perhaps even more importantly, you need a company that the buyers will also trust. If the buyers aren’t convinced the process is fair, they won’t be bidding, which helps explain why firms January 2012
MANAGEMENT
that have good reputations attract more buyers than those that don’t. Knowledge of an auction company’s reputation doesn’t seem to take long to become well known. A firm’s failure to attract trusting buyers is almost certainly going to result in a lower overall return from a sale. That means that while it’s natural to focus on percentage points and sales fees, the reputation of the auction company, its area of expertise, what it is prepared to do and what resources it has to offer can make an even greater difference in the net result. In sum, it’s a word to the wise to guard against selecting an auction company based solely on price when you could lose more in sales value than you would pay in fees. If you’ve decided to sell equipment at an auction, Klippenstine believes starting the planning process as early as possible will help maximize the amount of money you get from it, as well as minimize tax problems. How far out should that planning start, from a financial perspective? “Three to five years before the sale,” Klippenstine says. “There’s not nearly as many tools in our (financial planning) tool kit for the short term as there are for the long term.” LeBlanc agrees preplanning will make for a better sale. Although arranging the auction itself may not require as much lead time as tax planning, booking a company well ahead of time means you’ll have ample time to arrange everything. That includes picking a day for the sale. “A good practice is, the earlier the better,” says LeBlanc. “The time frame is very important. Going first makes sure you’re out in the market first and attracting buyers.” Ample lead time also ensures you can properly prepare your equipment for a sale. Even if you can’t spend time working on every machine, improving the condition of a few key pieces can provide a net benefit to the entire equipment line. “Tidying up one piece of equipment increases the attraction on all of the equipment,” LeBlanc says. The derelict machines can be sold ahead of time to scrap metal dealers or neatly organized and included in the auction. “There is a three-to-one rule,” says LeBlanc. “If you spend $1,000 to clean up a machine, we feel you’ll get $3,000 back for that effort.” CG January 2012
country-guide.ca 37
management
A new way to rent Could the American “cash with bonus” system be the best way to rent land when commodity markets are so volatile? By Gerald Pilger
new type of American land rental agreement is gaining ground across the Midwest and may soon cross the border into Canada because it appears to offer advantages both to farmers and landowners, especially with 2012’s economic forecast. Called “cash rent with bonus,” the lease is being praised for helping farmers reduce risks in volatile markets. University of Illinois economist Gary Schnitkey agrees with the overall industry consensus that the increasing volatility in commodity prices makes it extra difficult for landowners and tenants to negotiate a rent that is fair to both parties. “Commodity prices can go up or down a dollar very quickly,” Schnitkey says. “We just don’t know what prices will be a year from now, and that impacts the amount of rent that a farmer can afford to pay.” Landowners, meanwhile, are worried that traditional rental agreements will freeze them out of any windfalls if commodity prices explode, as they’ve shown in the last three years they can certainly do. The variability in rent is clearly shown in the November 15, 2011, Farmdoc Daily news release which looked at farmland rental rates in Illinois in 2010. Rental rates in this mega-yield corn- and soybean-growing region of the U.S. are much higher than in most parts of Canada, but if you look at the amount of variability rather than the dollar-per-acre average, it’s thought there is a lot of similarity here. For example, the average Illinois cash rent in McLean County was US$233 per acre in 2010. Yet only 35 per cent of rents fell within $20 of that average. In all, 26 per cent were between $20 and $60 lower than the average, with another 10 per cent more than $60 lower. Meanwhile, 19 per cent of rents were $20 to $60 higher than the average, and 10 per cent were higher by more than $60 per acre. Some of these rate differences can be explained by differences in land productivity. Even so, Schnitkey believes much more of the disparity is due to the goals of the owner and farmer and the relationship that has been built between them. Regardless, Schnitkey says, setting the cash rental based on an area average just doesn’t work well any more. 38 country-guide.ca
In part, that’s because traditional cash rental agreements do a lousy job of allocating risk and reward. They put all the downside price and production risk on the farmers, and almost all of the upside risk on landowners, who say they can’t afford to keep sitting on the sidelines when markets are so volatile and when corn and soy genetics have shown the power to explode when weather conditions are right. Typical crop-share agreements divide price and production risk more equitably between the landowner and tenant. However, disputes can arise over the timing of the sale of the crop and also over how payouts from programs and subsidies are shared. The flexible cash lease attempts to attack these concerns by varying the rent according to a formula that adjusts for yield and price variations, but this type of lease is often considered too complicated by landowners and tenants alike. In response, Schnitkey developed the cash rent with bonus leasing arrangement. It provides a base rent that is paid regardless of yield or price, and then pays the landlord a bonus if crop revenues exceed a pre-set revenue target. That means it offers both parties the advantages of the cash lease by having a known minimum fixed cash payment. Yet it also allows the landlord to receive some benefit from high prices and yields without the complexity of the flexible cash lease, and it protects the tenant if prices fall dramatically or if yields are poor. “We tried to make this lease as simple as possible,” says Schnitkey. For this lease to work, the tenant and owner must agree on a number of parameters. The first is the minimum cash rent that will be paid regardless of grain prices, production levels, and crop revenues. Schnitkey says it’s important for both parties to recognize that the lower the minimum rent is set, the higher the level of risk will be for the landlord, which then means that any revenue split to the landlord must be correspondingly higher too. In part, this is why determining the minimum cash rent is the most difficult part of this lease. One method Schnitkey has used is to discount the average cash rent in the area by $50 to $75 per acre. He adds however that this is based on Illinois rents that average around $200 per acre. In areas such as Canada’s West where land rents are lower, Schnitkey suggests january 2012
MANAGEMENT setting the minimum base rate at roughly 25 to 40 per cent below the average cash rent in your area. An alternate method for setting the minimum cash rental rate would be to look at an amount equivalent to the returns the owner would get from a guaranteed deposit certificate for an investment equal to the current land value. In other words, if land is worth $1,000 per acre and a GIC (for the same term as the proposed lease) is currently two per cent, then the minimum cash rent would be $20 per acre, with this cash amount paid prior to seeding. The second parameter the parties may want to agree on is the maximum rent to be paid, although Schnitkey says this is an optional step. Third, the revenue trigger must be calculated. This is the amount at which the bonus kicks in. Schnitkey recommends that the trigger level be the sum of all production costs plus the base cash rent. By using this formula, it ensures that all the costs (before profit) of the tenant are covered before sharing of revenues of the crop occur. Crucially, that makes the cash-with-bonus approach a lot different from a standard crop share or flex lease where crop revenues are shared regardless of tenant’s costs and profitability. Fourth, the landlord and tenant must decide on the division of crop revenue above the trigger. As with setting the minimum cash rental rate, there are no hard rules to follow. It is strictly a negotiated rate. However, the lower the minimum cash rental is set, the higher the revenue share going to the owner should be, Schnitkey says. In the online example from the Illinois website, the landlord’s share above the trigger was set at 40 per cent for corn and 45 per cent for soybeans. Finally agreements must be made on how yields will be measured, how the commodity price is set, and when the bonus is to be paid. Crop insurance harvest reports may be the criteria used to indicate yields. Expected prices could also be gathered either from crop insurance, from futures markets, or by daily averaging during the growing season.
