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March 29, 2012 $3.50

SPEC FUNDS U.S. goes on offensive

THE MILKMAN John Miller takes on milk markets FAMILY CORP.

KEEP FARM & FAMILY TOGETHER

NothiNg hits harder. or lasts loNger.

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Your farm equipment. + Our technology solutions. + Your John Deere dealer. = John Deere FarmSight™

Justin Childears 21st Century Equipment Bridgeport, Neb.

It all adds up for John Deere dealers and their customers Any dealer can sell equipment, but for Justin Childears, being able to offer customers unique, packaged solutions with John Deere FarmSight has helped take his customers to a new level. “John Deere FarmSight bridges sales, service and support. Customers view us almost like one of their employees. That’s where we want to be. It truly is decision support,” Childears said. For instance, based on information and data layers that they have collected over time with their customer’s equipment, Childears can analyze trends and use this data to help customers optimize their equipment. Like 21st Century, your local John Deere dealer has specially trained personnel with the tools and training to help you add value to your business. Your dealer also has developed special value added services to help you get the most out of your investment. Stop by your John Deere dealership today. And start building a whole new business relationship. JohnDeere.com/FarmSight

MARCH 29, 2012 Superior

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John Miller’s grandfather was the first Canadian to bottle milk 116 years ago. Now Miller is set to start bottling again — with Ontario’s supply management board keeping a very close watch.

WEATHER MARKETS: MORE THAN A GAME OF ROULETTE Prime yourself for this year’s weather rallies with our Errol Anderson’s strategy.

HAVE A GAS 2012 will see truckers move to liquified natural gas in a big way. Should you too?

SO YOUR KIDS WANT THE FARM Are you really so sure you’ve got what it takes to hand over control?

FARMING 2.0 Idaho’s Robert Blair shares how he is using drone technology to manage his crops.

NEWFARMINC.

Precision agriculture may mean you will need to expand faster than ever, just to keep up.

CREDITOR-PROOF YOUR FARM

ETHNIC CROPS GET THE BUSINESS

LOCAL QUANDARY Local food growers see huge growth. Sceptics see dangers. Maybe both are right.

SPECULATING ON GRAIN PRICES With the U.S. poised to handcuff speculators, grain markets may suffer.

MASTERING FOREIGN MARKETS There may be farm lessons in how machinery markets tackle exports.

MARCH 29, 2012

GUIDE LIFE — THE BOYS NEED YOUR HELP Ours schools are failing our boys. Here’s how to help your sons on the farm.

EVERY ISSUE 5

MACHINERY GUIDE Our Philip Shaw returns with his picks from the St. Louis Farm Show.

HANSON ACRES Even when you’re a close family, farm succession raises the tension level.

GUIDE HEALTH Maybe you should blame snow mould for early hay fever.

Are high grain prices taking the oomph out of Canada’s ethnic markets?

GUIDE HR — MANAGING INCOMPETENCE The Peter principle can apply to farmers too, and maybe even to you.

Make sure you won’t get wiped out even if the worst should happen.

IN WITH PRECISION SMART FARMING Machinery makers are set to introduce precison equipment you’ve never even dreamed of.

These 10 incorporation strategies can help give the next generation a better start.

TIME TO GROW

CONTENTS

FEATURES

PETUNIA VALLEY If farmers were in charge of food safety, Dan wouldn’t be hanging from the eavestrough.

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

One farmer’s story “I’m a 38-year-old farmer farming 3,500 acres with my parents and my young family,” said the email from a Saskatchewan farmer. “Although it’s had ups and downs, since I finished university in 1996, farming has been absolutely successful both financially and as a lifestyle. But I am becoming more and more depressed about the direction it is headed in.” He talked about a Guide article he’d read years ago about an older Albertan couple who had the philosophy that if you can’t pay cash for something, then you don’t need it. “My wife and I worked full time off farm after university as well as bought a halfsection farm. “Every dollar was invested into the farm. We started with Crop Insurance, loans and a line of credit. Stress with trying to meet commitments from all sides just about killed me. I couldn’t stand the thought of spending all that money on premiums and interest that would never go towards our equity and thus our financial freedom. I decided (like my parents and some relatives had) to selfinsure and self-finance. There would never be a better time, with no kids yet and not much equity to lose anyways. “This business perspective is much more than merely freeing ourselves of the bank. To attain this goal requires we reduce risk in every area. We need to absolutely and completely understand our farm’s finances, be excellent agronomists, mechanics, plumbers, etc. “Within nine years we had built the farm up, mostly by very slow but steady cash 4 country-guide.ca

