CGW120315

WESTERN EDITION

country-guide.ca

March 15, 2012 $3.50

WE ARE CANADIAN MAKE IT MEAN MORE GET OUT OF NEXT GENERATION’S WAY

+PLUS

THOSE BIN LEASES TOO GOOD TO BE TRUE ARE YOU OVERSPENDING ON MACHINERY?

NothiNg hits harder. or lasts loNger.

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What’s your favourite colour?

FCC equipment leasing has your brand covered When it comes to financing equipment for your operation, it’s good to have options. With FCC Leasing, you get your choice of brands, including new and used equipment. And you pay less money up front than a standard loan.

Ask your equipment dealer for FCC Leasing. www.fcc.ca/leasing

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PrePass Earlug 2X2_CG_Rev.indd 2/2/12 1 PG. 18 WHO IS THE17722-03-04A CANADIAN FARMER?

12:01 PM

Farmers are tied to the land, so it’s no surprise they’re so linked to their regions. They’re expert producers, so they define themselves by their crops and livestock. But how can we tell consumers who their Canadian farmers are if the farmers don’t know themselves?

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TURNOVER U.S. succession specialist John Baker returns to COUNTRY GUIDE to tell older farmers to step aside so the next generation can step up.

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GUIDE HR — YOUR VALUES AFFECT YOUR DECISIONS A “rational decision” is a contradiction in terms. Your values rule your head, and they can help you manage better — as long as you’re aware what those values are.

These farmers get paid to compost groceries that used to go to landfills. And they keep the compost to build up their soils.

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THE RIGHT MIX OF CASH CONTRACTS AND COMMODITY TRADING The best marketing plans typically mix cash and account trading. Our Errol Anderson provides a game plan, starting by knowing your tools.

BUSINESS MONEY FOR TRASH

THE RISING SUN After 340 years this Japanese farm is returning to value adding, this time with a business plan that can also build bridges to consumers.

Have truer words been spoken?

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THE TOUGHEST CHOICE Are you overspending on equipment? These quick tests will help ensure your machinery is working for you, not the other way round.

PETUNIA VALLEY Dan tells us that in the depths of a Canadian winter, a man’s thoughts inevitably turn to gadgets.

ROBOT DREAMS With new robotic and electronic technologies, the productivity gap between haves and have-nots may open up.

GUIDE HEALTH Why do your friends get prescribed different blood pressure pills than your doctor gives you?

Our Marie Berry helps you sort it all out.

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HANSON ACRES Firing up a brand-new tractor can stir up old tractor memories, including some the family won’t let you forget!

WATCH THOSE BIN LEASES Revenue Canada may want to talk to you about those too-good-to-be-true bin leases. They could turn out to be a ticking tax bomb.

MACHINERY GUIDE Mid-size tractors are the pro athletes on today’s farms.

Now, technology makes them even agile, productive and versatile.

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GUIDE LIFE — ON THE ROAD Plan a summer vacation that will help you learn more about the wide scope of food processing in Canada, and provide family fun too.

SHARED VALUE Sixty farmers are paying $1,600 each to join this Ontario management club. Here’s how they use benchmarking to earn those fees back, several times over.

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.

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MARCH 15, 2012

CONTENTS

EVERY ISSUE

country-guide.ca 3

desk EDITORIAL STAFF Editor: Tom Button 12827 Klondyke Line, Ridgetown, ON N0P 2C0 (519) 674-1449 Fax (519) 674-5229 Email: tom.button@fbcpublishing.com Associate Editors: 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

The questions they wanted to answer It isn’t the story we intended to bring you. It’s better.

I rarely use this space to recommend specific stories. This time I’m making an exception. There are many stories in this issue that you really should read — Gerald Pilger’s piece on leased bins is something everyone needs to know, Maggie Van Camp’s story on a hugely successful Ontario farm group is thought provoking, and if you haven’t been reading Pierrette Desrosiers columns about HR on the farm, this is a great time to start.

Before I forget, make sure you also read Gord Gilmour’s Big Idea interview with John Baker. John was the subject two years ago of an article called “If you’re 65, get out” which continues to be one of our most requested reprints.

For the first time ever, though, I’ll use this space to say that a particular story in this issue is required reading. If you’ve enjoyed anything in Country Guide over the past three years, repay us by taking time to read Anne Lazurko’s “Is there a Canadian farmer?”

And be sure you read it right to the end.

The story is different than we planned.

What we intended to do was to tackle the question of whether there is such a thing as a Canadian farmer, as opposed to a western farmer versus an Ontario farmer, or an open-market farmer versus a supply management farmer, or a grain versus a horticulture farmer.

We wanted to know, is there some way in which being a Canadian farmer is dif4 country-guide.ca

ferent from being an American or a Swiss or an Argentinian farmer?

I expected Anne would find out that wherever you farm in Canada, the pressures of the escalating capitalization of agriculture, plus the challenges of getting the next generation off to a good start and the pressures of technological change would dominate much of your thinking, and that these pressures — felt all across the country — would dwarf or at least outweigh regional differences.

I still think that this is probably true, and it’s a topic we may very well come back to in future issues. The thing is, though, that when Anne started putting questions about these pressures both to the people she quotes in her story and to those she doesn’t, they didn’t want to talk in those terms.

I’m not going to spoil her story for you by telling you any more. Make sure you read it for yourself. And as I say, make sure you read it to the very end. You will remember her last paragraph for a very long time. I guarantee it.

When I asked Anne why the story came in so differently than I expected, here is her response: “Perhaps it’s precisely because the world of farming is changing so much and so rapidly, there is a real desire to define who we are down on the farm as opposed to who we are within the larger ag industry.”

Those are profound words. Read the story. Enjoy it. Then let me know whether we’re getting it right. You can reach me by phone at 519-674-1449, or by email at tom. button@fbcpublishing.com.

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).

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We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage.

Canadian Postmaster: Return undeliverable Canadian addresses (covers only) to: Circulation Dept., PO Box 9800, Winnipeg, Manitoba R3C 3K7.

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

Subscription inquiries:

Call toll-free 1-800-665-1362 or email: subscription@fbcpublishing.com U.S. subscribers call 1-204-944-5766 Country Guide is printed with linseed oil-based inks PRINTED IN CANADA Vol. 131 No. 5 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.

march 15, 2012

Machinery

By Philip Shaw

Tractors in the 280- to 400-hp range are the pro athletes on today’s farms.

Sure, there are bigger, weight-lifter-type tractors out there. There are lots of smaller tractors that are more nimble too. But for their combination of power, agility and all-around competence, it sure is tough to beat these units, especially with the amazing new technologies that the manufacturers are building into them. No wonder they’re so integral to how Canada farms in 2012.

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VERSATILE 280 AND 305 TRACTORS  Versatile is represented here by its 280 and 305 engine hp fullfeatured row-crop tractors powered by the Cummins QSC 8.3-litre engine. According to the company, the Cummins engine offers an optimum combination of power, economy and performance. This engine is matched with a very smooth power-shift transmission, with 16 forward and nine reverse gears that are programmable to match a wide range of work requirements.

The Versatile brand is built around simplicity and power, and it’s evident here too. The 280 and 305 models have fingertip electro-hydraulics with an optional Hydra Flow Plus package delivering 55 gpm to meet the demands of modern machinery.

Design simplicity extends to the easy-to-reach controls. The information centre located on the centre console features large digital gauges. All-important information is displayed prominently, and the console is designed to minimize glare while being well lit for night applications. www.versatile-ag.ca

 JOHN DEERE 8R/8RT ROW-CROP TRACTORS John Deere offers nine models in its 8R/8RT Series, including three models on tracks. The 8R/8RT series ranges from 235 hp to 360 hp, and Deere is busy getting its customers into its dealerships to check out what the company inisists are the most intelligent tractors in the world.

The 8R/8RT series has intuitive controls, integrated GreenStar and JDLink technology, and an exclusive ActiveCommand steering system. The 8R/8RT series also has an Infinitely Variable Transmission (IVT) with Auto Mode, and power can be boosted an additional 35 engine hp through Intelligent Power Management to further enhance the operator experience.

The JD PowerTech PSX 9.0-litre engine powers the 8R/8RT series, and the CommandView II cab offers extra space and efficient controls. The 8RT track tractors offer many smart features, like hitch lift capacity of up to 20,000 lbs. and up to 60-gpm hydraulic capacities, plus the longest undercarriage of any tractor in its class. www.deere.com MARCH 15, 2012

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challenger mt600d series  Challenger has five models in this category, ranging from 270 to 370 hp, with the company describing their MT600D series tractors as a high-capacity, high-power choice for unrivalled performance day after day, season after season, year after year.

The AGCO Power 8.4CTA Tier 4 compliant engine powers the MT600D series. This engine power is enhanced by the sophisticated integration of Challenger’s Electronic Engine Management system (EEM) with common-rail fuel ejection. When activated, this system enables the engine and stepless transmission to work together for greater efficiency.

The MT600D series uses a closed-centre pressure and flowcompensated hydraulic system, which provides flow to multiple functions at up to 46 gpm and 2900 PSI. A power-beyond circuit and a load-sensing line are also available, while a fifth and sixth spool valve are optional. www.challenger-ag.us

case international magnum tractors 

fendt 900 series vario tractors  Fendt 900 Series tractors have six models in this category from the 924 Vario SCR at 240 hp to the 936 Vario SCR at 360 hp.

These tractors are Tier 4 interim compliant and deliver up to seven per cent greater fuel efficiency compared to previous models, and all have a reversing operator station.

The 10.4 Varioterminal puts control of all tractor functions in a one-touch screen monitor. There is an option of fully integrated guidance and an on-board computer for seamless transfer, tracking and storing of data to an office computer. The 900 Series is now powered by a Deutz 7.8-litre, six-cylinder turbocharged airto-air after-cooled engine. This is coupled with the stepless Vario CVT and Fendt-exclusive Tractor Management System (TMS) to enhance fuel efficiency.

These 900 Vario Series tractors have 22 equipment connections, including six rear and two front double-acting hydraulic valves, plus rear PTO, factory-installed front and rear three-point hitches, and full ISOBUS connection. Front-axle suspension with levelling control and a mechanical three-point cab suspension enhance the driving experience. www.fendt.com 6 country-guide.ca

Case International offers the Magnum 260, 290, 315 and 340 in this category, ranging from 290 to 389 hp, and the company describes the series as tractors that deliver unmatched performance, maximizing uptime with a superior operator environment that helps farmers take on more challenges.

These Magnum tractors are powered by the 8.7-litre Case IH engine, which has a 14 per cent power growth plus up to 35 engine hp power boost. The new Tier 4A technology provides 10 per cent lower operating costs than previous models. Its 19-speed full power shift transmission delivers a smooth power transfer to the field or road.

To increase operator comfort and efficiency, the cab is also engineered to stabilize ride, reducing shaking and bumping over uneven terrain, all with controls nearby. www.caseih.com

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business

Money for trash Instead of paying tipping fees to bury grocery store wastes, Quebec’s Michel Dufour (l) is paying farmers like Stéphane Gabriel to compost it for their own farms

By André Dumont

he sun has yet to rise on Stéphane Gabriel’s farm on this chilly winter’s day, but already a dump truck is grinding along the narrow dirt road that leads to his new composting station. Gabriel is ready to wave it in. For the past half-hour, he has been clearing space with his tractor and bucket.

What a way to get your weekly delivery of groceries!

Except, of course, Gabriel isn’t expecting to eat these groceries. And except too for the fact that Gabriel isn’t paying for these groceries either.

Instead, he’s the one getting paid to take them.

The farmer has been preparing for his weekly load of rejected grocery produce for half an hour, moving compost around with his tractor.

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Gabriel’s farm is called Les Serres Gabriel et Fils. It’s a family operation that produces field vegetables and greenhouse ornamental plants and field vegetables on Île-Perrot, the first island west of Montreal.

Gabriel’s farm is also the second in the province to join a little revolution, diverting the organic grocery store waste that usually goes straight to landfill sites and shipping it to the farm instead.

The mastermind behind this coup is Michel Dufour. At 47, Dufour has accumulated a fair bit of experience both at starting new businesses and at rescuing other businesses from near bankruptcy.

He has run a communication firm, he has sold bulletproof vests and, more recently, he has managed Continued on page 10 March 15, 2012

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business

Continued from page 8 a video game company. He’s a businessman in the classic sense, like a salesman who could sell harmonicas or insurance policies, as long as he’s selling.

Four years ago, Dufour founded AZN2 Environment, after coming up with the main concept. Instead of paying tipping fees to landfill sites for organic waste that will rot and produce methane, why not pay farmers to compost it?

On just this one farm, Gabriel can expect to take in between $20,000 and $30,000 per year to receive aging fruits and vegetables that have gone bad from some 20 grocery stores in the western part of Montreal.

Is Gabriel part of a new trend, where farmers are being paid for environmental services?

In Ontario, farms get premium rates for green energy from solar panels and biodigesters. In several parts of Canada and the United States, farmers are compensated for protecting waterways.

Perhaps one day, local farms are where we will stock up on green fuel and fresh compost for the garden.

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Trend or not, Dufour knows his concept makes environmental and business sense. When piled in a landfill site, organic matter decomposes producing methane, a greenhouse gas that unless captured and burned, is 21 times more damaging to the ozone layer than carbon dioxide.

Or, that same organic waste can be composted safely and at a competitive price on the farm to produce a nutrient-rich compost that also improves soil structure.

Weekly chores Once a week, Gabriel scoops out some of the compost from one of his composter’s three cells to form a “bed” onto which the dump truck unloads.

The new and old materials are then mixed and reinserted in the composter.

Gabriel also uses his tractor to mix the rest of the compost in order to air it.

Throughout the operation, steam rises from the decomposing matter as a result of the heat (up to 72 C) produced by the thriving populations of bacteria.

As the initial research phase wraps up, Gabriel continues to check the composter up to three times a week to

monitor temperature, ventilation and leachate levels in the pits underneath the cells.

But now that the early tests are complete, the AZN2 process is ready to roll.

This coming summer, some 10 more farms in Quebec will join the program.

AZN2 may then start eyeing expansion to Western Canada and also to the Maritimes, …at Loblaws’ request.

Dufour is also looking across the border at the United States, where WalMart has shown interest, and where he thinks the system is a natural fit for many food processors.

In fact, the AZN2 business model will probably work out better for farmers outside Quebec, simply because tipping fees are higher in most other jurisdictions.