A Canadian example Let’s say a farmer named Smith wants to rent a half section from a landowner named Jones on a three-year cash rent with bonus agreement. Land in the area is selling for $1,333 per acre and three-year GICs are 1.5 per cent. Therefore they agree the minimum base rent payable April 1 each year is $1,333 times 1.5 per cent, or $20 acre. The two parties then agree that the maximum total rent will be $100 acre. Smith has good financial records which show his cost of production (no land costs included) last year was $150 per acre of wheat and $200 for canola. Thus, the revenue trigger is set for wheat at $150 plus $20, or $170 for wheat, while for canola it is set at $220. Smith and Jones then agree that any crop revenue exceeding the trigger will be split 40 per cent for JANUARY 2012
Jones (owner) and 60 per cent to Smith (tenant) for both crops. The bonus (if any) is payable by Dec. 31. Finally, the farmer and landlord agree yields will be determined by bin measurement and allowances will be made for grade and dockage based on grading analysis done at the nearby inland terminal. Price of wheat will be based on the Oct. CWB PRO less the freight adjustment for the nearby terminal. Canola prices will be based on the January futures price less local basis on Oct. 1. Come fall, yields and prices are both good. Smith harvests 150 acres of 50 bushels per acre of wheat that is valued at $7 per bushel, and he bins 35 bushels of canola over 155 acres, priced at $11.50 per bushel. That means crop revenues are $350 per acre for wheat and $402.50 for canola. With both crops exceeding the trigger, the bonus must be calculated. Here, it is derived by subtracting the trigger amount from the total crop revenue, and then multiplying by the share percentage. The wheat bonus therefore is $350 per acre minus $170, with the resulting $180 multiplied by 0.4, so the landlord gets an additional $72 per acre of wheat. The canola bonus is $402.50 minus $220, with this $182.50 multiplied by 0.4 to show a payment of $73 per acre. Thus the total rent for the wheat is $92 per acre and for the canola it is $93 per acre. Total rent payable would be $92 times 150 acres of wheat plus $93 times 155 acres of canola, which works out to $28,215. The landowner would have received $6,100 in the spring, prior to the crop being seeded and a bonus rent based on yield and price of $22,115 which would be paid at the end of the calendar year. While this rent may seem high to many farmers in our example area, it is very much in line with the rental which would have been payable through a typical flex lease or under a crop-share arrangement given these yields and prices. Had crop revenues been lower, the rental payable would have also been lower. Where this arrangement is different is that no sharing of revenue occurs until after the tenants have their production costs covered. Furthermore the landlords are guaranteed an upfront minimum cash rental payment that is equivalent to what they would have received through a guaranteed investment. So both parties have minimized risk. The Illinois corn and soybean example can be viewed at www.farmdocdaily.illinois.edu/004347print. html. The same website has links to blank worksheets which you can print if you want to pencil in your own numbers to see how this lease arrangement would work on your farm. CG country-guide.ca 39
opinion
Built for success Yes, incorporation is a powerful business planning tool — but don’t make the mistake of assuming it will be a permanent, painless solution to your farm transfer questions By Gord Gilmour, Associate Editor
I
t’s no secret to anyone, says University of Sas-
ments and, inevitably, it is creating ever-bigger bar-
katchewan economist Bill Brown. The past two
riers for new entrants.
generations have produced an enormous shift
in the structure and nature of farms in Canada.
The challenge of putting together a great pile of money before you can even think of going farming
Long gone are the section-sized Prairie grain
may be the defining issue of today’s agriculture,
operations and the 100-acre family farms in the
and it is forcing a lot of farmers to rethink just how
East. They’ve been swallowed up by bigger and
they structure their businesses.
bigger operations, so today a 10,000-acre farm in
Maybe we all grew up to think of the farmer as a
the West barely raises an eyebrow, and everywhere
sole proprietor owner-operator, but there’s growing
across the country, if you aren’t expanding the
interest in alternative business structures.
amount of ground you’re covering every few years,
Brown recently spoke to Country Guide about
people begin wondering aloud if you’ve given up on
this issue from Dublin, Ireland, where he’s working
being a “real” farmer.
on a number of projects during his sabbatical year.
The trend is hitting every farm sector, leading to
What does he think? Brown says incorporation is
bigger production units and higher capital require-
the most obvious alternative structure, but there’s no way it’s as neat and easy as heading down to the lawyer’s office to fill out a few forms. In other words, getting the details right when you set up the corporation could prove one of the most important jobs you ever take on. Country Guide: Anecdotally we’re always hearing that farm business structures are changing, but what can you tell us about the actual numbers? Bill Brown: Off the top of my head, the last numbers I saw from Statistics Canada were from the last census, and about 12 per cent of Canadian farms were incorporated. That’s a change from the previous census, when about nine per cent were. As a percentage, that’s a huge increase, but as a portion of the overall total of farms in Canada, it still remains quite small. I do expect it to continue to increase as the average family farm continues to grow in size. There were also a few partnerships, but they’re a very small proportion of the total number of farms — maybe three or four per cent. It’s a business structure that has some issues. For example you have to take responsibility for all your partner’s debts.