growth, to where we could farm full time without off-farm work. “Don’t misunderstand our operation — we are not backwards hippies — we use almost all the latest technology and our yard is full of bins, wind turbines and equipment. But everything we do is for the long term, for the next generation. “I do not tell this to brag but to illustrate that this business model is perfectly viable, and probably much more so than most, since it inherently instills knowledge and risk management. I am becoming very depressed that academics, and many young farmers now, believe that the only way to be a successful operation requires rapid growth.” He and I briefly kicked some ideas around, and ended up agreeing we see eye to eye on a lot, but not everything. In my books, there may never have been a time when there are more business models in farming, and so many successful stories in each of them. There isn’t only one way to farm. One day a farmer will call to challenege us, saying we seem to support highinput agriculture. The next day another will call, saying the future is to invest in science. Some say that crop insurance is essential. As you can see above, some say no way. The thing everyone does agree on is that farming takes passion, and as we approach another spring, we can all just wish that the rest of Canada could sense the passion in the people who look to the land. Let us know if we’re getting it right. I’m at 519-674-1449, or email me 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). Subscription rate outside Canada and U.S. — $50 per year. Single copies: $3.50. Publications Mail Agreement Number 40069240. We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage.

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

Call toll-free 1-800-665-1362 or email: subscription@fbcpublishing.com U.S. subscribers call 1-204-944-5766 Country Guide is printed with linseed oil-based inks PRINTED IN CANADA Vol. 131 No. 6 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 29, 2012

Machinery

By Philip Shaw

The National Farm Machinery Show in Louisville, Kentucky is an education. It’s an eight-hour drive from the closest Canadian farm, but if you want to find out what’s capturing the attention of U.S. farmers, it’s worth the trip. With over 850 displays and over 1.2 million square feet of exhibit space, it’s the Super Bowl of American agriculture, and it’s no surprise that when I went this year, I found a few things I’m itching to try at home.

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HESSTON BY MASSEY FERGUSON WR SERIES SELFPROPELLED WINDROWERS  Hesston by Massey Ferguson introduced five new self-propelled models of windrowers last summer and had one of them at the Louisville show. The WR series is available in five models from 100 hp up to 220 hp with each model specific to operations. For instance the WR9770 features a disc header and with 220 horsepower has the muscle to operate in heavy crop conditions like winter forage, wet silage hay and hilly or rough terrain. The new WR Series features the Field Max Monitor, which is the controller for the electronically controlled hydraulics, operated by a virtual computer terminal. In fact these are the first windrowers in the industry to operate all hydraulic, engines and drive functions by means of an on board computer terminal system. The WR series features a unique cooling system called V-Cool.The radiator, all cooling units of the air conditioner, hydraulic systems and air to air intercooler are positioned in a V shape below a hydraulically driven, variable speed fan. The V-Cool system contains a self-cleaning “purge” cycle that reverses the fan, providing a blast of air to clear the air intake of chaff and debris every 15 minutes. www.masseyferguson.com

DEWEZE 600/700 BALE BEDS  Louisville is always full of surprises. Although there is a heavy emphasis on crop farming, there is something for livestock farmers too. The DewEze 600/700 series Bale Beds give livestock producers a convenient and efficient way to loading and unload bales off their trucks. DewEze Bale Beds are the first to offer remote control, which can be used to lower the arms and then squeeze the bale. After securing the bale, use the load function to bring the bale on top of the bale bed. Simply use the release function and the bale is secure. Reversing the process unloads the bales. DewEze Bale Bed sizes can be fit to any single or dual pickup truck from seven feet to 11.5 feet long. The Bale Beds come with solid dummy arms to further secure the bales. LED lights are standard on all 600/700 series models. www.deweze.com MARCH 29, 2012

country-guide.ca 5

kinze large-capacity grain carts  Louisville is American, so of course there is large equipment everywhere. Combines might be the biggest, but grain carts come in a close second. Kinze had just introduced their large capacity grain