“The whole idea is to recycle organic waste by composting locally, on a small scale,” Dufour says. Gabriel’s composter can hold a maximum of 150 cubic metres of compost. In Quebec, this keeps it scaled small enough to be classed as an agricultural activity, so it Continued on page 12 March 15, 2012

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business

Continued from page 10 doesn’t come under industrial or waste management regulation.

This small size also helps with the management of leachate. In large-scale composting facilities, leachate becomes a toxic liquid that requires extra infrastructure for treatment. In Gabriel’s composter, leachate is pumped from below and sprayed back onto the warm compost, using the naturally generated heat to evaporate the water out of it.

The remainder can then be spread over Gabriel’s fields, as long as it complies with his nutrient management plan.

This technique makes composting possible without the addition of carbon-rich absorbent matter that usually has to be mixed into the compost for a proper balance. Gabriel should get away with only two or three truckloads of wood chips per year.

“Wood chips and other carbon-rich matter will become more and more expensive,” Dufour says. “We are exploring the possibility of using onfarm materials, like corncobs or soybean straw.”

Sorted on source AZN2 is a lot more than a broker between the grocer and the farmer. The 12 country-guide.ca

company trains grocery store employees to properly separate organic waste from “contaminants.” Boxes, wrapping, elastics and any other non-organic material must not end up at the farm.

Dufour says however that store staff are usually supportive, happily participating in a project they see as good for the environment. “Training is AZN2’s core activity,” Dufour says. “Every time there is a new manager, we go back.”

ANZ2 also provides each grocery store with communications tools to tell consumers they are doing good things for the environment. Pamphlets are handed out at the cash register and large banners say: “Here, we compost.”

At Île-Perrot, the IGA Rochette et Vézina was among the first to join the program. Co-owner Daniel Vézina says his store is not only greener, it’s more profitable. “We used to throw out fruit and vegetables with their entire packaging. Now, everything must be opened and unpacked, so we end up saving some of the produce,” Vézina says. “Our bottom line in the produce department has increased by nearly one per cent.”

Vézina pays AZN2 the exact amount he would pay to a waste management company for the weight of his organic waste, but the bonus is that he is improving his store’s image. It’s also

good for HR, he says, because employees are proud to participate, knowing that the produce returns to the earth only a couple miles away.

AZN2 also trains the farmer to properly handle compost. The composter is built at the farmer’s expense, with financial help from the provincial government.

Gabriel figures the money he receives from AZN2 compensates for the time and money he puts into handling his compost.

The real gain is the finished compost, which he figures he ends up getting for free.

The soil at Île-Perrot is clay with very little organic matter. Adding compost helps a lot, Gabriel says, and he believes that since the nitrogen-rich leachate gets reinjected several times during the process, the resulting compost is much richer than anything on the market.

“We are going to spend less on fertilizer and our soil structure and its capacity to hold moisture will improve,” Gabriel says.

Plus, he says, it’s good to participate in such an environmentally friendly project.

Last November, Gabriel found a few pumpkins in his second load of organic waste. “I had sold quite a few pumpkins to IGA. They might have come back,” he says with a laugh. “Now that’s local.” CG March 15, 2012

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12/15/11 5:13 PM

insight

Turnover Canada has a unique way of approaching farm succession, says John Baker. Is that a good thing?

By Gord Gilmour, CG Associate Editor It’s the same the world over. Farm succession and farm transfer are huge issues for farm families, especially in advanced industrial nations where farms continue to grow in scope and sophistication at the same pace that farmers continue turning grey.

Yet John Baker says there appears to be a uniquely Canadian way of approaching succession. An attorney and director at the Iowa State University Beginning Farmer Center, Baker recently spoke to Country Guide during a break from a farm succession seminar he was teaching in Palmer, Alaska.

Baker has had a longtime interest in international farm succession planning, and he was one of the authors of a recent paper in the Journal of Agriculture, Food Systems, and Community Development which compared farm succession practices in Ontario, Quebec, several U.S. states and the U.K. and Australia. That paper uncovered the Canadian way of doing farm transfers.

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C ountry G uide : Let’s begin with a global picture.What are some of the universal challenges surrounding farm transfers around the world?

John Baker: Some recent surveys have gauged attitudes towards farm succession in a number of countries — England, France, the U.S., Canada, Japan, for example, and other countries as well. One of the issues they examined is what happens once a successor has been identified.

It appears that there are a lot of similarities here, especially in what roles the older generation is continuing to hold on to.

They essentially never turn management of the business over to the younger generation, and that’s a problem. France was the lone exception because, until recently, they had a mandatory retirement age. In all the others, the older generation continues to hold onto the reins.

In these surveys farmers were asked what roles they continue to play. In all of them, with the exception of Japan, the No. 1 job they maintained control over was paying the bills, and in Japan that was No. 2. In all the other countries the No. 2 job they kept was negotiating loans and in Japan that was No. 1.

I think that’s significant and it tells us a lot. How can you tell someone they’re running the business now, but I still sign the cheques and talk to the bank? If I’m holding the purse strings, who’s really running that business? It’s the other golden rule: he who has the gold makes the rules.

I think it happens for fairly understandable reasons. As people get older they generally become more risk averse. A farmer looking at succession near the end of their career might think, “I’ve done a good job, I have a good business. If something happens to it, there’s not enough years left to get it back.”

But if the successor generation hasn’t had time to grow into the role of running the operation, it can mean trouble when the older generation is no longer there.

We all fall off the perch eventually. Everyone dies, it’s not an option.

Time just gets away from them. It’s amazing how fast time goes by. I don’t think it’s happening because farmers are selfish, greedy or cruel. I think many of them simply haven’t thought about it.

march 15, 2012

insight

CG: And how about the Canadian context? Is there anything that makes our situation up here — though if you’re in Alaska today, maybe I should say down here — unique?

JB: I think it’s especially unique out west where you have the wide-open spaces, which can make for some real challenges in providing the education and knowledge to people that they’ll need to grapple with some of these issues. We certainly have a bit of that, say in the Dakotas, but nothing like what you face.

You also, of course, have to some degree harsher growing conditions and more variability in end products than we might see in the Lower 48.

Some of your farms also have quota, which we don’t have.

With quota you’re not just passing on the physical assets like land, equipment and buildings, but also the business assets like quota. You also have quite a wide variety of agriculture, everything from wines grapes to grain.

One of the biggest differences is also cultural. You have Quebec, which has much more of the French influence than the rest of Canada. The English-speaking portion of the country is really quite similar to the U.S. in terms of succession planning, in that they’re both based on the English model of passing property.

Generally there are some differences between Canadians and Americans too though. Canadian farmers tend to have a more definite retirement date, either for full or semi-retirement. In the U.S., when farmers call themselves “semi-retired” what they really mean is they’re not doing the physical labour anymore, but they’re still doing most of the management. In many ways I think you’re actually doing better in Canada, because you’re passing on not just the physical labour but also the management control to the successor generation.

CG: As an outside observer, how do you think Canada is doing? What are we doing right and what are we doing wrong?

JB: I think the way you’ve focused on farm succession and paid it the attention it deserves is a very good thing. I’ve seen a lot of energy going into understanding the issues and finding solutions to them. There have been a lot of educational materials prepared for farmers and I think Canada is actually far ahead in the delivery of these materials compared to the U.S. I really like some of the work I’ve seen done up there.

As for what you’re doing wrong — that’s a very difficult question. I certainly don’t want to come across as the Ugly American who thinks he knows what’s best for Canada and how you should be doing things. That certainly isn’t the case.

But I guess I would say I was sorry to see the Canadian Farm Business Management Council’s funding cut as much as it was.

I’m not immune to budgetary realities, of course, but they did fill a very important leadership role. They organized an excellent international farm succession conference that I attended and spoke at a number of times. Without them, where’s the fire going to come from? I think the CFBMC was instrumental in making it a national issue, with a national focus, and that’s what it definitely needs to be.

march 15, 2012

CG: It seems like you feel there needs to be a real sense of urgency when looking at this issue. Can you tell us a bit about that?

JB: The average age of farmers in the U.S. is around 60, and you have very similar demographics in Canada. There are a lot of assets that are going to be changing hands and it’s not going to just involve farmland, but often farm businesses. It’s very important that these issues be addressed, and not just for the farming community.

Just to give a personal example, I live in a very small community in Iowa. Like many other people, my single largest asset is my home. The only reason that community enjoys any level of prosperity is that it is fortunate enough to be surrounded by prosperous farmers. From a purely selfish standpoint, people like me should want to see farms successfully transferred so they can continue being successful businesses that support local communities.

CG: And are there things that the farm community — on both sides of the border — should be doing differently to ensure that this happens?

JB: One thing that I think is very important is that the agriculture community should welcome and encourage new entrants into agriculture. These sorts of people can come in a couple of different varieties.

In Japan they talk about “U-turn” farmers. These are people who have left the farm and pursued a different career, usually very successfully, and then later in their life they’ve decided that they actually want to farm. We should welcome these people back, because they bring with them tremendous knowledge and experience. I know a farmer back home who was washed out in the 1980s, and then returned to farming in the late 1990s. He’s a very handy person, and when he left the farm he started an autobody business. When I talk to him now, he tells me, “I’m a much better businessperson now, because of that experience.”

There are also a lot of people with no farm background who are interested in farming. The farm community has a funny reaction to that — they seem to wonder, “Why the hell would you want to do that?” That’s very unfortunate and it doesn’t happen in other careers. I’m the first member of my family to ever have a professional degree and work as a lawyer, for example, and nobody wonders why I wanted to do that. Most people think it’s wonderful — a story of upward mobility and doing something new. Why isn’t it like that in agriculture? The fact is there are a lot of people who are interested in agriculture, and we should be encouraging them.

CG: Finally, why is it important for farms to have a succession plan nailed down? Does it help to contribute to their continued success?

JB: It certainly can. One thing the research shows is that once farms have a successor identified and put a plan in place, that business can move forward more readily. There’s a reason to invest in new assets and adopt new technology, for example.

When there is no successor in place, it’s very easy to ignore these things and keep doing things as they’ve always been done. CG

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18 country-guide.ca

March 15, 2012

business

Who is the Canadian farmer?

Our struggle to define Canadian farmers may overlook the one thing that matters: Why they farm in the first place

By Anne Lazurko, CG Contributing Editor

e live and work on farms spread across the country in roughly the same 10 degrees of latitude.

We grow a breath-taking array of foods we all consume, and we act as stewards of vast tracts of our collective home.

We are Canadian farmers. But what exactly does that statement mean? Is there really such a thing as a Canadian farmer?

What exactly does a P.E.I. potato farmer have in common with a Saskatchewan grain producer? And is that Prairie farmer in the same proverbial boat as an orchardist pruning his apple trees in the Okanagan Valley, or a milk producer in Ontario, or a beef producer in Alberta?

“ I feel more rural in Ontario than I do in Saskatchewan.”

Photo credit: David Charlesworth

— Barry Senft From the farthest eastern reaches of the Maritimes to Vancouver Island, Canadian farmers grow everything from potatoes to grains, oilseeds to flowers, ginseng to apples. And they raise anything that will tolerate domestication: mink, cattle, sheep and pigs, not to mention cows for milk and bees for honey.

So it might be worth asking… Who the hell are we?

There are a lot of stats on Canadian farming.

The 2011 census figures are not yet released, but as of 2006 roughly 167 million acres were

March 15, 2012

in production on a total of 230,000 farms. In 2010 Ontario agricultural cash receipts were at $10 billion while Saskatchewan and Alberta come in at about $9 billion each, Quebec at $7 billion, Manitoba at $5 billion and the Maritime provinces at around a half-billion each.

Those are big numbers but they reach across such a wide array of farm products, farm size, farm markets, farm politics and farm culture as to be rendered meaningless.

Any meaning they do have is found on the farms themselves and within the farm families who do this work every day, who give meaning to the term, “Canadian Farmer.”

Barry Senft has seen more than a little of agriculture across the country. While remaining financially and seasonally involved in a 5,000-acre family farm near Lipton, Sask., Senft has held positions with various farm and industry organizations across the country for almost 30 years. He was a director with Saskatchewan Wheat Pool, chief commissioner for the Canadian Grain Commission and executive director with the Canadian International Grain Institute, and he is currently CEO with the freshly minted Grain Farmers of Ontario.

Senft knows a lot about farming in Canada.

Perhaps because he remains actively involved in his farm out west while working with eastern producers, he immediately points to the differences among us, the most obvious being proximity to population and the implications of that. “The sheer magnitude of people in Ontario has an influence on agriculture, both positive and negative.”

Continued on page 20 country-guide.ca 19

business Continued from page 19

Defined by the fishbowl?

Defined by markets?

Some would say population proximity creates even broader differences when it comes to environmental concerns. Or does it?

Compared to the Prairies, Ontario producers farm in a fishbowl, Senft says.

They’re constantly under surveillance by both the population at large and by provincial regulators for things like pesticide application and manure management.

Alvin Keenan sees environmental concerns as something farmers should themselves be concerned about. “The more densely populated the agricultural area, the more input we receive from the population. It makes us more sensitive and we need to work with that.”

All farming on P.E.I. is done within three kms of a freshwater source, meaning farmers have learned how to protect their watershed. Now, the province’s new crop rotation act requires the planting of crops with more organic matter in rotation with potatoes. It means farmers have had to find innovative ways to meet the rotation requirements, including unique land swaps or rents with grain producers.

It’s pretty clear that proximity to his neighbours and to the effects of his farming operation on the larger world make Keenan philosophical about the requirements. Such considerations are true for farmers in the larger Maritime region, B.C. and southern Ontario. It does make one wonder at the Alberta uproar over increased watershed regulations around ranching, or what a Saskatchewan canola grower might say if ever it was legislated that certain practices be required to control club root.

Yet while environmental concerns are up front and personal, Barry Senft sees all this proximity as mostly positive. “I feel more rural in Ontario than I do in Saskatchewan because your neighbours are right there and actively doing things,” he says. “Look one direction and there’s a dairy barn, the other and there’s a greenhouse, or a grain producer. On the Prairies you can’t see your neighbour so there is an increased isolation factor.”

Western farmers may stereotype the East as the land of supply-managed dairy and poultry farms. But that isn’t the East that Senft sees.

Proximity to people means proximity to markets. In southern Ontario, there are 130 million people living within an 800-mile drive, Senft says. “In Ontario that means we will increasingly tailor the product to the population.”