40 country-guide.ca
january 2012
opinion CG: My sense is that larger farm size and the accompanying capital requirements are the forces that are driving this trend. Is that what you see, or is it an oversimplification? BB: It certainly plays an important role. The average farm in Saskatchewan has about $700,000 in equity and $200,000 in debt, for a total of $900,000 in assets — and that might actually be a bit smaller than the average across the country. But the bottom line is, a lot of assets and equity don’t produce a lot of cash. There are periods of course where farms do quite well, but over the course of many years, there will be long periods where they don’t make a lot of returns or have a lot of cash. The increase in the value of those assets over many years contributes to farmers’ overall wealth and it funds their retirement. But it also means there’s a very high cost of entry. CG: That makes the questions of generational transfer, farm succession and inheritance for farming and non-farming children even more important. What are your thoughts on that? BB: The issue of fairness to non-farming children is certainly an issue, but how the farm is structured is going to be very important for its future success. More and more you see non-farming children who want to inherit land, usually with the understanding they’ll rent it to the farming family member. But they may then decide they want to sell it out from under their sibling, and frequently the young family member who has taken over the farm won’t have the money to buy it, so the land gets sold to someone else in the area. The example I always give is a family member who lives and works in Calgary who inherits land but who also has a $300,000 or $400,000 mortgage that they’re paying six or eight per cent on. They may decide that it makes more sense to sell the land, which is only returning three or four per cent to them, and pay off their mortgage. CG: How can farm business structures like incorporation overcome some of these obstacles? BB: You can do a few things with share structure. For example, you can create voting shares for farming members of the family and non-voting shares for non-farming members, and so on. You can also set up rules that you can’t sell shares outside of the family, but that’s not perfect either. For example, the farming family member might not want to buy, or might not have the money to buy, when the non-farming member wants to sell. Still, over the short term, at least, you can ensure that the farm can continue as a viable business entity that is owned and controlled by the family. However, that gives a lot of power to the farming family members — maybe too much. The non-farming members can’t sell their land or interest in land, and the farming members manage the operation and make a lot of business decijanuary 2012
sions from day to day that can have a major impact on the interests of the non-farming members. For example they may decide that the farm needs to buy a brand new $60,000 pickup truck for the use of the farm manager — them — and that would be money that would come right off the top of the farm’s income through the Capital Cost Allowance deduction and be unavailable to be distributed for shareholders. So over the short term incorporation can keep the farm viable, but a generation or two down the road you can find you have a whole different set of problems emerge. CG: And what about the risks to farming members of the family if you don’t include some of these restrictions on shares? I can see situations emerging where farmers might find themselves falling victim to a palace coup of sorts and they’ll be told they can either stay as an employee or find something else to do, but the other shareholders are hiring a farm manager to run things. BB: That can happen. It can happen on farms that are held in family-owned corporations and it can also happen in much larger family owned businesses. Dan Morgan’s book Merchants of Grain talks about how the McMillans took over Cargill after one of the daughters married a McMillan. He was a manager, and he basically took over the company, even though he never directly controlled more than 10 or 12 per cent of it. Today there are lots of Cargills that own shares in the company, and get returns from it, but they’re not really involved in the management of the company. It’s something you can see at a farm level too, and it would be a mistake to say that it’s always for some sort of sinister reason. In a lot of cases it can happen because it needs to happen. The other family members might look at the operation and at how Joe is running it and realize that Joe’s an alcoholic, he’s making terrible business decisions, and that his performance is hurting everyone. In order to protect everyone’s assets and interests — including Joe’s — a change needs to be made. CG: Would it be fair to say, then, that incorporation is a business structure that will give you some tools, but it isn’t a silver bullet? BB: It isn’t a panacea that will solve everything. It can address certain issues right now, and it can even ensure some continuity for a period of time — say a generation or two. But long-term success or failure can’t be determined or guaranteed today. It’s going to depend a lot on the individuals who are involved then, rather than the people setting it up now. I think it’s important to note that if the family as a whole wants to see the farm carry on, it will happen. If the family doesn’t, it won’t. No business structure can change that. CG country-guide.ca 41
business
Brave new skills How do you teach an appetite for risk?
By Richard Kamchen rowing up the daughter of a barber, every now and again Bette Jean Crews would hear the phrase “just a farmer.” When she married a grower and became a farmer herself, she understood just how misguided that phrase was. After 40 years of helping run an 800-acre family farm in the Trenton area of Ontario, Crews has come to appreciate the abilities of farmers and the complexity of the industry. Farmers were multi-disciplinary centuries before the word was invented. Now, they must add whole new layers of meaning to the term. “The demand is only going to get greater,” Crews says. Just look at business management, agrees Don Connick, who operates a mixed farm south of Gull Lake, Sask. Connick rattles off a list of reasons: “Input prices keep going up, land prices are in for some serious escalation, and then there's the management of credit and dealing with financial institutions.” The pressures on a whole range of business skills will be intense, Connick predicts. “Short- and long-term planning, goal setting and the organizational skills to try to bring these plans and goals into place will be important.” Knowing how to market will also be key, but so will knowing how to fit both marketing and production into a broader business picture, says Stephen Vandervalk, a fourth-generation farmer from Fort Macleod, Alta. For instance, Vandervalk knows how addictive it can be to be always chasing higher yields and higher field efficiency. But if that last five per cent of production means you might lose 20 or 25 five per cent on the marketing side, it won’t be sustainable. “With the wheat monopoly going, you’re going to see all the durum, malt barley and spring wheat as cash crops,” Vandervalk says, pointing out farmers will be need to skillfully adjust their marketing plans to fit the right mix of the right cereals in with their sales of canola and special crops for the good of the overall operation. 42 country-guide.ca
Connick agrees. “The learning curve is going to be pretty steep.” Crews says marketing has changed significantly from when she first joined the farm, when she had little option but to sell her apples to packers for less than she wanted. These days, the choices afforded growers are far greater. “Farmers more and more are finding their own markets, and doing more research into niche and specialty markets,” Crews says, noting grain farmers are discovering alternatives as well, such as selling directly to ethanol plants or oilseed processors. “Those opportunities I think farmers need to be aware of, and have the background and the knowledge to investigate the best business decision for their farm.” Marketing skills to understand futures markets and financial skills to hedge the Canadian dollar are other skills farmers will need, Crews says. Such skills are already widely used by larger farmers, but Crews points out that her son, who has come into the family farm that includes up to 400 acres of grain, is looking at those markets more than she or her husband ever did. “That’s going to be definitely a mandatory requirement,” Crews says. “It’s going to be more and more important in the future,” Connick adds. “That’s going to have to be a skill that’s either developed by the individual or hired out to someone you trust to make these decisions for you. And that sort of expertise will not come cheap.” Ultimately, Vandervalk believes one of the most important traits a farmer can and will need to have in the years ahead is the ability to thrive in a world that demands risk taking. He points to his own region. “I can think of a time when people thought $50 an acre was ridiculous to pay for rent and anyone was crazy who did that. But those people who went ahead and stepped up did very well,” says Vandervalk, who grows red and white spring wheat, durum, canola, mustard, peas, barley and timothy with his father and brother. “Now, rents are $60 to $65 and you only wish you could rent for $50.”