That local appetite has also spurred an understanding of markets, Senft says. Prairie producers have been marketing nonboard grains for some time and the loss of the CWB will provide new marketing challenges. But while he sees a growing demographic, mostly young, in Saskatchewan honing their marketing skills, the older generation of Ontario producers is already aggressive when it comes to marketing.

“There is a lot more awareness of the border with things like processing of wheat and soybeans,” Senft says. “They are watching the markets a lot closer.”

Ontario producers largely market based on cost of production and they understand the folly of trying to anticipate the top of the market. Senft implies western farmers might require more time and experience before uncovering this wisdom.

With more intensive farming and more direct marketing, Senft says some Ontario farmers might think of themselves more directly in terms of the U.S. Corn Belt than the Canadian Prairies, and he feels the West might have more in common with Australia where big volumes, small populations, and a reliance on exports make production and government advocacy issues more aligned.

But perhaps an Ontario producer of ginseng might have more in common with Alvin Keenan, a P.E.I. potato farmer.

Keenan grows 1,000 acres of potatoes with his brother and their sons, selling most of their production into the fresh market.

Smaller, closer markets have challenges of their own. For Keenan a five per cent increase in the local potato supply can devastate his market, potentially taking every last penny out of his net returns. By contrast, he’s seen soybean acres in the region over the last three years increase from 3,000 to 50,000 but it doesn’t affect either the world market or the price. “Different commodities have different boundaries,” he says.

20 country-guide.ca

Defined by the consumer?

All farmers, whether they farm in a fishbowl or in isolation, whether their markets are distant or close, sell to a final consumer. And Ken Perlich wonders if it might just be our consumer that defines us as Canadian farmers.

“We have two distinct agricultures,” Perlich says. “When you look at who you serve, that tells a bit of a tale of who the Canadian farmer is.”

Perlich is an ag economist who travelled across Saskatchewan for six years with the provincial Department of Agriculture, then worked out of Philadelphia doing economic forecasts regarding Canadian agriculture for some of the largest companies across the globe. He is now a partner in Perlich Auctions, a fullservice auction business and he maintains an interest in the family farm near Lethbridge, Alta.

When Perlich looks down the road, he sees vast tracts of grain land and huge ranches. In the other direction, he can see smaller irrigated crops and farmers working “under plastic” in horticultural production. It’s a microcosm of Canadian agricultural production.

“To the extent that we’re all roughly in the same 10 degrees of latitude...we face many of the same issues and challenges,” Perlich says. “From there we go in completely different ways.”

A final end consumer at a market garden has a local face-to-face relationship with the farmer. An overseas buyer of exports has a completely different relationship. “That person who consumes Canadian production might not live here, so that person can’t be defined,” Perlich says.

Perlich is finding that in a computer age “I need to know who that average person is and then produce for that. But I think we’re better off if we can see the customer as an individual. I’d like to think I serve the people every day.”

It begs the question for all exporters: if we can’t define our consumer, can we define ourselves? Perhaps it’s more of a two-way street between all producers and all consumers no matter their stripe.

Is the onus solely on farmers to understand their consumers?

It’s a question Alvin Keenan considers as he markets his potatoes in the Maritimes and south along the Atlantic seaboard. “When you market for yourself, you do see things differently,” he says.

“The most rewarding thing is when we can satisfy the person who consumes the food. But it’s hard to reach consumers because generally farmers are kept away.”

Keenan markets under the family’s brand, Rolly Bay Holdings Ltd. But that Continued on page 22 March 15, 2012

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11-12-20 3:54 PM

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doesn’t mean his customers know anything more about farmers than that export buyer Perlich spoke of. On his own farm Keenan has heard, “wow I didn’t know potatoes grew in the ground.”

“We have a tremendous future in agriculture, but we have to use the tools available to us to get closer to the consumer. It helps to get their support and politically that’s important,” Keenan says.

Keenan uses his own experience to explain. Potatoes have pests that are by definition quarantineable: bacteria ring rot would quarantine his farm, potato wart would quarantine the province. He has experienced both. However because the potato industry had educated consumers, when potatoes were quarantined for fresh product, they could still be processed, frozen and shipped as french fries. This industry in P.E.I. was saved, all because consumers knew their food would be safe.

On the other side of his farm, Keenan also experienced the mad cow debacle.

“It was the same thing with a different commodity.” Producers and the industry were irresponsible, he says, in that they had not structured the industry to be less vulnerable, so the consumer was left to believe what they heard, even though the food was safe. The science worked, but politically we failed, he says.

While there’s work to be done in terms of consumer education, back in Lethbridge, Ken Perlich believes that “in Canada there is a general understanding by the public of farmers as being providers of food, that agriculture is trusted and appreciated. We are lucky to be a Canadian farmer of whatever kind.”

In Canada we’re harnessing technology even on small pieces of land to farm more intensively and make more money, he says. So whether you’re a large grain farmer or an orchard, there is a certain respect for farmers.

“Maybe that’s what defines the Canadian farmer then,” Perlich muses. “Both his customer and their appreciation of us.”

Defined by attitudes toward land Andy Hammermeister tries very hard to find connections between the Nova Scotia farmers he works with now and those he grew up with on the family farm in southern Saskatchewan. But mostly he comes up with differences related to the 22 country-guide.ca

size and scale of farming and how that affects their respective approach to their work and their land.

Hammermeister is director of the Organic Agriculture Centre of Canada at Truro. Dairy is the largest ag sector in Nova Scotia. Stable because of supply management, much of the local production of soybeans and corn goes toward dairy feed. The second-largest industry is mink. Yes, mink. It’s about as volatile an industry as dairy is stable. Apple orchards and commercial vegetable production round out the province’s agriculture.

The scale of agriculture here resembles the United Kingdom. Fields are small, roads are narrow and winding.

Ten- to 20-foot-wide equipment is common, but the scale makes sense, he says.

Back in Saskatchewan his brother removed cattle fences from two adjacent quarters of land. “With no fences and using the easements, he figured (he) saved 15 per cent of his time simply because of the larger scale of equipment, and efficiencies of time and scale.”

It’s a good point. Where you come from does influence perceptions. While farm size is growing across the country, land values reflect greater pressures in some areas than others. According to FCC farmland values increased by 7.4 per cent nationally last year. Saskatchewan led with an 11.6 per cent increase.

Still Barry Senft says, “when I tell people from Saskatchewan what land is trading for in Ontario, they don’t believe me. We’re at $10,000 to $13,000 per acre while in Saskatchewan it’s around $1,500.”

Some of the land values in Ontario can be accounted for by productivity.

Rainfall and heat units are higher which means more diversity of crops and a higher value-per-acre return. But much is the influence of urban sprawl. And often it is the influence of speculators and investors and has nothing to do with cost of production.

“Is that a good thing?” Senft muses.

Many across the country are starting to ask the same question. And in terms of definitions, it’s an increasingly important one because ownership of the land, and how decisions are made about its use, may come to define the Canadian farmer as much as anything else.

And as land values increase, the issue becomes the need for capitalization. With that increasing debt, the question becomes who the future farmer is going to be, Senft

says. Though benchmarks might be at different levels, it’s the same issue for any farmer planning to retire. In 2009 there were 79.4 per cent of farms had no young operator (under 55). Perhaps our definition of the Canadian farmer will change more than we can imagine.

Defined by culture and geography If land defines us, so too do our individual cultures and geography. Ken Perlich in Lethbridge struggled to articulate the reason for the differences he sees amongst farmers. He is particularly aware of the Trans-Canada Highway through Alberta and Saskatchewan and sees distinct differMarch 15, 2012

Photo credit: Chris Yauck Photography

Continued from page 20

BUSINESS

“We’re all roughly in the same 10 degrees of latitude,” says Ken Perlich. “From there, we go in completely different ways.”

ences in attitudes and culture to the north and south of that imaginary border.

It started with immigration, he says, but he’s not certain if the difference is explained by where people came from, or where they ended up settling. South of the Trans-Canada there is more American influence, he says, particularly in Alberta. Early European immigrants largely settled north of the highway in places like Edmonton and Humboldt.

Because of their respective immigrant experience, these two groups are inclined to have different world views.

He associates these views with characteristics such as risk-taking which in turn impacts what species you might grow and the degree of independence a MARCH 15, 2012

producer might have. Perlich is careful not to stereotype, but he puts it this way.

“In Regina, the weather compels people to be a little more dependent on their fellow man.”

This was witnessed historically with the development of Prairie co-ops in Saskatchewan and Manitoba and the structure of the CWB. “We are in a new era (with the proposed dismantling of the CWB),” he says. “It will be a great social experiment and we’ll only know in 10 years how it will turn out.”

But was this previous penchant for co-operation and community a result of who settled, or where they settled?

Perlich points to the 1930s when homesteaders in southwest Saskatchewan

were resettled to help cope with drought and depression. In the northeast they weren’t resettled, meaning there were no upgrades to their conditions. “That has an effect on how you see and respond to the world,” he says.

Despite these north/south differences within Canada, Perlich believes what really defines us is the 49th parallel. If an Alberta rancher is more independent than a Saskatchewan grain producer, an American farmer is more independent than all of us, he says with a laugh.

“Americans really believe that no matter where I’m at and what I grow, if I’m given a fair shot I can compete against Continued on page 24 country-guide.ca 23

BUSINESS

“We’re all similar...

How many times has a farmer put his last dollar into it?”

Continued from page 23 anybody. Whereas in Canada we are a little bit more inclined to be not quite as independent across all sectors, mostly because we’re an exporting nation.

“It’s a bit of an irony though,” he says. “Because it’s only a perception. U.S. farmers are hugely subsidized.”

Self-perception obviously matters when trying to define oneself. Which might be why everyone is trying so hard to find similarities amongst a very diverse crowd. We want to be able to say this is what a Canadian farmer is.

Maybe we still can.

As Andy Hammermeister puts it, all farmers are similar in why they farm.

Lifestyle. Independence. Being on the 24 country-guide.ca

land. Running the equipment. Having control. They see farming as actively producing something, as a service to humanity by providing crops and foods.

And they are proud. “Farmers are very conscious because all of their work is open to peer review all the time. Others drive by it every day,” he says.

“It’s their palette,” Hammermeister says, a beautiful way to express the sense of pride every farmer has in a meticulously maintained field. “It’s an exhibition of their skills.”

Perhaps the last word should go to full-time farmer, Alvin Keenan.

“Basically we’re all similar,” Keenan says. “We all try to do too much. How many times has a farmer put his last dollar into it? How many times has he sold his

goods for less than the cost of production?

Why? Because he can, but also because the country requires that he does so, allowing people to use their disposable income for other things. In the last 100 years we’ve gone from production for bare existence to tremendously commercialized. Whether it’s 1,000 acres or five acres, if you lose it, you lose everything. Farmers take production extremely personally.”

So there it is. Maybe that’s what defines the Canadian farmer, that personal attachment to what he produces, to the land, to the idea that what he does matters. And maybe that’s not a definition of a Canadian farmer, but of a farmer. Just a farmer. Part of a greater global definition. And maybe that’s enough. CG MARCH 15, 2012

PHOTO CREDIT: AARON MACDOUGALL PHOTOGRAPHY

— Alvin Keenan

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Shared value Sixty farmers pay $1,600 a year to join this management club. Here’s why

rom the outside, this sounds like any other financial benchmarking group that you could find in any other province across this big country. But this one is different, and not only because it’s in eastern Ontario and has a French name.

What makes this group different is its success, as well as the success it is creating for its members.

The reason that Groupement de gestion agricole de l’Ontario (which basically means the Agricultural Management Group of Ontario) has been so successful for more than 20 years isn’t because of culture or language, even though it’s mostly French in a province where the vast majority of farmers are English. Nor is it down to some egalitarian political theory, even though most of the members are dairy farmers in supply management.

Instead, this farm business management group has nearly 60 farmers paying $1,600 a year membership fees out of their own pockets because this is a group that has actually found a way that works to help farmers make better business decisions.

“It works not because of geography, culture or linguistics,” says Pierre Glaude, the group’s instigator and longtime facilitator, as well as director general of the L’Union des Cultivateurs Franco-Ontariens (a group representing Ontario’s French farmers). “It works because it helps farmers look at their farms as businesses, and helps them do strategic planning.”

Yes, but does that mean it pays?

In 2000, a joint research project in Quebec — the hub of farm business management clubs — found farms that had been members of such groups for a number of years had increased their operating income by 43 per cent and improved their return on assets by 2.2 per cent compared to farms that hadn’t signed up.

That’s a big jump for any farm, and importantly, it isn’t just a quick blip. Overall, the study showed, financial ratios get better the longer the farmers stayed in their groups.

Based on anecdotal evidence, Glaude also believes the members of this Ontario group have been more successful at transitioning their farms to the next generation than other farmers in the region.

Of course, the opposite is true too. The group can help some farmers learn that they’re on a downward trajectory that can only be turned around by infusing a significant chunk of cash. For such members, getting that information from the group instead of wait26 country-guide.ca

ing to hear it from the bank has meant that they’ve been able to leave the farm while they’ve still got some dollars left in their pockets.

“It’s easier to make the decision more timely,” says Glaude.

The basic mandate of these farm business management groups is to help farmers improve their individual bottom lines by benchmarking various costs and ratios against other members who have similar farms in similar growing areas.

As well, members of this management group share the services of exclusive on-call financial advisers to help them crunch numbers and find solutions for expansion, transitions and even successions.

Each management group has its own policy regarding adviser usage. For Groupement de gestion agricole de l’Ontario, the membership fee guarantees 16 hours of work plus $100 per hour for work above that. Similar groups in Quebec have a small membership fee and are billed by the hour or job for the services.

Farm management groups started in Quebec more than 40 years ago. By 1982, the number of groups had grown so much that with the help of the Quebec Ministry of Agriculture and the Union des producteurs agricoles, they formed a co-operative for farm management services and developed their own benchmarking software. In 2011, Quebec had 26 business management groups with some 1,800 members.

Originally in Ontario, two separate clubs started in neighbouring eastern counties and six years later, one developed in northeastern Ontario. A few years ago the three clubs amalgamated into one, subcontracting their adviser’s time to the northeastern group.

The concept and eventually the benchmarking software came from the Fédération des Groupes Conseils Agricoles du Québec. “Basically we replicated a formula from Quebec,” says Glaude.

When the Ontario group first started, they linked with members from the Quebec group to learn how to operate their own non-profit group. When a group in Manitoba and New Brunswick wanted to start a similar benchmarking group, some of the Ontario board members helped mentor them through the startup process.

“We helped them the same way the people from Quebec helped us,” says Alain Poirier, chair of the voluntary board that runs it as a non-profit enterprise. Poirier and his son, Daniel, milk 45 Jerseys near Lefaivre, Ont. while his wife, Claudine, works off farm.

March 15, 2012

Photo Credit: Linda J. Cutler

By Maggie Van Camp, CG Associate Editor

business

The group approach boosts incomes, says Johanne Lafrance and Alain Poirier, and it helps succession planning too.

Find the winners Poirier says the group’s core strength is comparing cost-of-production information by enterprise. Although the farms involved are mostly dairy, they also include cropping and poultry operations.

Almost all have a combination of livestock and crops. For example, there’s a whole page comparing expenses per kg of milk on their individual farms to the group’s average.

Over the years, Poirier’s most valuable learnings have come while comparing his feed costs per kg of milk to the group’s benchmarks. If the weather one year affected feed quality, everyone would have a lower number. However, if 10 members made a change and their feed costs/kg were all lower than the average, Poirier would try to find out what they did, and usually the group’s staff adviser could make that link.

Examining production costs with farmers working in similar conditions can put it all in perspective, says Poirier. For the dairy farmers, the numbers are broken down further into herd size.

March 15, 2012

Similarly, CanWest DHI’s Profit Profiler program (www.canwestdhi.com) is a spreadsheet to compare one dairy farm to another of similar size, production level and/or geographic location. The program can also be used to project outcomes and cash flows for changes. Profit Profiler costs about $900 per year, including a consultant coming out to the farm for a couple of hours to help source and input the correct information and review the results.

Having advisers at their service all the time and sharing information among the members is a major advantage for these management groups over straight benchmarking programs. Groupement de gestion agricole de l’Ontario has three staff: two part time in the office and one adviser on the road.

“Advice is just one phone call away,” says Poirier.

Poirier finds using the group’s advisers instead of his accountant to calculate his farm’s financial numbers is less expensive and less time consuming. Moreover, for cash flow projections on expansion plans Continued on page 30 country-guide.ca 27

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business

Continued from page 27 or farm transition analysis, the adviser already has multiple years of basic information so that doesn’t have to be gathered and calculated again.

Take it to the bank If Poirier is considering buying some land, for instance, the group’s adviser can calculate the carrying capacity on the actual productive value of Poirier’s own farm’s cropping enterprise, not estimated provincial averages or guesstimates. Additionally, this longterm benchmarking and relationship gives the adviser a more complete understanding of his farm, and how his family works and envisions the future.

Many members share their farm’s benchmarking

When the group first started meeting, all the data had to be handwritten on a spreadsheet but now the members save their financial statements on flash drives so staff can download the data directly into the benchmarking software. Unlike some benchmarking groups, this one is not linked on the Internet.

At the end of each farm’s annual report is a visual of how the farm is faring compared to the average.

The schematic looks like a spiderweb, helping the farmers identify their strengths and weaknesses in one glance as their information is superimposed on circles of the group’s average. The spiderweb ratios include debt servicing, enterprise earnings before interest, amortization and salaries, feed efficiency, milk per kg of concentrate, feed cost per cow per kg of milk, average price received per kg, production value per cow, value of crop production per hectare, and percentage of gross revenues spent on salaries.

Neutral data is best

report with their bankers. Luc Gagne, the chief adviser of Groupement de gestion agricole de l’Ontario, will sometimes accompany members when they approach an institution. In fact, the group’s financial analysis is so well respected that local bank managers have suggested clients join and have even gone so far as to make it a condition of loan approval.

During the year-end review, the staff ensures each farm’s information is complete and accurate. By standardizing the numbers for comparison with each other and year over year, this generally improves the farm’s management accounting. According to Power of Group, a booklet from Ontario’s Agricultural Management Institute (newly updated edition available free at www.takeanewapproach.ca) hiring outside advisers for such groups does help standardize accounting data.

30 country-guide.ca

Johanne Lafrance, the current secretary of the group’s board, and her husband Michel Lafrance farm with sons, Laurier and Jonathon near Ste.-Anne de Prescott, Ont. They milk 300 cows and grow 1,700 acres of corn, wheat, soybeans and forages. “It’s neutral data and it shows us what is working for us,” says Johanne.

“It also points out what we need to work on.”

It also lets farmers focus on the numbers that are most important to their own farms’ success. On Lafrance’s rapidly expanding farm, for instance, she finds tracking the ratio of production dollars per employee per kilogram of milk is key. It lets her know if their farm is overspending on labour. “That number tells me how much each person is bringing to the farm,” she says.

Since the data is compared to the whole group or subgroups, it can be surprisingly reassuring. For example, if it was a poor forage-harvesting year, then feed efficiency will drop for everyone in the club. “It’s comforting to know that someone else is in a similar situation,” says Lafrance.

In this particular management group, many of the active members have been female, traditionally the bookkeepers on family farms. For some, this linked their farms’ financial results to production efficiencies, making it easier to support decisions with numbers.

But the group isn’t for everyone, Lafrance says.

Being willing to share, self-criticize, and make improvements is critical, but it does limit who will join the group, says Lafrance. “You have to be willing to learn, to share and to trust.”

Lafrance has observed a certain behaviour pattern repeating when the group meets annually to get their hard-copy results. The first year new members tend to keep their reports close to their chests. The next year, they might share a peek with the person beside them.

By their third report, they’ve seen the benefits and walk around the room sharing their information freely.

March 15, 2012

BUSINESS

However, you don’t have to share your report with anyone else if you don’t want to. The comparison data is the group’s average, and there are enough members to make the data intrinsically confidential. The advisers also keep names out of the comparisons and act as a privacy wall, exchanging lessons learned without naming names.

If a person in the group wants to ask top producers how they were so successful, they can ask their adviser to pass on the request. The top farmers can then choose to give the requesting person a call or not. Similarly if the adviser knows that someone successfully tried a new production method, he may ask them to share the results either at the benchmarking meeting or at one of the three group get-togethers.

It’s basic peer mentoring and it’s one of the intangibles that makes Poirier and Lafrance passionate about this group.

Better succession plans Some smaller offshoots called 4x4 cells have also formed to discuss specific needs.

For example, a cell group may meet to discuss succession, with individual members getting together based on their needs.

Lafrance is a part of one of those 4x4 cells. “We meet with our books opens,” she says. “It becomes a support group with specialized needs.”

For the Lafrances and Poiriers, the combination of networking with other farmers who have tackled succession and also having access to a trusted adviser who knows their family has been invaluable. Lafrance’s two sons, Laurier and Jonathon, are already involved in the farm. Poirier’s son Daniel is back on the farm after recently graduating from Alfred College, the University of Guelph’s French language campus.

As well, members have a long-standing habit of sharing their farm’s financials with an open attitude. This helps the next generation know exactly how the farm business is performing financially, what aspects are weak and strong, and what opportunities are out there to improve financially.

Through the succession process, the group’s advisers also assess the viability of various potential expansions for supporting the additional salary. Both generations are comfortable asking Gagne questions, and throwing ideas and concerns off him.

Gagne who has been coming to their farms for 16 years, has a degree in farm MARCH 15, 2012

business management, is a neutral third party, and yet is young enough to be approachable by the new generation. He’s respected by the members and can say things that they wouldn’t accept from each other without being seen as playing favourites.

Underneath this network of business agreements and benchmarking is simply a community of farmers learning and supporting each other. Once a year, the group goes on a three-day trip to learn something new about farming and they usually have a summer barbecue together.

For Lafrance, the main benefits stretch way beyond business. “It’s like a big family,” she says. CG

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management

Watch those bin leases Are those new bin leases a great deal, or a big tax headache just waiting to explode?

By Gerald Pilger ith strong farm demand and the rising costs of steel driving up the price of grain bins, more farmers are considering leasing instead of buying their bins. Most bin manufacturers, leasing companies, some retail sales outlets, and even some banks are now leasing grain bins.

On the surface, grain bin leases look very attractive. Online ads now offer farmers three-year and sometimes longer terms with annual payments that are 100 per cent tax deductible.

Plus, many such leases give the farmer the option to purchase the bin at the end of the lease, sometimes for as little as 10 per cent of the original cost.

One leasing company is even offering to sell the bin to the farmer for just $10 at the end of the lease!

Is it a deal that is too good to be true?

There may even be a ticking tax liability hiding inside these leases. A spokesperson with Revenue Canada has confirmed for C ountry G uide that grain storage facilities (grain bins) are considered capital assets that fall in a class normally depreciated at 10 per cent. That seems to be at odds with many bin leases.

The Revenue Canada spokesperson added: “A farmer should consult with an accountant before entering into a leasing arrangement for grain storage that appears to create an expense deduction greater than the normal depreciation rate.”

There are significant differences between an outright purchase and leasing a bin. The two most obvious are the cash flow and tax implications.

A purchase of an asset typically requires the buyer to make an immediate cash outlay as a down payment, and then amortize the remainder over a period of time. With a lease, by contrast, the entire cost of the asset minus the residual value is amortized over a period of time. Therefore, the amount of cash needed is typically much less in the first year when leasing than if the asset is purchased.

Depending upon the residual value, interest rates, and time period of the lease, the lease payments may continue to be lower than an amortized purchase payment over the length of the lease, or the lease payments may be higher.

32 country-guide.ca

In most farmers’ minds, the ability to write off the entire lease payment as an expense is the biggest reason for opting for a lease purchase of an asset. These farmers see a three- or five-year writeoff of most of the cost of a bin as a much better tax strategy than only being able to expense the bin as a depreciating asset over a much longer period of time, especially if the farmer is able to purchase the bin at the end of the lease for a small percentage of its real value.

The real comparison isn’t nearly as black and white, however, because of factors including the variability of interest rates, taxation rates, and availability of cash for the down payment.

Rob Strilchuk, director of taxability services for Mowbrey Gil LLP in Edmonton has provided the three tables at the end of this article comparing the actual cash outlays and tax benefits of a major financed bin purchase and a lease purchase of the same bins at differing tax rates.

Strilchuck points out that if the tax rate is low there may be little difference between the actual cash outflows through a lease purchase or financed cash purchase, and when future tax considerations are added into the equation, the cash purchase may be an even better option.

“You need to consult your tax adviser to decide if a purchase or lease is a better option,” advises Strilchuk.

Nor are the tax implications of a lease or purchase decision the only consideration that needs careful study. Strilchuk cites a list of factors which will have a bearing on this decision: • What is the real interest rate being charged in the lease? In many cases, the inherent interest rate on a lease is higher than the interest charged for the purchase of an asset.

• In a lease, a farmer has to finance the cost of the GST. Even though the GST is recoverable, the farmer must carry the GST until it is refunded. By contrast, no GST is charged on the purchase of an exempt asset such as a bin.

• Cash flow is a major consideration. A purchase will usually require a down payment which increases the upfront cash flow requirements.

• A true operating lease creates off-balance sheet debt. In a lease, the asset and the lease liability March 15, 2012

management

do not appear on a balance sheet. This accounting principle can result in an increased amount of credit available to a farmer to invest in other business opportunities.

The unknown risk Dan Gallimore of KMPG at Lethbridge agrees with all of Strilchuck’s points and, like Strilchuck, he urges farmers who are considering leasing to sit down with their accountant to be sure leasing is a better business decision than an outright purchase.

Gallimore says farmers also need to consider the risk of Revenue Canada looking at a grain bin lease as a tax avoidance strategy. He says if Revenue Canada considers the lease to be an operating lease, there should be no problem. However, if Revenue Canada determines the lease to be a capital lease, farmers could be opening themselves up to back taxes, penalties, and fines.

In the past, Revenue Canada has been quite clear about the difference between a capital and an operating lease. By definition, a capital lease is a lease which covers the major part of the life of an asset and after the lease ends, the lessee typically retains ownership of the asset.

On the other hand, if there is still useful life of

March 15, 2012

the equipment or building at the end of the lease and the lessee can return the asset at the end of the lease without any further obligation, it has been considered an operating lease.

The guideline Revenue Canada has used in the past to determine if a lease is a capital lease and not an operating lease is: • The lease term is greater than 75 per cent of the useful life of the asset • The lease has an option for the lessee to purchase the asset at the end of the lease period for less than fair market value • Ownership of the asset is transferred to the lessee at the end of the lease term •O R if the present value of the lease payments exceed 90 per cent of the fair market value of the asset.

If any one of these tests is met, Revenue Canada can deem the lease to be a capital lease, meaning that the asset should have been considered a capital purchase and depreciated as such. Such a ruling could have very large tax implications. The lessee could be required to pay the taxes which would have accrued on the difference between the lease amount already deducted and the much lower Continued on page 34

country-guide.ca 33

management

Continued from page 33 capital cost allowance which can be claimed on the asset. Additionally, the farmer may have to pay penalties and interest on this amount as well.

“Short of asking for a tax ruling before leasing a bin, a farmer has no way of knowing if a bin lease will be looked at as a capital lease or an operating lease,” says Gallimore. “A good accountant will always outline the risks that a farmer could face when leasing but ultimately, it is up to the farmers to decide how much tax risk they are willing to take when leasing a bin.”

Strilchuk also cautions farmers about future tax

implications when a leased bin is sold. Bins have a long lifespan and chances are they will be sold at some point in time. Many farmers believe that if they sell a bin for more than the purchase price, all proceeds above the purchase price will be considered a capital gain in the class and taxed accordingly.