Information in hand
It isn’t just what you learn. It’s how Today, being able to keep up to date with developments in government programs, technology and markets is just what you do as a farmer. Tomorrow, that ability to keep on the cutting edge will be a prized skill of its own. It will also expand. There will be new demands, including traceability and food safety, and new government regulations and new red tape. “We’re getting into a lot of recordkeeping, identity preservation, phytosanitary rules, health rules with animals,” says Connick. “This is probably something that’s going to grow in the future and we will have to deal with it.” It will be a challenge to find the time to keep track of what’s happening off the farm while still running the operation. In part, that means even more pressure on the human resources front, with farmers having to create clear roles for every individual in the operation so the farmers can spend their time managing, not doing. “Some of the tasks that we do now may have to give way to keeping on top of the information end of it,” Connick says. In addition to better time manageJanuary 2012
BUSINESS
their fields. It’s giving farmers a whole new social avenue without having to leave the farm,” says Black. Uninitiated farmers should understand technology is much more user friendly than it ever was and likely will become simpler to use as time goes on. “The best way to learn it is through trial and error. You will make mistakes, but the more you use it and the more you practise with it, the better at it you’re going to get,” he says. Still, if farmers are too leery about being on the Internet or using social media, they could alternatively cope by having their local sales or service rep drop in on them or phone them with developing information. What they glean could help keep them in the game, as Black believes it’s this kind of technology that could help break the production ceiling that’s been reached. “As we make this information more accessible to the producer and researchers, we should be able to trend above our existing production plateau to feed that nine billion by 2050,” says Black. “If it comes to that, where we are able to improve our production capabilities through the Internet and social media by more timely information for our own individual production — be it cows, pigs, crops, what have you — the people that don’t adapt to that are going to be left behind.” Continued on page 44
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ment, staying current with pertinent news will require more than just waiting for a newsletter to arrive at your doorstep. Farmers will need to go out and get that information, and the best way will be to utilize new technology to find the answers they’ll need, according to Wayne Black. “It’s not as simple as just picking up the phone and calling your local retailer, because your local retailer is going to probably do the same thing a lot of farmers do now — get onto Google and search for their answers,” says Black, who farms in Ontario’s Huron County. Besides farm news websites, blogs and social media like Twitter and Facebook can provide an efficient route for keeping in touch, locally and abroad. “We’re sharing information about production techniques with farmers in the U.S. and talking about concerns with crop prices or crop production with farmers across North America. It’s not just within our county and province any more,” says Black. “Since last year, I’ve noticed a lot of farmers in Ontario really picking up this Twitter tool for social media… they’re able to access research data much faster and apply it to their farms, and researchers can access the data much faster from what’s happening on the farm.” Twitter is also changing the way some farmers interact with one another. Chatting while in line at the elevator or at the coffee shop is giving way to exchanging ideas online, and with the mobility offered by Smartphones, farmers no longer need to be tied to their desktop to get online, and can communicate from wherever they happen to be. “I use Twitter instead of going to the coffee shop. And with today’s technology in agriculture, there’s other farmers that can use Twitter as if they’re at the coffee shop while they’re in
contest rules and eligible products.
But don’t take it from us, ask one of your neighbours. country-guide.ca 43
business Continued from page 43
the school option
Will you learn more in class or on the farm? Since running a farm will require ever more business acumen and technical knowledge, many believe a post-secondary education is a must-have for the next generation of farmers. It isn't that you can't learn how to farm from your parents. It's that school takes you away from the day-to-day, so you can focus on how all aspects of farming must integrate together. In fact, more farmers believe that to get that ability to see the bigger picture, you don’t actually need an agriculture degree. A degree of almost any kind will help. Besides, leaving the farm and going away to school can help young people decide whether they really do want to go back to the farm. “I personally feel if you’re going to run your own farm, to go and get an education because you get connections, meet people and get different life perspectives,” says Stephen Vandervalk, who tried his hand in engineering, management, geology and economics before returning to the farm in Alberta. But Vandervalk feels the farmers of the future needn’t automatically choose an ag degree, especially since more input suppliers and ag companies provide farm-learning opportunities. “I’ve had more education from companies than I know what to do with,” Vandervalk says, but concedes: “Going to ag school would be better than just staying on the farm.” Ontario apple grower Bette Jean Crews also advocates post-secondary education. She took business courses and her husband went to an ag college. Crews knows farming is a complicated business and believes an ongoing education can help in developing best management practices. “It’s important in lots of ways in that it develops skill sets, contacts, and an appetite for learning,” says Don Connick, who earned a Bachelor of Agriculture from the University of Saskatchewan. Although Connick has found his university degree valuable, he doesn’t want to discount those who have the innate ability and intelligence to be able to learn needed skills outside of a formal post-secondary setting. But it can certainly go a long way to meeting the growing requirements of an already demanding industry. “You need a lot of skills to succeed at farming,” says Michele Rogalsky, director of the University of Manitoba’s School of Agriculture. The school offers a two-year Ag Diploma program, and has been preparing individuals to manage farms for just over a century. While practices of production and business vary and change, farming principles remain the same, she says. The course work is heavy as it tries to cover whatever a student may need in the years ahead. The curriculum covers crop and livestock production and management, as well as courses in economics, marketing, and business management. Studies also include mechanics, and students are exposed to emerging equipment technologies. Issues of world markets, and regulations concerning issues like ecological sustainability, animal welfare and water run-off are addressed as well, and students have course options related to bio systems engineering, water management and precision agriculture. The program also has a focus on written and oral communication. 44 country-guide.ca
The benefits of education go beyond what you learn in the class. It’s who you meet, the new perspectives you encounter, and the chance to test yourself without Mom and Dad in sight “We really try to stress that throughout the curriculum, they need critical thinking and communication skills; you need that to farm and you need that to manage,” says Rogalsky. Connick agrees. He says that as farms grow larger, there will be greater demand for hired labour, and right now, the availability is limited. And with the scarcity of employees, hanging onto good staff will be essential. “If you want to be successful in this business and successful with hiring labour or even hiring custom operators, human relations and communication skills are going to be something we’ll need and have to learn,” Connick says. “Recruitment is tough but once you get a good person in place, you want to retain them. And it’s difficult.” The students are also required to complete a comprehensive management planning project. Working with the students on their two-year project are five farm management instructors, who also happen to be practising producers. The undertaking might task students from family farms to assess and analyze the production and financial records for those farms. Later, they’ll don their manager’s hats in order to budget and assess alternatives as if they were in charge. Financial projections, budget scenarios, and risk analysis will all be included in putting together a comprehensive production plan and financial statements. And after all that, students must defend and support their decision-making to a panel, which could include bankers, ag lenders, farmers and professors. “They can be grilled on any question — the rations for the livestock, breeding programs, weed control programs, and issues regarding ag sustainability,” Rogalsky says. “It’s a rigorous program. After the two years, they come out with a very well rounded education.” CG January 2012
w e at h e r NEAR NORMAL
**
** NEAR-NORMAL SNOWFALL
Snow Coastal rain
SNOWIER THAN USUAL
SnCol pe o d rio wy ds
sn Oc ow ca / b sion lo al wi ng
**
NEAR-NORMAL TEMPERATURES AND PRECIPITATION
Sn Mil ow / r d s ain pel ls
COOLER THAN NORMAL
t
en qu w e r F no s
BRITISH COLUMBIA
January 22 to February 18, 2012
Jan. 22-28: Generally fair but often wet on the coast, mixed with snow at times. Intermittent snow elsewhere on two or three days this week. Temperatures trend to the cold side. Blustery. Jan. 29-Feb. 4: Changeable on the coast as fair days exchange with occasional rain or mixed rain and snow. Chance heavy in places. Scattered snow east and north. Mostly cold and windy. Feb. 5-11: Fair overall with a couple of bright days and cold temperatures. Scattered rain, chance snow west on two or three occasions. Periodic snow inland, possibly heavy in eastern regions. Feb. 12-18: Cold temperatures dominate but look for a couple of windy, milder days as well. Conditions vary from fair to wet on the coast. Occasional snow inland, heavy in places.