However under the lease scenario, this is not necessarily the case. Revenue Canada may rule that the original purchase price was not just the end-oflease purchase price but that amount plus all lease payments less interest. Instead of a farmer incurring capital gains, he would be facing recaptured capital costs which are taxed as farm income. This could create a large tax burden when the bins are sold. CG

Three scenarios — five-year costs for a 31,000-bushel bin setup worth $199,700 Alberta individual acquiring, 30% tax rate, 10% CCA class Lease Year 2012 2013 2014 2015 2016 2017 Total

7.82% lease rate and $5,000 buyout, semi-annual Payments 46,500 46,500 46,500 46,500 46,500 5,000 237,500

Lease Expense CCA 46,500 46,500 46,500 46,500 46,500 250 232,500 250

Tax Benefit 13,950 13,950 13,950 13,950 13,950 75 69,825

Buy 20% down and 4.5% interest rate, semi-annual

Cash Outflow 32,550 32,550 32,550 32,550 32,550 4,925 167,675

Payments Interest 75,883 6,307 35,943 5,570 35,943 4,174 35,943 2,714 35,943 1,189 219,655

GST to fund on payments annually $2,325 (recoverable)

19,954

CCA 9,985 18,972 17,074 15,367 13,830 12,447 87,675

Tax Benefit 4,888 7,362 6,375 5,424 4,506 3,734 32,289

Cash Outflow 70,995 28,581 29,568 30,519 31,437 3,734 187,366

Future tax deductions $ 112,025

Alberta corporation acquiring, 14% tax rate, 10% CCA class Lease 7.82% lease rate and $5,000 buyout, semi-annual Year 2012 2013 2014 2015 2016 2017 Total

Payments 46,500 46,500 46,500 46,500 46,500 5,000 237,500

Lease Expense CCA 46,500 46,500 46,500 46,500 46,500 250 232,500 250

Tax Benefit 6,510 6,510 6,510 6,510 6,510 32,550

Buy 20% down and 4.5% interest rate, semi-annual

Cash Outflow 39,990 39,990 39,990 39,990 39,990 5,000 204,950

Payments Interest 75,883 6,307 35,943 5,570 35,943 4,174 35,943 2,714 35,943 1,189 219,655

GST to fund on payments annually $2,325 (recoverable)

19,954

CCA 9,985 18,972 17,074 15,367 13,830 12,447 87,675

Tax Benefit 2,281 3,436 2,975 2,531 2,103 1,743 15,068

Cash Outflow 73,602 32,507 32,968 33,412 33,840 1,743 204,587

Future tax deductions $112,025

Alberta individual acquiring, 39% tax rate, 10% CCA class Lease

7.82% lease rate and $5,000 buyout, semi-annual

Year 2012 2013 2014 2015 2016

Payments 46,500 46,500 46,500 46,500 46,500

Lease Expense 46,500 46,500 46,500 46,500 46,500

2017 Total

5,000 237,500

232,500

CCA

250 250

20% down and 4.5% interest rate, semi-annual

Cash Outflow 28,365 28,365 28,365 28,365 28,365

Payments 75,883 35,943 35,943 35,943 35,943

Interest 6,307 5,570 4,174 2,714 1,189

CCA 9,985 18,972 17,074 15,367 13,830

Tax Benefit 6,354 9,571 8,287 7,052 5,857

Cash Outflow 69,529 26,372 27,656 28,891 30,086

90,675

5,000 146,825

219,655

19,954

12,447 87,675

4,854 41,975

4,854 177,680

GST to fund on payments annually $2,325 (recoverable)

34 country-guide.ca

Buy

Tax Benefit 18,135 18,135 18,135 18,135 18,135

Future tax deductions $ 112,025

March 15, 2012

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MACHINERY

Robot dreams With new technologies, the productivity gap between the haves and have-nots may grow bigger than ever

By Laura Kunzelman

ew machines aren’t just getting bigger, they’re also getting smarter. The most incredible breakthroughs in onfarm engineering hardly even make the news anymore. Farmers can rely on yield monitors, auto-steer and global-positioning systems that give one-inch accuracy, not to mention variable-rate technology.

But how close are we to fully roboticized operations?

Probably both a lot closer — and a lot further away — than you think. In fact, the technical hurdles aren’t all that great, especially considering how far agricultural engineering has come in the last few years.

The legal hurdles, however, may be enormous.

It’s still early days yet, so it’s impossible to say just where today’s burst of innovation will end. But it’s equally impossible to look at the advances of the past decade and say that this is all that the farmer is going to get. Technology has brought us this far, and it’s unlikely to run out of gas just yet.

More likely is that the way you farm in 10 years will be as different from the way you farm today, as the way you farm today is different from the way you farmed 10 years ago, before you had GPS, a myriad of new electronic technologies, and the massive power increases in today’s farm equipment.

In fact, to say that the rate of change will only be

36 country-guide.ca

as blindingly fast as it has been over the past decade is probably underselling it. Get ready for whiplash.

The real comparison between how you farm in another decade may be between how you farm now and how your ancestors farmed in the era of steam and horsepower and threshing crews.

CAN’T STOP TECHNOLOGY Today’s technology can auto-steer a tractor down the field, activate spray booms remotely and individually, and auto control the sections to limit overlapping. The only thing it’s not yet capable of doing automatically is steering around the corners. Now, that’s coming too, says one industry observer.

With variable-rate and global positioning technology already available from the driver’s seat, it’s difficult to believe advancements will stop any time soon, says John Froese, product manager for precision agriculture at tractor manufacturer Versatile.

What makes it even more unlikely is that farmers love the technology and are eager to get more, Froese says. “Currently 20 per cent of farmers use VRT and we definitely see that number growing in the upcoming years,” Froese says. “I estimate 50 per cent of farmers’ equipment will have VRT in the next two years.”

Michael Bevans, a product engineer with Alberta Agriculture’s Ag-Tech Centre, agrees and says that over the past five years, the market has been getting more and more technologically driven.

“If you aren’t keeping up with the developments and technology and methods, you have outdated yourself,” says Bevans. Now, he warns, it’s going to start getting even harder to compete against farmers who are keeping up with technology and improving their productivity.

“My advice is to keep up,” says Bevans. “Pay attention.”

MARCH 15, 2012

MACHINERY

BRAINPOWER VERSUS BRAWN It turns out your farm employees are probably going to need to pay attention too. In fact, this may be one of the great unintended consequences of farm technology.

Some farmers and farm experts are suggesting that one of the benefits of advanced technology on the farm is that it will be simple to operate. In other words, if the technology does all the work, farmers won’t need to hire skilled tractor operators. All they’re doing after all is sitting in the cab and calling the shop if something goes wrong, this thinking says, so how high pay do they have to be?

Teulon, Man. farmer Pete Skrabek begs to differ. He says that producers need skilled people more than ever before because one part of the operation is getting simpler only by adding more complexity to another area.

“The GPS may simplify steering the tractor, but now if you have a hired man working that machine, what happens if it fails or he has to troubleshoot?”

Skrabek says. “On old tractors you had to be able to steer and tug a lever. Now you need basic electronics understanding and potential diagnostics. And with the GPS the jobs change too. Everything needs to be more efficient. You need an operator with a large knowledge of the system and what he is trying to accomplish.”

As for the idea of ditching the driver completely, it isn’t as if the technology isn’t here right now.

Using GPS, farmers could map out their fields, and then just let the tractor do all the work. Still, although the technology is gaining popularity, there is a hesitation to market it as a tractor that can do all the work for you.

In fact, the biggest barrier is legal. What happens if something goes wrong?

“Equipment is emerging free from the need of operator entirely,” says Adam Reid, marketing director for Buhler Industries, the Winnipeg-based manufacturer of Versatile tractors and other farm equipment. “Technology exists for that to happen, but I don’t know who the first manufacturer is who will take on that kind of responsibility.

“There are a lot of legal hurdles before farmers take the operator out from being the wheel,” Reid says.

Froese has the same view. “The technology already exists where cars can drive themselves to and from work,” he says. “But there has to be a manufacturer that is willing to stand up and say they will be first.”

A VARIABLE FUTURE Even so, other technologies are growing by leaps and bounds, and we’ll get closer and closer to a roboticized future, even if we don’t always call it that.

Adam Reid sees near-universal adoption of vari-

MARCH 15, 2012

able-rate technology coming. “The equipment and technology has evolved and one of the things we will see in the short term — and see in the long term — is the use of VRT and more equipment equipped with VRT,” Reid says. “The technology we have now has taken a lot of the operator error out of machinery.”

Versatile’s Froese agrees that farm size is clearly one of the important drivers behind the adoption of newer and smarter technology.

“Farmers are becoming more business people,” Froese says. “They have to be, in terms of managing the big farms. The farm will keep on growing and (farmers) will be looking for more and more advanced technology.”

AgTech’s Bevans says that computer-driven software will take over. “Farmers will be able to variably apply nutrients, not just in blankets,” Bevans says. “They can target the areas that need it. That technology is improving.”

BEING IN THE KNOW Guy Lafond, research scientist at the Indian Head Research Farm in Saskatchewan says that what we should also be looking for is technology down the road that has much better ability to monitor and respond to conditions on our farms.

“A way to do this is to use some kind of mobile data acquisition platform that would be self-propelled and auto guided and would be robotic in nature,” Lafond says.

Innovation in the use of sensors would then pave the way for the next stage of robotics. Bevans also adds that future developments could include more computer-driven GPS programs, more satellite imagery, and technology that gives the farmer on-the-go monitoring of what’s in their soil. He also notes that available technology is already adding new ways to manage operations, such as the John Deere JDLink system.

That system has been widely used in the construction industry, where John Deere is a major player, Bevans says. Some of its main features include the ability to monitor machine health, recover stolen machines through GPS tracking, and extend machine life through preventive maintenance.

It enables equipment owners to look at productivity in a new way and maximize what is done using daily reports, Bevans says. It’s not yet widely available or used for agriculture equipment, but when it does begin to emerge, it will likely continue to support the trend to larger farms.

Says Bevans, “The farmer can own a fleet of tractors and go to their desktop and see where they are at.” CG

country-guide.ca 37

machinery

The toughest choice The numbers are in. Investing more in the newest farm machinery is no guarantee that your net income will grow. But then, running old machinery is no guarantee either

By Ron Friesen new rotary combine will easily set you back $300,000 even without a straight-cut header, which adds another $50,000plus, and without a lot of the technology that you’d sell your kids’ birthright to get your hands on.

By the time you walk out of the dealership with just this one machine, in other words, you’re going to sign away more dollars than most of your friends in town will invest on any single deal in all of their lives.

And whoever heard of running a farm with just a combine? So now you need to go shopping for a new 350- to 400-horsepower four-wheel-drive tractor, meaning you’ll need to stuff at least another $230,000 in your wallet. And you say you want a high-clearance sprayer?

That’s $200,000 to $260,000 more, and for a self-propelled swather add another $120,000. Plus, if you want your farm to really spin like a top, you’ll need that new grain buggy, and a new air seeder, and you better mix in a new mid-size tractor. Or maybe you should make that two.

Add it all up and the mechanical assets of a modern Canadian grain and oilseed operation aren’t just staggering, they can in fact be crippling.

“It’s not unusual to see a million dollars’ worth of money tied up in harvesting equipment alone, and the same in seeding equipment,” says Bob Gwyer, a business development specialist for the Manitoba Agriculture Ministry who helped to provide the above figures. “It’s just unbelievable.”

Unbelievable, maybe, but it’s true, and it’s the same in every important grain- and oilseed-producing area across the country. In Gwyer’s backyard, for example, a 5,000-acre operation is far from rare, and it will likely have at least $2 million invested in equipment.

38 country-guide.ca

The question is, is that really a smart investment? Sure, the computer programs at the dealership are pretty conclusive in showing how those dollars are earning you a handsome rate.

But are you really sure?

Surveys show that, apart from land itself, machinery is the largest capital investment for a farming operation. The question isn’t whether farmers should invest big money in machinery but rather how much investment is enough, or even too much.

Guidelines for determining that vary.

It’s also only part of the dilemma.

Harold Froese, a Manitoba credit union agricultural adviser, says his institution uses a benchmark cost of $250 per acre for a grain and oilseed farmer in his area to own or lease equipment.

But accessing that kind of money to spend on machinery is getting harder. Froese says when he graduated from university in the 1970s, the average grain and oilseed farmer spent 60 cents in total operating costs to earn back $1. Today, that margin has narrowed to where farmers now spend 85 to 90 cents to make a dollar.

“In a lot of ways, it’s more difficult to buy new machinery,” says Froese. “The very established farmers tend to buy new equipment because they can afford it.

Often the younger ones will buy used equipment.”

It’s part of the reason why machinery costs vary so much. Simply put, some farmers spend more simply because they can.

Jonathan Small, a farm management consultant with MNP in Red Deer, Alta., conducts surveys for Alberta Agriculture on investment levels and production costs for large grain farms, and points out for instance that in one survey, he found that the machinery investment on individual farms ranged from $100 all the way up to $700 an acre among farms that were

growing essentially the same crops, getting similar yields and selling the crops for the same prices.

Obviously, that big a difference in machinery investment means a big difference in profitability too, and eventually in sustainability.

Sometimes, the differences can be explained by field conditions. “Bigger yields tend to push up harvesting equipment investment,” Small says. “More or fewer days in the field (mainly related to latitude) also have an effect. More days in the field allows for lower levels of investment.”

Ratios show how much the farm should invest Small says the best way to determine your capacity for investing machinery is to take these three machinery costs — the interest cost on machinery loans plus depreciation and repairs — and treat them as a single cost for owning and operating that equipment.

These three costs alone account for the biggest single expense on a farm, apart from fertilizer. They also typically account for anywhere from one-half to three-quarters of the annual fixed costs on a grain farm. The size of these three combined costs influences the decision about what to spend on equipment.

What is the right amount? It’s what the operation can sustain, based on long-term production levels, operating expenses, overhead and the desired profit level, Small says.

Says Small: “What is left over defines what an affordable level of equipment is.”

Looked at another way, it comes down to gross margin minus fixed costs, Small says. Subtract the “three amigos” (cost of money, depreciation and repairs) March 15, 2012

machinery

from your total fixed costs. What you’re left with is the sum of the costs that do not relate directly to equipment.

If you want a rough guide on how much you can afford to spend on equipment, take the gross margin, subtract the non-equipment-related fixed costs and your desired level of profit, and multiply the remaining number by 0.25, Small says. “That’ll give you the maximum affordable expenditure in investment in equipment per acre.”

A different approach Mark Sloane, a private farm management consultant from Clearwater, Man., takes a different approach. He uses a mathematical ratio based on the value of gross farm sales to quantify machinery investments and to measure their effectiveness.

Sloane, who operates Right Choice Management Consulting with his business partner Andrew DeRuyck, says his machinery investment ratio was born out of a desire by producers to know if their investment in farm equipment was reasonable or not.

Sloane offers two ways of arriving at the ratio: One: Take the total machinery investment in dollars, divide it by the number of productive acres, and then divide that figure by the farm’s gross revenue per acre.

Or: Add together total fuel expenses, repair and maintenance expenses, equipment depreciation, interest on equipment loans and the cost of equipment leases. Divide that amount by the total number of productive acres.

Both formulas produce a ratio to demonstrate if a farmer is investing in a little machinery (as revealed by a low ratio) or a lot (a higher one). A reasonable ratio usually ranges between 80 March 15, 2012

and 120 per cent of average gross sales per acre.

Being high or low is neither good nor bad in itself. What the ratio does is allow producers to spot and mitigate potential problems with the machinery they have on hand, says Sloane, a former senior accounts manager with Farm Credit Canada.

“If you have a high machinery investment ratio, you’re carrying more machinery than the average guy in the industry. If you’re a guy who can’t fix things when they break down and you can’t rely on custom work, then a high machinery investment ratio will mitigate downtime in the middle of the season, especially if you can’t bring anybody in to help you do the work. That can justify having a high machinery investment ratio,” Sloane says. “But if the ratio is too high, the depreciation and interest costs may offset gains resulting from less downtime because of mechanical problems.

“If you have a low machinery investment ratio,” Sloane says, “you have less invested in machinery per acre than the average person in the industry, which is fine as long as you’re able to access custom work or if you have a good mechanic on staff who can mitigate your risk during downtime.”

Is new really cheaper than used?

Farmers sometimes argue that in the long run new equipment is cheaper — and ultimately more profitable — to own than used equipment. Small calls that notion “a complete myth.”

“We found no correlation between those things in our surveys and I have found no correlation over the last 25 years of looking,” Small says. “Yes, repairs as a percentage of fair market value are lower on new equipment than older equipment. But in dollars per acre, it ends up being about the same.”

Small says the results from his surveys of acutal working farms are clear: “Farms operating newer equipment, or with high investment levels, do not produce significantly better or make more money.”

Leasing machinery and hiring custom operators are also investments in farm equipment. Both have financial advantages and disadvantages, depending on the situation.

Sloane says leasing may help to decrease taxable income if the entire lease fee is an expense and therefore deductible. This becomes a tax advantage. When you buy a piece of equipment instead of

leasing it, the only deductible expenses are the loan interest and the depreciation, which are usually much less, hence a lower tax advantage.

Tax gains with leasing can be short lived Small acknowledges the Canada Revenue Agency may allow farmers to deduct lease payments as income tax expenses, but the disadvantage of writing off the entire cost of the machinery is that, when it is sold, the producer is left with a low cost base on that item and a significant tax liability as a result.

“There is a tax deferral advantage but possibly no long-term tax saving,” says Small.

Employing custom work can have financial advantages, depending on the situation. If the timing is perfect, a Prairie grain farmer for instance might be able to hire combines following the advancing harvest all the way up from Texas and not have to own a combine himself. Even hiring a local custom operator can be less costly than having harvest equipment sitting unused in a machine shed for over half a year, says Small.

But Froese points out custom combining is more practical in the U.S. Midwest, where the weather is usually dry at harvest time. Manitoba, for example, often has heavy morning dews in September and a generally higher humidity, which makes timing more difficult.

He notes that a combine bought brand new can provide a farmer with 15 or more years of service. Also, depending on crop rotations, a combine can be in near-continuous operation from midJuly until November, harvesting winter wheat, other cereals, corn and finally sunflowers.

“Farmers can spread out their equipment over different crops to reduce their investment costs over a longer period,” says Froese.

Buying, leasing, renting — all are options for a producer looking to invest in machinery. But Froese says the determinant for a lending institution to decide whether to finance that investment goes well beyond the machine shed. The financial viability of the entire farm is the deciding factor.

“We look at the whole business,” Froese says. “We never look at equipment in isolation.” CG country-guide.ca 39

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The rising sun Value adding on this Japanese farm goes back 340 years, but they’re still learning how to do it even better. Maybe there’s something new under the sun after all

imes had been hard before in this part of the Japanese countryside, but never quite as hard as this. With farms getting bigger and bigger, and with its young people lured away to factory and office jobs, the local town Kozaki seemed doomed to fade away.

Shops were boarded up. Population was falling, and it was getting harder and harder to provide local services. It’s a familiar story around the world, but now Kozaki has reversed its decline by going back to tradition — something most of us thought the Japanese never got very far away from in the first place.

This time, however, it’s because these Japanese farmers are discovering how shrewd their ancestors were in terms of business strategy.

Today, Kozaki and its farmers are back processing local organic grains and soybeans into traditional foods and sake, and the area has been so successful that it not only stemmed its population decline but is actually attracting newcomers who want to work in traditional agriculture or set up their own businesses making and selling food.

Located just north of Tokyo, Kozaki used to be a regional commercial centre with some light manufacturing industries. Then, when the local economy soured, agriculture got much of the blame. With larger, more mechanized farms, there were fewer families, fewer jobs, fewer children in school… all the kinds of rural development issues that many Canadian regions are all too familiar with.

In fact, there were predictions that Kozaki was on its way to becoming a ghost town, until farmers and local business people rolled up their sleeves to re-invent the way they work.

An example is the family-owned farm called Terada Honke, which started making sake about 340 years ago using water from the nearby Tone River.

Recent generations of the family had focused on increased production. As margins per litre fell, they shifted to mass production techniques that helped them produce higher and higher volumes.

But even as they invested all available resources in productivity, their bottom line got worse and worse.

42 country-guide.ca

By 1990, then-president Keisuke Terada had worked himself sick running the brewery, which was still heading towards bankruptcy.

“Mass production was no fun,” said Terada’s son, 38-year-old Masaru. “We wanted to do things the traditional way.”

Masaru Terada said the brewery completed its shift to totally traditional methods almost two years ago. Now there is no more machine brewing. Everything is done manually. First, the farm’s six brewers wash the rice and let it steam overnight. Then they mix the rice with a special mould, which is actually a fungus that develops naturally on rice plants but is prevented by fungicides.

The rice is laid out for three days in a charcoalheated room at a temperature of 90° until the combination of heat, moisture and rice mould breaks down the rice’s protein and starch.

In the next step, the brewers beat the rice into mush with bamboo paddle sticks, starting at five or six o’clock in the morning and working for 12 hours.

During a recent media visit, the male brewers were assisted by two female clerical employees, so not everything is quite as traditional as it once was. (That said, the brewers did chant traditional preparation songs to measure time while beating the rice.)

Next, the rice mush is put in vats to ferment for 40 to 50 days. In the final step, the brewers mix the fermented mush with water and hand-processed rice yeast, turning out a final product of 18 to 19 per cent alcoholic content sake 35 days later.

It isn’t nearly as efficient as modern technology, March 15, 2012

Photo Credit: Chika Yoshida, Foreign Press Center/Japan

By Richard Smith

business

Terada says. “That’s a total of three months, instead of one month using industrial methods.”

Through this traditional method though, Terada Honke produces 80,000 two-litre bottles a year valued at approximately $650,000. “Our profits are not high,” Terada tells me with Japanese understatement, “but we do pay taxes.”

Terada Honke also supplements its income through sales of other products, one being sake lees, a cooking ingredient made from the rice mash that is left over after brewing. “People want to eat it because it is very nutritious,” Terada says.

To supplement its production, Terada Honke also buys rice from Kozaki Shizen Juku, a 75-acre farm run by 60-year-old Kazushi Suzuki. Since last year, the farm has also been growing rapeseed along the Tone River to make rapeseed oil. “We use the fuel from the rapeseed,” Suzuki tells me. “We should not depend on fossil fuel and pollute the air.”

For Suzuki, Terada’s sake venture is an opportunity to market high-quality rice, helping him increase his net return per acre. It has also helped him refine his production techniques, so now he is able to develop consumer markets selling higher-quality rice than is generally sold in retail outlets.

It’s working so well, Suzuki says, that he has started a new rice-farming business near the Kozaki train station. Now, people from the city pay him 6,000 yen ($78) for the pleasure of working on his farm and planting rice for the day.

To showcase local farming and food products, the former town hall turns into a market between every March 15, 2012

Friday evening. Masaki Saito, a member of the organizing group called the Kozaki Fermentation Hometown Association, says sales are growing 20 to 30 per cent annually, and consumers are participating more and more, from children to old people.

“Tofu doughnuts are always sold out,” Masaki says. “Miso, delis and tsukemono (Japanese-style pickles) also sell well.”

Kozaki’s mayor says the town’s shift to traditional agriculture has been a grassroots movement. “People here wanted to preserve traditional, natural methods,” Kiichi Ishibashi says.

Ishibashi also says ag tourism is revitalizing the town, especially with the “Kozaki, the Hometown of Fermentation” festival each March attracting 35,000 people to the town of 6,500.

Those kinds of numbers are drawing evermore ag and farm businesses, Ishibashi says, and they are rebuilding bridges between farmers and consumers.

As I walked through the market, I found classmates Ayaka Tsubaki and Reina Narita, both nine, who had come for a snack after cram school. “The market is full of good things we want to buy and eat,” Tsubaki said.”

Near them, I found Sato Hirayama, 80, sitting at the market with two friends while she waited to go home with her son. Hirayama comes to the market because she remembers fresh food from her childhood, but she tells me it is a skill that her son, who works for Texas Instruments, simply doesn’t know.

“I would die if my son did the farming,” Hirayama laughs, taking another bite. CG country-guide.ca 43

TOOLMAN

The right mix of cash contracts and commodity trading

By Errol Anderson uilding a workable farm market plan isn’t easy. It isn’t only a science, there’s an art to creating a solid risk-management plan too.

Even so, effective pricing usually involves a mixture of cash contracts with the added horsepower of a commodity trading account.

No doubt, there are times when a cash contract is the best alternative. Local buyers have done an excellent job of providing several cash contracting alternatives. Indeed, some contracts closely mimic the use of a commodity trading account.

But there are also times when the use of a commodity trading account is the best marketing choice.

So the question is, what is the best mix of cash contracts and commodity trading to manage price risk in your farm operation? To answer that, let’s work through a series of questions designed to help you sort which strategy to use.

Do you sell grain now or wait? The decision to sell or not starts with the fundamentals. In other words, how do the current supply and demand factors affect the market? What is the market outlook?

Your past experience is a bonus here, but remember, producers are notoriously bullish. It can be valuable to bounce your view off a market analyst for added balance. Surround yourself with a network of market opinion. Fundamentals are important, but they are still only part of the answer when making a pricing decision. Keeping an eye on commodity charts also gives clues to price direction. Always respect the price trend of a market. The trend is always your friend.

Do you sell on the cash or futures market? Producers who understand basis make extra profit here. Let’s say you’ve made the decision to sell some crop in the bin. Now you have an option. Should you sell to the local buyer or sell a futures contract (hedge) directly through a commodity broker. Since cash markets run in close parallel to futures markets, a sell signal on the futures usually means sell signal on the cash market.

Grain buyer competition often heats up through road bans and spring seeding. Basis levels improve. If local basis bids are attractive, this is a signal to deliver on the cash market. If basis bids aren’t, this is a signal to sell the futures or purchase put options to guard price downside.

In this case, the decision to sell on the cash or futures market is simply a basis decision. If the basis is weak, hedge. Don’t deliver. Once the basis improves, deliver the physical grain and buy back your hedge with your broker. Remember, when the basis changes in your favour during the life of your hedge, it improves your bottom line.

How much should you forward-price using cash con44 country-guide.ca

tracts or commodity contracts? Here are some rule-ofthumb suggestions. How much to forward-price depends largely upon your farm’s financial health. Those in a low equity position are much more likely to forward-contract and hedge more aggressively to ensure a profit.

The mix of new crop cash contracts versus trading account also depends on your production comfort level. If you are only comfortable of pre-pricing 25 per cent of your new-crop production using a deferred delivery (DDC) contract, then there is room for some commodity trading price protection. Let’s say you sign DDC contracts to your production comfort level and the market continues to rally. Now what? It’s time to scale in put options or sell the futures as a hedge to add to your risk-management portfolio. The advantage of these tools is that they doesn’t obligate you to deliver.

Late winter into early spring is an active new-crop hedging period. Experienced marketers may hedge up to one-third of their expected new-crop production before it is planted. Once the crop is in the field and closer to harvest, they may pre-price up to 50 per cent of expected new-crop production. Also remember this: Whether forward-pricing new crop or selling old crop, the key is to price in small quantities. This offers you more marketing flexibility and extra control to sell into the top third of average yearly prices.

Do you sell today or defer delivery? Selling grain today or accepting a higher price for a deferred date is an economic decision. You need to figure your cost to carry the additional months in relation to the return. Check several markets. There is often a buyer anxious to purchase grain to cover a particular sale.

It is not uncommon to get 10 to 15 cents more for a bushel of barley because of a local supply problem.

Also, it is worth asking if a buyer is willing to pay an extra five to 10 cents to get all your barley. Your bargaining ability comes into play here.

Most believe that the difference in marketing is simply one of being a good judge of market outlook.

Being able to pick the high price is very helpful, but unrealistic. Understanding basis, carrying charges, hedging, shopping the market and planning sales all contribute to the end result… profit. The key is to have a good working knowledge of your entire toolbox of delivery and pricing options, including a mix of cash contracts and commodity trading. CG Errol Anderson is author of ProMarket Wire, a daily grain and livestock risk management report.

He is also a registered commodity broker located in Calgary. He can be reached at 403-275-5555 email: prowire@shaw.ca.

March 15, 2012

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Your values affect your decisions But are you really aware how?

By Pierrett Desrosiers

ou’re thinking of buying a tractor. Of course, as a rational business owner you think that you will evaluate your decision in a rational way.

For years management theory assumed that a business person would use a rational decisionmaking model. That model establishes that you will make a decision based on a logical, sensible choice, often following a step-by-step process.

Usually the pros and cons of a choice are ranked or scored with the highest scoring option being “the best” option. However, new discoveries have been made regarding the functioning of the brain, and as Antonio Damasio, a brilliant neuroscientist has said, “A rational decision is an impossible one.”

Emotions are the first pathway. They influence every decision. And values are closely linked to them.

Let’s go back to that tractor. Will you choose the most comfortable one or the most luxurious one, the cheaper one, the one with the best warranty or the one that carries the most prestige?

You will feel good, attracted to and positive toward some of the choices you face and will thereby be motivated “toward” those choices. You will also experience unpleasant, indifferent or even disgusted feelings and so be motivated “away” from other choices. Your values will influence your decisions, but to what extent are you aware of those values?

One of the primary emotional strengths related to emotional intelligence is to know yourself, which starts by knowing your values. A value is what is true, beautiful and good, based on personal or social criteria, and that is used as a reference or moral principle.

Your values affect your choices, your actions, and your level of satisfaction in life. They will very much determine your goals and outcomes in life. Indeed, when you feel that your lifestyle is in line with your values, you feel more in harmony.

Finally, your values will determine how you perceive and interpret any particular situation. These are important references in your personal, professional and business life. A value is said to be 10 to 100 times more important in life than a gift, a talent or a quality.