ALBERTA Jan. 22-28: Cold air dominates on most days under generally fair skies. Snow and drifting on a couple of occasions in the south bringing higher windchills. Mostly clear, cold north. Jan. 29-Feb. 4: Variable conditions as disturbances move through, causing widespread snow and drifting on two or three days. Chance heavy snow south. Blustery. Temperatures lean to the cold side. Feb. 5-11: Unsettled on a few days this week in the south with some snow, possibly heavy in places. On settled days look for bright skies and cold temperatures. Very cold north. Feb. 12-18: Windy on a few days this week with variable temperatures. A couple January 2012
of bright days will be followed by minor warming and some snow and drifting. Chance of rain in the extreme south.
SASKATCHEWAN Jan. 22-28: Cold temperatures prevail on many days this week. Higher windchills will make outdoor work difficult. A disturbance will bring some snow and blowing to southern and central areas. Very cold north. Jan. 29-Feb. 4: Temperatures vary but trend to the cold side. Snow falls on a couple of days in the south along with blowing and a chance of heavy snow. Flurries and extreme cold north. Feb. 5-11: Bright skies and cold temperatures will alternate with minor warming along with snow and blowing snow. Blustery winds bring higher windchills. Settled but cold north. Feb. 12-18: Expect fair skies overall and mostly cold, although slight warming will bring snow on a couple of days this week, possibly heavy in a few southern and central areas. Windy.
MANITOBA Jan. 22-28: Fair and cold on most days but passing disturbances bring two or three episodes with blowing snow this week. Higher windchills. Bitterly cold and clear in the north. Jan. 29-Feb. 4: Cold temperatures dominate the week with blustery winds at times. Expect some snow on a couple of days, chance heavy in places in the south. Flurries, cold north.
Feb. 5-11: Fair skies and cold temperatures alternate with milder air and occasional snow. Windy at times with blowing snow and higher windchills. Continued fair, cold north. Feb. 12-18: Bright skies and cold temperatures on most days but on one or two days, slight warming will bring snow, blowing to southern and central areas, possibly heavy in places.
January 22 to February 18, 2012 NATIONAL HIGHLIGHTS The West will bear the worst of Canada’s winter this year. Under the control of our ongoing La Niùa, cold Arctic air is expected to dominate Western Canada for the next two months and perhaps longer. Harsh cold will be accompanied by heavier-than-usual snow in southern British Columbia and southern Alberta, with Saskatchewan, Manitoba and Northwest Ontario seeing several periods of inclement weather of their own, although overall snowfall amounts should average closer to normal. Eastern Canada is also expected to be hit hard at times as weather systems cross the Great Lakes and the Maritimes. Some areas of southern Ontario may receive heavier than usual snow totals. Otherwise precipitation amounts and temperatures should run close to average from the Great Lakes north and east to Quebec and the Atlantic Provinces.
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 45
ACRES
By Leeann Minogue
The vision thing No one seemed to need one before, but now they say a vision statement can be good for the farm. Dale isn’t sure. Even Donna isn’t convinced, but the kids are already talking... t was only mid-morning when Jeff and Elaine walked across the farmyard to his parents’ house, but his Mom and Dad already looked exhausted. “We thought you’d never get here,” his dad Dale said with an exaggerated sigh of relief. “Sorry,” Elaine said, setting her laptop down in the kitchen. “We thought about picking him up when we got back last night, but it was already nine when we got home from the city, and we knew he’d be asleep.” “Don’t listen to Dale,” Donna said as she hurried to gather up the toys strewn around the kitchen table. “We can manage a two-year old for two days.” “Sure you can,” commented Dale’s father Ed from his usual coffee-time seat at the far end of the table. “That’s why your house looks a tornado’s roared through.” The toddler heard his mother’s voice and came running out of the living room for a hug. On his way he dropped the two toys he’d been carrying, so Donna bent to pick those up too. “Did you have a good trip?” 46 country-guide.ca
“It was the Crop Production show, Donna. Saskatoon in January isn’t exactly a beach vacation,” Dale said. “It was nice to get away for a few days,” Elaine told her father-in-law. Donna nodded. “Sometimes you need to get some distance from the farm to get a new perspective.” “We got that alright,” Jeff said, excited to tell his parents about what he’d learned. “I ran into lots of the guys I went to university with. Some of them had some good ideas. That’s the real reason we didn’t come by last night. One of the guys told us about some online videos. When Elaine and I started checking them out, we couldn’t stop watching.” “You abandoned your kid to watch dirty videos?” Ed said. “And you’re telling your mother about it?” Jeff rolled his eyes and explained that they’d been watching videos — “webinars” — posted by the Canadian Farm Business Management Council on their www.farmcentre.com website. “It was the first we’d heard of them,” Elaine said. “But we really liked the one Jeff’s friend recommended. It was about vision and goal setting.” JANUARY 2012
ACRES
“Visions,” Ed chuckled to himself. “This is going to be good. Any more coffee, Donna?” Donna stepped around more stray toys to pour coffee while the family settled around the table. J e f f i g n o r e d h i s g r a n d f a t h e r. “Remember that guy from Biggar I lived with when I was in university? He farms with his father and his sister. He said they started putting their plans down on paper a couple of years ago, and it’s made it way easier for all of them to make decisions together.” But Dale wasn’t much more enthusiastic than his father. “I went to one of those business planning workshops a few years ago. It was like a two-hour grammar lesson. ‘Always use the present tense.’ ‘Don’t forget to use active verbs.’ By the end of the workshop I wasn’t sure if I was running a farm or grading high-school English papers.” “We don’t have to get hung up on the wording,” Elaine said. “That’s not the important thing. The idea is to figure out where we want the farm to be in the future.” “We don’t need paper and a pen to do that. I’ll tell you right now,” Dale said. “We want our farm to be making more money.” “She’s got a point, Dale” Donna told her husband. “There’s more than one way to make money on a farm.” “Exactly!” Elaine said. “That’s the point of a vision statement. We need to make sure we all agree on exactly what business we’re in. So we can focus on the same goal.” “After watching this kid of yours this morning, I’m thinking it’s the zoo-keeping business,” Ed said. “Add a giraffe, and we can sell tickets.”