In my practice I often notice conflicts and “wrong matches” among associates because of major differences in values. Your character and competencies can be very different from those of your associates and yet you still work well together. However, having different values than your associates can be a source of many conflicts.

You will not compromise on values or if you will, you will be unhappy. If your central values involve “family, a balanced lifestyle, charity, health, and harmony” while the values of your associate are more along the lines of “recognition, prestige, power, money and competition,” then it is very unlikely that his choices and yours will be the same.

46 country-guide.ca

When we are faced with a dilemma or with an internal conflict because of a decision we have to make, it means that one or more values that are important to us are conflicting. We make difficult choices based on a hierarchy of values. However, over the years, this hierarchy could change gradually, or it could change suddenly because of a tragic event such as a death, an accident, bankruptcy or divorce.

To quickly discover your values or those of others, note the following three questions:

1. Where do you invest your money?

Example: Do you find that fresh fruit and vegetables are always too expensive (health), but you drive a luxury car (comfort, prestige, recognition) or do you prefer to forego renovations in your house (comfort, aestheticism, prestige) in order to invest in your childrens’ schooling (education)?

2. Where do you allocate your energy?

Do you have time to sit on four different committees (social involvement or recognition), but never enough to work out (health) or to spend time with your family (family)? There are 24 hours in a day, and the way you spend your time is based on what you value the most.

3. What do you like to talk about?

Do you always spend time talking about your business, the selection of a replacement bull, or ways to increase production (efficiency, recognition, achievement) or do you prefer to talk about your children and their projects (family, children)?

Each decision that we make, or do not make, speaks to our values.

To find out what your values are, consider these questions: • What makes you the happiest?

• What offends you or frustrates you the most?

• What are the criteria on which you most often base your daily decisions?

• If you could change the past, what would you change?

Think of yourself at age 80 and ask yourself: • W hat will be my biggest regrets when I look back on my life?

• Which achievements will I be the most proud of?

All of your answers reflect your values. If you are dissatisfied with your answers, or results that you get in life, it may be time for you to reconsider what truly matters to you. CG Pierrette Desrosiers is a work psychologist, professional speaker, coach and author who specializes in the agricultural industry. She comes from a family of farmers and she and her husband have farmed for more than 25 years. (www.pierrettedesrosiers.com) Email: pierrette@pierrettedesrosiers.com. march 15, 2012

w e at h e r NEAR NORMAL

MILDER THAN NORMAL

WETTER THAN USUAL

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NEAR-NORMAL PRECIPITATION

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NEAR-NORMAL TEMPERATURES AND PRECIPITATION

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COOLER THAN NORMAL

BRITISH COLUMBIA Mar. 18-24: Variable temperatures. A few highs reach the teens in the Interior. Blustery. Fair apart from scattered rain west, snow north and east.

Mar. 25-31: Pleasant, seasonal most days but cooler, blustery outbreaks bring heavier rain south and snow north on two or three occasions.

Apr. 1-7: Highs climb to the teens on most days under sunny skies but a couple of cooler, windy days bring some rain, mixed with snow at higher levels.

Apr. 8-14: Changeable skies as cool and mild air collide. Fair, mild days interchange with cool and wet. Frost patches Interior, more frequent north.

Apr. 15-21: Pleasant under considerable sunshine this week aside from scattered rain on two or three occasions. Brisk winds at times. Frost pockets Interior.

Intermittent rain or snow falls on a couple of days. Windy at times.

Apr. 1-7: Expect changeable skies and variable temperatures as mild, dry days alternate with rain or snow. Chance of heavy precipitation in places.

Apr. 8-14: Weather disturbances bring a couple of wet or snowy days this week.

Otherwise sunshine and seasonal to mild temperatures prevail. Blustery winds.

Apr. 15-21: Pleasant and warm on many days aside from scattered shower activity.

A weather system threatens with heavier snow on two days.

March 18 to April 21, 2012

ALBERTA Mar. 18-24: Temperatures oscillate from above zero to freezing. Windy at times.

Sunny skies in spite of occasional rain or snow on a couple of occasions.

Mar. 25-31: Blustery winds result in variable temperatures with some highs in the double digits. Sunshine alternates with heavier rain or snow and frost.

Apr. 1-7: Pleasant weather dominates with seasonal to mild temperatures but cooler, windy outbreaks bring heavier rain or snow on two or three occasions.

Apr. 8-14: Fair overall but weather systems bring rain or snow, chance heavy in places on two or three days. Seasonal to occasionally cool and blustery.

Apr. 15-21: Generally pleasant with seasonal to occasionally mild temperatures.

March 15, 2012

SASKATCHEWAN Mar. 18-24: Expect changeable temperatures under windy conditions. Mostly sunny but look for rain or snow on two or three days this week.

Mar. 25-31: Seasonal but a few mild spells send temperatures into the teens.

Occasionally blustery. Sunny but heavier rain or snow in places.

Apr. 1-7: Changeable with temperatures varying from cool to very mild. Sunny skies alternate with rain. A risk of heavy snow in a few localities.

Apr. 8-14: Sunny but a weather system brings some rain or snow with a chance of heavy precipitation in places. Temperatures fluctuate. Blustery.

Apr. 15-21: Mild temperatures on many days under sunshine. Scattered shower activity on two or three days with a possibility of heavier snow in some areas.

MANITOBA Mar. 18-24: Look for variable weather this week as mild, dry days exchange with rain or snow. Chance of heavy precipitation in a few localities.

Mar. 25-31: Generally fair apart from a couple of unsettled days with intermittent rain or snow, possibly heavy. Often windy.

Cooler, snowy north.

Editor’s note: Where’s my weather page?

Look in every second issue for your month-long Country Guide weather forecast during the winter months when we’re publishing every two weeks.

March 18 to April 21, 2012 NATIONAL HIGHLIGHTS Rapidly warming temperatures and highly variable weather conditions will dominate the weather picture in this period. In far Western Canada, cool and often wet weather is anticipated due largely to a cool flow off the Pacific.

A contrasting mild circulation will bring typical spring weather to a large part of central Canada stretching from eastern Manitoba into Ontario and western Quebec. Near normal precipitation can be expected to accompany the mild conditions. Across the remaining areas of eastern British Columbia, most of the Prairies, eastern Quebec and the Atlantic provinces, look for temperatures and precipitation to average close to normal values. The only exception may be in eastern areas of the Atlantic provinces where occasional storms will generate snow and some strong winds

Prepared by meteorologist Larry Romaniuk of Weatherite Services. Forecasts should be 80 per cent accurate for your area; expect variations by a day or two due to changeable speed of weather systems. country-guide.ca 47

ACRES

By Leeann Minogue

Fire it up!

Ask any farmer: a new tractor can stir up old memories, including some the family won’t let you forget he three generations of Hanson men — Dale, Jeff and Ed — had just finished installing the monitors in their new tractor. The Case IH 600 Quadtrak had just been delivered a week ago. After not being able to seed most of their land in 2011 because of flooding, they thought switching from tires to tracks might get them off to a better start in 2012.

“Ready to go,” said Jeff’s father Dale, climbing down the steps. “Let’s turn the key and see what she can do.”

“Wait,” Jeff said, rushing to the office at the back of the shop. “There’s one more thing to put in.”

“The kid probably thinks the tractor won’t run until we hook up the satellite radio,” Dale said.

“You weren’t any different when you were his age,” said Dale’s father Ed. “You wouldn’t drive the grain truck across the field until you changed the AM radio to the Top 40 station. And don’t think I’ve forgotten how you always left the rear-view mirrors tilted so you could use them to comb your hair.”

But when Jeff came back from the office he was carrying a beat-up fire extinguisher.

“I took them out of all our vehicles. Dropped them off in town to get them checked and re-filled,” he said. “We’re ready for the season.”

“Huh,” said Dale. “Good thinking.”

“I saw a bunch of ads in the paper,” Jeff said.

48 country-guide.ca

“This is Ag Safety Week. Thought I better do something about it.”

Ed wasn’t about to say anything about safety.

Not since The Incident. And besides, looking at this new tractor and knowing he was never going to get to drive it was putting him in a black mood. It looked like he’d sat in the driver’s seat of his last new machine. Unless his hip got so bad that he had to resort to getting around town on one of those damned wheeled scooters.

It wasn’t fair. In his day, Ed had known the insides of an engine better than anybody in the district. But tractors weren’t just about engines anymore. They were all about buttons and screens, blinking and beeping. He’d seen all he needed to see at the combine clinic last winter. Instead of talking about rotors and concaves, the young hotshot teaching the course had spent almost all day going on about the yield monitor. And damned if there hadn’t been a 12-year old kid sitting at the end of the table, nodding along as if he already knew exactly what the guy was talking about.

And yet, Ed was still pretty sure he could still do it. He would have argued for his shift on this new tractor, if it hasn’t been for The Incident in 2010.

Dale and Jeff didn’t say much about it anymore.

Not that Ed thought they’d forgotten. They were probably just trying to save him a little dignity. The MARCH 15, 2012

acres

guys down at Wong’s Café were much less polite. Even now, almost two years later, very few weeks went by without one of the smartasses at coffee row laughing about it.

Ed insisted it wasn’t his fault. The monitors were beeping and blinking right in his line of sight. How could a guy see?

And, turning around in the seat to see what was going on behind the tractor had made his neck sore after the first couple of hours. And after lunch was never a great time to try to stay awake, and an especially bad time to be making the opening round. Everyone knew that was the hardest part. And the darn GPS was no help to you there.

Besides, Ed was sure, if his cellphone hadn’t started ringing at just the wrong time, nothing would have happened.

Ed could still remember the sickening thud the seeder made when it hit the power pole. He had swerved so quick to look back, he hadn’t been able to turn his neck for two weeks afterwards.

It had seemed like it was happening in slow motion. He’d watched the pole teeter over, further and further. Until it finally fell over and landed right on top of the air cart, as his foot finally hit the clutch.

At least Ed knew the safety rules. He didn’t go leaping out of the cab trying to get himself electrocuted. He knew enough to call for expert help first. And, of course, he had his phone with him. (As he was quick to point out, if that phone hadn’t started ringing, the whole incident never would have happened.)

It was when he pulled his cellphone out of its case to dial 911 that Ed remembered that the power pole lying on top of the air cart was part of the main line that supplied the power to town, and most of the neighbours.

While Ed was sitting in the cab, waiting for SaskPower, the police, the fire truck, and worst of all, Dale and Jeff to show up on the scene, he thought it was the most humiliating 30 minutes of his life. He waited, alone, relieved that at least the guys sitting around in the dark at Wong’s Café wouldn’t know why the power was out all over the district. Ed couldn’t decide if he felt like a kid sent to his room to wait out his punishment, or an old man waiting to be airlifted to the nursing home. march 15, 2012

Then he found out that the waiting had been nothing. It was a hundred times more humiliating watching all of his saviours drive up, look up at him, and shake their heads. And then Jeff and Dale. Just standing there quietly, heads in their hands. Probably wondering how they were going to get the crop in now.

And how much this was going to wind up costing.

And then things got worse.

This was the day of Alice Emerson’s funeral. Ed would have been at the service himself if the Hansons weren’t so busy — seeding, spraying, dealing with seed customers. And although he’d known her since he’d sat behind her in grade school, Ed had never liked Alice that much. In fact, this was exactly the kind of stunt Ed would expect Alice to pull — holding her funeral on just the wrong day. And getting herself buried in the old Spring Hill cemetery, so the entire long convoy of funeral mourners

would be driving down this road, right by the tractor. Exactly when Ed was being helped down out of the cab by about 17 people.

Yup. The guys from town weren’t sitting in the dark at Wong’s Café. They were cruising by, headlights flashing, on their way to see Alice buried. Slowing down to get a good look at all the commotion. Waving at Ed. Ed was jolted back to 2012 by Jeff’s shouting.

“Grandpa! You okay?”

“Of course I am,” he said. “Just trying to add up how much you must have spent — driving a bunch of perfectly good fire extinguishers all the way to town.”

Jeff didn’t take the bait, just rolled his eyes.

“I was trying to get your attention to tell you to get up into the cab and turn that key,” Jeff said. “You’ve got seniority here. You should be the first Hanson to run the new tractor.” CG

Are you having trouble managing your farm debt?

We can help. Mediation may be the solution.

The Farm Debt Mediation Service helps insolvent farmers overcome financial difficulties by offering financial counselling and mediation services.

This free and confidential service has been helping farmers get their debt repayment back on track since 1998. Financial consultants help prepare a recovery plan, and qualified mediators facilitate a mutually acceptable financial repayment arrangement between farmers and creditors.

To obtain more information about how the Farm Debt Mediation Service can help you: Call: 1-866-452-5556

Visit: www.agr.gc.ca/fdms

country-guide.ca 49

LIFE

On the road Planning a summer vacation?

There’s food for thought at these slightly off-beat destinations

By Helen Lammers-Helps The more we know about the world beyond our doorstep, the better prepared we and our children will be to find a path to success in it.

Nowhere is that more true than in food and farming. Our farm kids may know first hand how their food is produced, but how many of us have exposed ourselves or our children to the whole story, from right after the food leaves your farm gate until it reaches the consumer’s plate?

The best news is, you can package your own food tour and mix it with enough just plain fun stuff so you will hardly know you’re learning about the food supply chain.

Here are some examples just to help you get a sense of the full opportunity ahead of you. Get some ideas, and then click your way to some great food destinations. Summer will soon be here!

GO ON AN URBAN SAFARI What about an adventure to the city to see how urbanites (your customers) buy, eat and enjoy the foods you produce (or could produce)? Ottawa is a great city to visit with kids.

Although a million people call Ottawa home, it’s always a welcoming, clean and friendly city.

Here you’ll discover one of Canada’s oldest and largest farmers’ markets. The Byward Market was established in 1826 by Lt.-Col. John By (the same man who was in charge of the Rideau Canal). He designed the streets to be extra wide to accommodate the horse-drawn carriages that delivered the produce. Today you’ll find almost 300 vendors plus museums, cafés, specialty food shops, bakeries, artisans, boutiques, galleries, and restaurants. This is also a great place to people watch as 50,000 people visit the Byward Market each weekend in the summer months.

Of course the nation’s capital is home to our spectacular parliament buildings perched atop a cliff overlooking the Ottawa River and there’s also a host of museums. No matter what your interest, there is a museum for you.

Don’t forget the Museum of Civilization across the river in Gatineau. It does a great job showcasing the importance of food and farming in the rise of Canada. It also houses the Children’s Museum, an interactive area that lets kids explore the world with hands-on artifacts, props and costumes.