The rest of the family pretended not to have heard that, but the toddler started banging loudly on a xylophone in the next room, and Ed nodded sagely, as if to say his case was closed. “I don’t know,” Dale said. “There’s a real danger in getting too tied up in a vision. What if we decide our main goal is to buy more land? We could set aside cash to buy land for years and wind up missing a really good deal on a new combine. And what if no good land comes up for sale in the meantime? Or say we do buy more land, and we’re so busy hustling around at harvest time that we don’t have time to deal with six little plots of new pedigreed seed varieties? We always have to be flexible. Ready to take advantage of opportunities. Not fixed on one thing that might not work out.” “Sure Dad,” Jeff agreed. “Of course we have to be flexible. But don’t you think we’d be better off starting with a plan, and adjusting it when our situation changes? If we don’t know where we’re trying to go, how will know when we get there?” Dale still wasn’t on side. “This is all easy to say if you live near Biggar. But I had a vision last spring. A vision of golden fields of wheat blowing in the wind. But instead we had 4,000 acres under a foot of water at seeding time. I don’t see how writing down a bunch of goals could’ve helped that.” “Nobody’s saying we can change the weather,” Jeff said. “But if we’d talked more about our long-term plans in advance, it might’ve helped us decide how much of our dry land to seed to pedigreed seed. We were making some pretty fast choices on the fly last spring.”
Our exceptional canola and pedigreed seed varieties will stop the competition in their tracks! With unrelenting yield momentum, unsurpassed standability and outstanding genetics, we set the pace for performance.
JANUARY 2012
“I suppose,” Dale admitted grudgingly. “It doesn’t need to be complicated,” Elaine said. “We can just talk about our vision, and then just draft a few personal goals for each of us to help make the vision come true. That’s what the business management specialist, Michelle Painchaud, says in the video. ‘A vision without an action plan is just a hallucination.’” “My goal is to find out that this whole discussion has just been a hallucination,” Ed grumbled. “We could start with something simple,” Jeff suggested. “Like… Hanson Acres is continuing the family tradition of optimizing inputs to produce grains and oilseeds.” Ed had the first question. “What about lentils? Aren’t we going to plant lentils? Your seed customers are always calling up to ask about lentils.” Dale had a comment too: “That doesn’t say anything about whether or not we’re going to try to expand our pedigreed seed business.” And then Donna spoke up. “We’re not going to stop taking care of the soil, even if using the right rotations sometimes means a bit less profit in the short run.” These complaints made Elaine smile as she opened her laptop. “See? We’re already having a good conversation about our vision. And we’re just getting started. Roll up your sleeves. Michelle Painchaud says the vision is the easy part. Wait until you see the video.” “I’m definitely going to need more coffee,” Ed said, shaking his head. “And somebody better get that xylophone away from kid or I’m going to need a lobotomy too.” CG
Find out more at ShutTheSellUp.com Can you find a seed company about the seed and not the sell?
country-guide.ca 47
LIFE
Learn to let go If you aren’t ready to retire for you, do it for your spouse By Helen Lammers-Helps
etirement always used to be a dirty word on the farm. Retirement meant washed up. It meant useless. Basically it meant you were ready to be carried out of the house in a box. If that’s still your attitude, though, you might be well advised to spend a minute thinking about your better half. Are you really so sure that they want to farm until they drop too? More and more farm spouses are saying, “What about me? When do we get to travel and relax a little without being so tied to the farm?” In fact, disagreements over retirement are leading to a growth in divorces, even among couples who have been together 30, 40 and sometimes even 50 years, says Elaine Froese, a farm family business coach in Boissevain, Man. and author of W HEN LETTING GO IS HARD. So what’s stopping people (yes, it is usually men) from retiring? What makes them think they want to drop dead in a tractor seat even if it means risking their marriages and ending up alone? John Fast, an executive coach in Waterloo, Ont. who has worked with farmers across the country, says that for many men it’s the fear of change that’s the problem. Their identity is wrapped up in their role as a business owner. For decades they have poured all of their energy into the farm and they haven’t had time to cultivate other interests, hobbies or social networks. That leaves them asking, “If I wasn’t the owner of this farm operation, would I still matter? What would I do with my time?” It’s why such men often view succession planning as the first nail in the coffin. Of course, women can react this way too. Still, it’s mainly a male phenomenon. Overall, while men see change as loss, women are more likely to view change as an opportunity for growth, says Fast, author of THE FAMILY BUSINESS DOCTOR. Even so, it shouldn’t become a matter of assigning blame. 48 country-guide.ca
NEW WAYS OF THINKING Fast tells wives to consider their husbands’ experience. Topics like retirement and succession planning come up at a time when men are also feeling the effects of aging. They have relied on their vigour and on their grit to feed their families and to give their lives meaning, and now their thinning hair, sagging muscles and reduced stamina are signalling that they are no longer at the top of their game. As if that wasn’t bad enough, today’s technology means that farming is changing at an ever-increasing rate, so older men may fear their years on the farm won’t be as valued as they were in previous generations. In other words, if these men are going to be respected, they feel they’ve got to be active. But Fast says the husbands need to recognize that in addition to the risk of divorce, overstaying their time at the helm of the farm business may not be in the best interests of the farm. If a younger generation is chomping at the bit to take on a leadership role, they could easily become frustrated and leave the family farm in search of another opportunity where their future is more assured. Resentment can build, leading to conflict, a breakdown in communication and hard feelings. Fast says it’s estimated that 80 per cent of family business failures are the result of unresolved and destructive family dynamics. The independent attitude and entrepreneurial drive that were positive qualities for establishing the business can work against a business owner when it comes to passing the baton to the next generation, which usually involves a more collaborative process. Stubborn pride may also prevent business owners from seeking outside expertise which could facilitate the succession process and smoothe the transition, says Fast. Instead these farmers may withdraw and resort to unhealthy coping strategies such as workaholism and alcoholism. If you think you’ve been in denial about the need to hand the reins over to the next generation, there is hope. The first step is to see retirement in a positive light. Stop thinking of it in terms of the farm, and start thinking of it in terms of you. JANUARY 2012
LIFE
NEW WAYS OF TALKING TOO
HARD CHOICES
AND THE REAL COSTS
You don’t even have to call it retirement. Just say that you’re taking some time for yourselves. Fast prefers to think of it as “redirecting our energies and lifestyle.” Froese meanwhile calls it a lifestyle plan rather than a retirement plan. Whichever way you go, the goal is to begin thinking of a future built on opportunity, not loss. Take some time to think about what you’d like to do if you had the time. What have you always thought you’d like to do but didn’t have the time for? How about travel, golf or woodworking? Maybe you’d like to restore an antique tractor, or spend more time with the grandkids. If you have no idea what you would do with more time, think back to the kinds of things you liked to do when you were young. This may give you some clues. Or try perusing the leisure studies section of your local community college, or check out your community recreation guide for activities that you might enjoy. Maybe there’s a service club, church or charitable organization that would benefit from your time. Start developing interests and hobbies outside of the farm now. It will make it a lot easier to plan your retirement if you have something to look forward to. What about mentoring a young farmer? As a mature farmer you have a wealth of experience and the next generation could benefit from your insights.
While it’s fun to dream of the things we could do and the places we might go, it’s also essential to talk about the hard things, says Froese. Avoiding the things that scare us or that we don’t want to talk about is more likely to make things worse than to make them go away. Where will you live? Will you stay on the farm or move into town? What will your role be in the farm? These are the kinds of questions you need to ask yourself. If you need help, bring in a facilitator who can help you open the lines of communication. You may find you need to reconnect with your spouse. After years of raising a family, couples often find they’ve drifted apart. What are your spouse’s hopes and dreams? What does retirement look like to him or her? Do they want to retire to the cottage? Or spend the winters in Florida? Take some time individually envisioning what this stage of your life might look like and then compare notes.
Of course, none of your dreams will become a reality if you haven’t figured out how to finance this stage of your lives. People often underestimate how much money they’ll need to retire comfortably. Keep track of your living costs so you can realistically predict how much money you’ll need when you retire. You can’t plan for retirement if you don’t have a good handle on living expenses, says Froese. Make a budget so you know what a comfortable spending limit is. Hire the necessary experts such as lawyers and accountants to ensure you have all of your details right. Also make sure you have a will that’s up to date, as well as powers of attorney and other important legal agreements in place. Spending some money up front could save much more — as well as a lot of grief for your loved ones down the road if the necessary legal documentation isn’t in place when something happens. You’ve worked hard and you deserve to take it easier and enjoy the fruits of your labour. By embracing this stage of your life and taking control of the process, you can have the kind of life you and your spouse want to have, before it’s too late. CG
JANUARY 2012
More farm spouses are saying, “What about me? When do we get to travel and relax a little?”
— WHEN LETTING GO IS HARD by Elaine Froese is available at www.elainefroese.com. — John Fast’s THE FAMILY BUSINESS DOCTOR is available at www.johngfast.com.
country-guide.ca 49
h e a lt h
Managing your headache By Marie Berry
lmost all of us know the symptoms of headache. According to studies, 90 per cent of Canadians have experienced the pain, tightness and ache. Almost all of us also know that the majority of headaches come and then are gone, apparently leaving no lasting effect. Despite being so common, however, there is no one single cause of headaches, which can make their diagnosis and treatment more difficult. Women seem to experience more headaches than men, and this is thought to be related to cyclic hormone changes. Family history or genetic factors may also play a role because if your parents or siblings experience more headaches, you may as well. Age has its influence too. Luckily, as you get older, headaches generally become less common. About 15 per cent of people with headaches have chronic ones, and 10 per cent have migraines. Migraines arise from a nervous system problem which results in blood vessels in your head becoming sensitive, which in turn causes the migraine pain. Drugs used to treat migraines act on the nervous system to stop progression of this type of headache. Some drugs like valproate are usually used to treat seizures, some like amitriptyline are usually used to treat depression and pain, and others like propranolol are used to relax blood vessels. All of these drugs are taken on a regular basis to prevent migraines. Once a migraine has begun, triptan drugs such as sumatriptan which also act in the nervous system are used to stop it. With migraine, light and noise sensitivity can occur, as can nausea and vomiting. Sometimes an aura or a set of warning symptoms develops in advance of a migraine, creating a window to prepare for the headache. By keeping a diary of your activities and foods, you may be able to identify triggers that may cause a migraine. Then it makes sense to avoid these. Tension headaches account for about half of all headaches and are related to stress, anxiety and muscle tension. These headaches are often accompanied by neck and even back pain because the muscles are tensed in these locations. Reducing the tension will resolve the problem, but at work or home this may Depression shouldn’t be just dismissed as “winter time blues.” Rather it should be diagnosed and treated, so next month, we'll look at some of the drug and non-drug approaches that seem to work.