Until the end of June, Ottawa also has a special exhibit of interest to the farming community. The Canada Science and Technology Museum’s From the Farm to the Freeway demonstrates how corn can be made into biocomposite plastics and used in the automobile industry.

For more information to help you plan your trip to Ottawa, go to www.ottawatourism.ca.

Family vacations are a chance to bond while experiencing something new together. This could also be an opportunity to learn a little more about the agri-food system and other parts of Canada.

Travelling not only opens the mind but it also makes us appreciate our own little piece of the world after we get home.

SEE FOOD RECOVERY IN ACTION Ever wonder what happens to all the fruits and vegetables that don’t measure up to consumer standards because they’re too small, or have slight imperfections?

Ontario Christian Gleaners takes in fruits and vegetables from an area encompassed by the Holland Marsh, Grand Bend and Leamington. Each day, Monday through Friday, about 50 volunteers wash and prepare the vegetables which are then diced in a large mechanical dicer and dried using a converted grain dryer. The vegetables are bagged along with beans, barley or lentils for added protein. The gleaners partner with relief organizations which ensure the food gets to where it’s needed.

Each day about 4,000 pounds of food are processed, enough to feed hundreds of people. You can see this process in action — tours are available each morning at 10:30 a.m. and take about 45 minutes. For more info, go to www.ontariogleaners.org or call 519-624-8245. Volunteers and donations are also welcomed.

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MARCH 15, 2012

life

Food processor tours Rising concerns about biosecurity means many food processors have cut back on public access. Still, some processors welcome the public and give tours. Check the websites for mills and bakers, but remember there’s a whole lot more to see. You can check out cheese, ice cream and chocolate processors, to name just a few (and usually there is tasting involved!). Here’s a sampling of some of the food processors across Canada that offer public tours — with a focus on tasty treats — but be forewarned. Always confirm tour details and timing.

Alberta Chocolaterie Bernard Callebaut, Calgary. Learn more about the full scope of Canada’s food industry. Visitors here can see the entire chocolate manufacturing process from a viewing gallery adjacent to the factory. Processes include chocolate moulding, enrobing, pinning and mixing. Watch the chocolatiers create handmade chocolate moulds, one-of-a-kind sculptures, handcrafted loose chocolates and more. After learning about the history and science of chocolate, visitors receive a free sample of chocolate and a chance to purchase their favourite chocolate treats. Groups can book a free guided tour which takes 30 to 45 minutes by calling ahead or drop in Monday to Friday for a self-guided tour. For more information, go to www.bernardcallebaut.com or phone 403-265-5777.

Ontario The Candy Factory, Collingwood. From the viewing room, visitors see various kinds of candy being made including suckers, fudge, brittles, barks, sponge toffee and chocolate. Monday through Friday from 9 a.m. to 5:30 p.m. Go to www.candyfactory.ca or phone 705-445-2400 for more details.

Prince Edward Island Cow’s Creamery, Charlottetown. Here is your chance to see ice cream and cheese being made. Free sample of premium ice cream included. You can also see Cow’s Creamery create its famously whimsical cow T-shirts. Tours are offered every half-hour Monday to Saturday from May 15-Oct. 15 and every hour on Sundays. Admission: $6 plus tax for adults, children two to 12 $4 and children under two are free. More information available at www.cows.ca or phone 902-370-3155.

Cheeselady’s Gouda, Charlottetown. Watch a variety of Gouda cheeses being made through the glass viewing windows two days per week, or check out an educational six-minute video any day. You can also see the ripening room where all the cheeses are aged in rows on wooden boards. Several flavours of Gouda cheese are made here. Open starting in April, Monday through Saturday, 10 a.m. to 5 p.m. Phone 902-368-1506 for more information.

New Brunswick Covered Bridge Potato Chips, Hartland. The Covered Bridge plant, profiled in Country Guide (May 2011) is located beside the world’s longest covered bridge right in the heart of potato country in the picturesque St. John River Valley. Take a self-guided tour to learn about potatoes and potato farming and to see how these old-fashioned kettle chips are made. Get a free bag of chips, hot off the line. Self-guided tours are available seven days a week in the summer. Tours are also available in the winter but call ahead. Cost: $5 + tax for adults, $3 + tax for youth (ages six to 14), children five and under are free. Details available at www.coveredbridgechips.com or phone 506-375-2447.

March 15, 2012

United States If your travels will take you stateside, you can find out which food processors and other factories offer public tours at http://factorytoursusa.com. The database here will allow you to search by state and by type of factory. CG

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h e a lt h

Controlling blood pressure

By Marie Berry he message has sunk in. We all know by now that high blood pressure can contribute to cardiovascular disease.

Most of us also know that if you do have high blood pressure (or hypertension), you may be prescribed medication to lower it. However, many of us may be confused about what we are taking, and why what we take may differ from what relatives or friends take.

Blood pressure is the pressure your blood exerts against your blood vessels and heart as it circulates throughout the body. If that pressure is too high, the vascular system may be damaged, much as a tire can be damaged if you run it at too high a pressure.

Blood pressure is represented by two numbers.

The systolic or top number represents the pressure when your heart is beating, and the diastolic or bottom number represents the pressure when your heart is resting.

Optimal blood pressure is usually considered to be 120/80. The aim of treatment, however, is generally to keep blood pressure below 140/90, although sometimes your blood pressure goal will be different because of other factors like the presence of diseases such as diabetes.

If you have high blood pressure, the first recommendation will always be to make lifestyle changes such as weight loss, smoking cessation, increased activity level, improved diet and reduced salt intake. However, if you do require medication, there are many options and certainly one or more will work for you.

Diuretics or water pills are commonly the first step in treatment. They reduce blood pressure by removing excess fluid from your body, and they include hydrochlorothiazide and furosemide. Along with fluid, diuretics may also remove minerals such

With our peak hay fever season coming fast, you may already be experiencing allergy symptoms. The wide variety of prescription and non prescription remedies can be confusing. Next issue, we’ll look at treatment approaches for those sneezes, sniffles, and watery eyes.

as potassium, and sometimes you may need to take a potassium supplement along with your diuretic.

Angiotensin converting enzyme or ACE inhibitors inhibit a specific enzyme which is involved in the manufacture of a substance known as angiotensin. With reduced angiotensin levels, blood vessels relax and blood pressure is reduced. Cilazapril, enalapril, fosinopril, quinapril, and ramipril are examples. Angiotensin II receptor blockers or ARBs block angiotensin from acting on blood vessels.

ARBs include irbesartan, losartan, and valsartan.

Sometimes blood pressure therapy is started with an ACE inhibitor or ARB, or sometimes these drugs are added to a diuretic. There are also combination products available that have either an ACE inhibitor or ARB mixed with a diuretic in the same tablet.

Calcium channel blockers affect how calcium molecules move through blood vessel walls. They relax the blood vessels and reduce blood pressure.

Amlodipine, felodipine, nifedipine and diltiazem are examples. Generally, long-acting formulations are considered more effective.

The Canadian Hypertensive Education Program outlines the recommendations for high blood pressure treatment. The starting recommendation is a diuretic, an ACE inhibitor, an ARB, or a long acting calcium channel blocker. If your blood pressure is not controlled, then a second drug from another group is added. Lower doses of several drugs are preferred to higher doses of one or two drugs because this reduces the risk of side effects. Thus, you could be taking two or more blood pressure medications. You can view the recommendations at www.hypertension.ca. You will find they are quite understandable.

At one time beta blockers that act at specific sites to relax blood vessels were widely used. However, today they have been replaced with more effective and better tolerated options.

Hypertension has few symptoms, and you feel fine in spite of your high blood pressure, but regardless of which tablets you may take for high blood pressure, do remember to take them. Compliance is the key.

Marie Berry is a lawyer/pharmacist interested in health care and education.

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March 15, 2012

“Why do you suggest Bible readings at the end of your articles? Does anyone believe what is written in the Bible?” A friend and I are drinking hot chocolate on a cold winter day. He admits he has an old Bible in a cupboard but has not read much of it. The book belonged to his grandfather and is written in an oldfashioned script. When he tried to read it, he found the language antiquated.

“Who wrote the Bible?” I reply that the Bible is actually a library of 66 separate books written by many authors over a period of about 1,000 years. Much of the Bible is the story of the Hebrews, an ancient nation living on a bridge of fertile land with the Mediterranean Sea to the west, and desert to the south and east. For some reason or other, the Hebrews were unusually sensitive in matters of religion. The Greeks had a genius for art, the Romans had a genius for government, but the Hebrews had a genius for religion. They brought their experience of God into everything. For example, we might say “There was heavy rainfall.” The Hebrews would say “The Lord sent much rain to water the earth.”

My friend says the Bible was written by people who believed the world was flat. I argue that the concept was credible for the people of the time. Strangely, some people still believe the world is flat. We laughed about the line from the country song by Prairie Oyster; “Every train that leaves a Prairie town is running on a one-way track.”

The discussion continues, still under the influence of hot chocolate with the addition of blueberry muffins. He says that Columbus discovered the world was round, quoting the rhyme “In fourteen hundred and ninety-two Columbus sailed the ocean blue…” Feeling confident from teaching history of navigation to student pilots, I retort that Columbus did not make the discovery. My friend says he will read my scripture suggestions if I am right.

Who discovered the Earth is round? It was a chap named Eratosthenes who hung out with other intellectuals in Alexandria in ancient Egypt. He made the discovery in 240 BC. Eratosthenes was touring southern Egypt and stopped by a water well in Syene, which is Aswan today. By coincidence it was high noon on the day of the summer solstice. As he looked down into a well to pull up a bucket of water, he observed that the sun’s light went straight down without casting any shadows. He had drawn water from many wells but had never observed this before.

The next year he was in Alexandria for the summer solstice.

At high noon he observed a tower. If the sunlight came from directly overhead, as it had last year in Syene, the tower, like the well, would cast no shadow. The tower did cast a shadow and Eratosthenes calculated the angle as seven degrees. He had discovered the world was round, but now he wanted to know how big the Earth was. This meant measuring the actual distance between Syene and Alexandria. He hired a man to walk the entire length on a straight line, counting each step. The man walked 524 miles!

Using crude mathematics Eratosthenes calculated the circumference of planet Earth to be 25,000 miles. The true distance is 24,860 miles.

So, my friend may be dusting off his Bible!

Suggested Scripture: Psalm 24, Isaiah 40:3-15

Searching for…

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Tractors, Trailers & Parts Miscellaneous Products & Services Monitoring, Control Equipment Seed Pedigreed & Commodities Chemicals Fertilizer & Inputs Insurance Brokers & Banking Buildings, Covers & Heating Parts, Repairs Maintenance Trucks, Trailers & Canopies Harvest, Haying & Forage Grain Handling & Storage Commodity Marketing Irrigation & Drainage Lawn, Garden & ATV Safety Equipment Energy Solutions Solar Products

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AgSearch.com is your online guide to regional and national businesses & products serving the needs of the agricultural community.

AgSearch.com provides you with a comprehensive set of searchable listings as well as useful information on agricultural products and services.

Relevant info to help you make informed decisions, plus ag business location and contact details — you’ll find it all together at

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

MARCH 15, 2012

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Va l l e y

The mother of invention Dan Needles is the author of “Wingfield Farm” stage plays. His column is a regular feature in Country Guide

ILLUSTRATION: RICK KURKOWSKI

n the depths of a Canadian winter a man’s thoughts inevitably turn to gadgets. It is a proven fact that the Eureka! moment for most of the great Canadian inventions — things like the paint roller, the jolly jumper, the green garbage bag and duct tape — all happened in late March, after the inventor had listened to the wind whistle through the floorboards for four months and burned through six bush cords of firewood.

We have about six inventors per square mile here in Petunia Valley.

None of them have reached national or global prominence. But Owly Drysdale achieved local fame for the coffee holder and doughnut spike he welded onto his International 1086, an innovation that has been much copied but never properly credited to him. Owly is modest about his achievements.

“My brain is a public resource,” he insists. “Like a library or a lighthouse.

Just to know that people have made use of my idea to better their lives is the

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only compensation I need.” Owly went on to create the combine coffee perk and several fast-food recipes that could be whipped up on the manifold of his John Deere 4400. Owly’s Field Pizza Pops take about three minutes… a little less if the machine has turbo, and a lot less if it needs a water pump. His ATV dinners were interesting, but I could never eat the peas. For the last 10 years, Owly has been working on the combine toaster. He figures that the first company that turns out a combine that can do toast is going to sweep the market.

One reason our inventors don’t pursue patents vigorously could be the liability factor. Wilf Smalley invented the motion-activated barn gate opener, which attempted to mimic the success of the garage door opener so popular in the suburbs. However, Wilf’s gate was set off by anything from a passing taxi to a cellphone and when it malfunctioned the results were frequently memorable. Wilf’s sheep came to appreciate it because they were always able to

get back into the barnyard after a tiring day out on the road, or rather, “the long pasture” as Wilf prefers to call it.

I have one invention to my credit. I created a pig-moving system that has been adopted by a few of my friends. As is so often the case, burning necessity inspired Dan’s Up & Away Hog Mover. I just hate loading pigs. Whenever I tried to move pigs the old-fashioned way, with a ramp and a square piece of plywood, the attempt always ended in tears. I have some strange effect on pigs. They come up the ramp and see the guy with the glasses and identify a weak spot. Then they turn me upside down and go romping out the lane to the highway. If I so much as glance at a pig on moving day, the pig instantly senses treachery and moves to the loselose corner of the matrix.

So I invented the Up & Away Hog Mover. It is a regular pig crate with room for two pigs and I place it underneath a barn beam in the pigpen. For three weeks before moving day I put one apple in the crate every morning. First pig in gets the apple. By moving day, all I have to do is show up and the pigs are in the crate. I give them two apples and bang the door shut behind them. Then I winch it up in the air four feet, back the truck underneath and lower it onto the truck. Ta-da! No farmers have been harmed.

Owly watched this process one year and pronounced it, “The slickest way of moving pigs I have ever seen!” This is high praise coming from the inventor of the self-steering manure spreader and The Cattleman’s Lance, a tool that allows a man seated on a tractor to open a gate and pass through without letting any cows come with him. It’s a 15-foot pole with a hook at one end and an electric prod at the other.

We may not have a Hall of Fame to honour the pioneers of agricultural technology in Petunia Valley. But even a newcomer can pick them out of a crowd because, like Owly, they usually have a few marks on them and they limp.

March 15, 2012

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