50 country-guide.ca
not be easy to do. Relaxation techniques, exercise, and even time management will help. Headache can also be the result of a sinus infection or congestion. In such cases, treatment with an antibiotic for the infection and/or with a decongestant for the congestion may alleviate these sinus headaches. Cluster headaches occur in clusters or groups and are not common. If you experience headaches in clusters, you should have them checked-out. Of course, there are many other common causes of headache. A hangover, not getting enough sleep, skipping meals, exposure to loud noise, fumes, dehydration, an incorrect eye glass prescription, and even smoking cessation can result in headache, all of which can readily be resolved. Some foods, for example processed meats with nitrates, MSG, red wine, ice cold beverages or ice cream, can produce headaches which stop when you stop ingesting the trigger food. Headache can also be associated with a head injury. Even if you think the trauma is minor, get it checked out. As well, a sudden headache can be a symptom of a stroke or a “bleed” in the brain, and a headache that occurs along with fever, nausea, and a stiff neck may be a sign of meningitis. When headaches are chronic or when they worsen, occur with other symptoms, or are accompanied by seizures or a loss of consciousness, they are a sign that there may be a more serious underlying condition. Non-prescription pain relievers are suitable for treating headaches. Acetaminophen reduces pain, but remember to not take more than four grams (eight extra-strength tablets) in 24 hours in order to avoid potential liver problems. Ibuprofen, naproxen, and acetylsalicylic acid or ASA will also stop pain, but can cause stomach irritation and can interact with blood thinners. Stronger pain relievers are combinations that can include narcotics like codeine. These must be used carefully to prevent a rebound headache when you stop them. Researchers estimate the time lost in productivity due to headache adds up to two hours, 40 minutes for every Canadian every year! And that’s just the average, with some of us suffering less, and some more. If you experience a headache, you are not alone, but do get it treated. You have better things to be doing than suffer that pain. Marie Berry is a lawyer/pharmacist interested in health care and education. January 2012
Bert Gillis loved to fly but never earned his pilot’s licence. For most of his life he farmed north of Wynyard, Sask. in partnership with his two brothers and sister-in-law. During the Second World War he was a mechanic in the Air Force. His job was to repair training planes at the air base in Winnipeg. He loved the sound of the big radial engines that powered the yellow airplanes dotting the sky during wartime. When the war ended Bert returned to the farm, but flying had captured his imagination and interest. Whenever he could get an airplane ride, he was delighted. Last autumn Bert’s friend Forrest Pederson, an 82-year-old retired pharmacist, decided he wasn't flying enough to justify owning an airplane. Forrest put his Cessna 172, a singleengine plane with four seats, up for sale. It sold quickly. The date for the new owner to pick it up was drawing near. Bert and Forrest had been planning a plane ride but kept putting it off. Bert was struggling with cancer. His energy level was low and he did not feel well. When he turned 90 he realized “he would have to slow down.” Forrest called Bert a few days before the new owner came for the Cessna. He could not let his airplane go without keeping his promise to Bert. Besides, he wanted one last flight before giving up his beloved plane. The two old friends went out to the airport, unlocked the plane, checked it out and were soon airborne. It was a lovely autumn day. They flew over Bert’s farm, circled the town then explored the Quill Lakes. As they surveyed the familiar landscape from their perch in the sky, memories flowed. Forrest described the day: “There were lots of combines in the fields. The gold stubble fields, green trees and blue water were beautiful.” As Bert’s health declined, his friend Duane Guina assumed more responsibility for his care. Duane borrowed a hospital bed and moved Bert to his home where he had some extra care for the last days of his life. I went to see Bert a few days before he died. When I asked him about the flight his eyes lit up. “We had to climb a little higher because there were so many flocks of geese flying around that day.” I smiled. My pilot manuals tell me that the Quill Lakes are a stopping point on the largest migratory route in North America. Thank God the two elderly fliers climbed higher. Duane’s emotions moved from alarm to relief when he learned the two old fellows, the pilot 82 and the passenger 90, had gone flying. “It is probably good that I didn’t know about it until Bert told me the next day.” Duane asked Bert how he had managed to get into the little airplane. “Forrest helped me.” Dr. Sherwin B. Nuland, a surgeon who wrote HOW WE DIE: REFLECTIONS OF LIFE’S FINAL CHAPTER says: “The greatest dignity to be found in death is the dignity of the life that preceded it.” That autumn flight was the last for Forrest in his airplane, and Bert’s last before he died. I thought about Bert’s long and interesting life when I was reading Professor Anthony Grayling’s version of Psalm 113 in THE GOOD BOOK: “When we come into the world we weep, while others round us smile. May we live that when we die, we smile, and others round us weep.” Suggested Scripture: Psalm 113, Isaiah 40:28-31
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Rod Andrews is a retired Anglican bishop. He lives in Saskatoon. JANUARY 2012
country-guide.ca 51
Va l l e y
The gleaner
any years ago, my wife picked up a castiron, hand-cranked corn sheller at an auction, just about the same time Bob Pargeter passed over his cornfield next door with his new combine. I noticed there were all sorts of intact corncobs lying on the ground at the corners of the fields where the machine turned sharply, so I went out with an empty grain bag one Saturday morning and, in the space of 20 minutes, gathered as many cobs as the bag would hold. As chance would have it, Bob drove by in his truck and gave me a puzzled look. It occurred to me I might have irritated him, because he failed to raise one index finger off the steering wheel. This can be a sign that you have irritated a Pargeter, something no sane person in this township would want to do, so I made a point of visiting the Kingbird Café the same day to explain myself. “No problem,” said Bob. “It’s good not to see it go to waste… but you just looked so desperate!” Gleaning after the harvest never really caught on in this part of the world and by the time I had run that bag of corncobs through the hand-cranked corn sheller I began to see why. Fortyfive minutes of cranking converted one bag of cobs into a two-gallon pail of grain corn, which satisfied the hens for about two days. A minute with the calculator indicated that I would have to 52 country-guide.ca
spend three 40-hour weeks gleaning and shelling to feed the hens all year. The savings to me at the market price at the time of $3 a bushel would amount to roughly $75, or $1.60 an hour for my time. Even a freelance writer, putting in two naps a day and a long lunch at the Kingbird Café, can outperform those numbers. Owly Drysdale, who is nearly 90 now and still keeps cows, remembers using one of those shellers for his mother’s hens. But he shook his head when he saw me grinding cobs into a pail. “Either get the boys to do it or shut the door on the barn so the neighbours can’t see you. They’ll be putting a tag day together for you before you know it.” Last fall, Bob and his brother Bert were combining the cornfield next door and running a grain buggy back and forth to a transport truck out on the road. In the morning, I noticed there was a small pile of corn sitting in the middle of the road with five crows standing on it, so I went out with a broom and a shovel and filled three bags. Ten minutes later Bob drove up, stared at the spot and I waved at him. “Oh,” he said. “It was you. I didn’t think those crows ate it all.” “Did you want it back?” I asked. “No,” he said waving a bear paw at me. “I was worried some motorbike might slip on it and sue me. But if you want some more, we had an oops! moment out there last night in the dark.
It was the end of an 80-hour week and the combine jogged right but Bert kept going straight with the buggy. It was maybe 10 seconds before we saw it but that was enough to leave a trail of corn 50 feet long and a foot deep.” That afternoon, I went out with the boys and gathered 20 bags off the field with a broom and a shovel. Bob saw the load in the back of the pickup and nodded approvingly. “When that combine sneezes, it feeds a writer’s chickens through the winter.” The five books of Moses, which guide Christians, Jews and Muslims alike, offer explicit rules on the subject of gleaning. Leviticus 9:19 advises farmers not to harvest the corners of their grain fields or gather the gleanings in their vineyards. This food is to be left for “the poor and the stranger.” Buddhists use the term “mottainai” to indicate regret at the waste or misuse of something sacred or highly respected, such as religious objects or food. Nearly every culture has some “waste not want not” pronouncement on the need to share the harvest with those less fortunate. On the Petunia Valley Sideroad, the farmers look after poor, strange artists like myself and keep us on speed dial during the harvest. Wingfield’s World, the complete collection of Dan Needles’ Letters from Wingfield Farm was published last fall by Random House. j anuar y 2 0 1 2
ILLUSTRATION: RICK KURKOWSKI
Dan Needles is the author of “Wingfield Farm” stage plays. His column is a regular feature in Country Guide
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