These Kinze carts have a pivoting vertical auger, which allows the operator to control adjustment (over two feet of height and nearly two feet of reach). There is also a hydraulically adjustable spout, which pivots to make it easier to load trucks evenly. The Kinze carts have new larger-diameter augers, which boost

carts before the show, with 900-, 1,100-, 1,300- and 1,500-bushel

unloading capacity up to 750 bushels per minute. Tracks are

capacities. Kinze describes these carts as the industry’s first dual-

available on the 1100, 1300 and 1500 models. Patented unequal-

auger, low-profile grain carts with an external corner auger. Kinze touts an unmatched line-of-sight with these carts offering the operator great visibiliy, reducing fatigue with less neck strain.

length parallel link axles with dual 520/85 R42 165 tires are also available on the 1100 and 1300 models. www.kinze.com

yetter 5000 stalk devastator

john deere 2623vt vertical tillage  Vertical tillage is a relatively new concept in the tillage business. On display in Louisville was the 2623VT vertical tillage implement. Deere says the 2623VT offers the latest in technology and toughness with its unique angled gang and blade configuration. The front gang has 22-inch shallow-concavity spherical blades on 7.25 spacings and is angled 21 degrees to provide maximum residue chopping. The rear gangs have 22-inch shallow-concavity wavy blades on a 19-degree angle that help anchor residue and aerate the soil. The goal is a more uniform, smooth seedbed. Deere maintains the 2623VT front spherical blades chop thick crop residues to the right size, manage weeds and root balls, and even remove field ruts. www.deere.com 6 country-guide.ca

Here’s one for corn farmers and for the increasing number of other farmers driving through fields with tough, sharp residues. Equipment to reduce tire wear from crop stubble is getting a lot more attention. Tires are an expensive investment and the move toward more residues in modern cropping has created a need for equipment to preserve tire life. The Yetter 5000 Stalk Devastator crushes stalks, allowing tires or tracks to roll easily without the damage. Yetter maintains the rollers on the 5000 Stalk Devastator reduce stubble damage to the tires, wires, and hydraulic hoses on combines, trucks, tractors and seeding and tillage equipment. The 5000 Stalk Devastator knocks over stubble while leaving the stalk attached with roots partially broken. This means the stubble won’t be blown away, so erosion is kept in check and more moisture conserving residue is left on the soil surface. Meanwhile, crushed stalks are pushed into contact with the soil, facilitating quicker plant tissue breakdown. www.yetterco.com March 29, 2012

TOOLMAN

Weather markets: More than a game of roulette By Errol Anderson

eather markets offer excellent opportunities to price well above the market average and to lock in a profit months in advance of harvest. There is a caveat, however. To get those benefits, you must be clear on your objective, which is to take advantage of a quick rise in prices without getting burned should prices suddenly drop back down. Lack of a farm market plan and plain old greed can land any market player in jail in this game. Typical weather markets are neither long nor lasting. Prices go up quickly. Then they come down even faster, which means that without a pricing plan, golden opportunities may be missed. Even worse, some growers get caught up in speculative furor, adding even more risk by buying futures while leaving grain unpriced. This market gamble is fondly known as a “Texas hedge” and it is a strategy with high risk of disaster. With this in mind, let’s take a look at the beast itself. Remember, sharply rising prices are not sustainable and rarely hold for the long haul. In a weather market, prices scramble higher, peak, then ultimately collapse. There is no way of picking the top of this heated market. Weather concerns create fast price gains that are not easy to duplicate, and they don’t warn you of an impeding collapse. For instance, canola growers may want to keep an eye on new-crop futures. Should new-crop futures soar, fall cash bids will flare at the same time. By shorting or selling the futures (hedging) or purchasing put options, growers can start guarding above-average returns. Remember, speculators play the market. Farm business managers manage price risk. These are two entirely different approaches to futures trading. Here are two possible situations you may be faced with in a weather market. In the first, your crop is in great shape and weather problems are someone else’s hardship. In this case, you can be more aggressive using forward cash contracts. March 29, 2012

In the second scenario, let’s say it is your production that is affected by weather. Yields slip. In this situation, be less aggressive with cash contracts. Be more aggressive scaling in put options. Temper your delivery obligations, but try to guard profits while the price iron is hot. The worst decision is to do nothing. Never assume hot grain prices will hold. They won’t. And remember, bear markets always have a much longer life span than that of the bull. Let’s take a look at the typical phases of a weather market. Phase 1. The market heats and climbs in steps. In other words, prices move up, then rest, then move up again. This is sometimes called a resting bull market and it signals the start of a healthy price rise ahead. A bull market snorts, then rests, then snorts again… Phase 2. Futures prices spike, sometimes for several trading sessions. Those caught on the wrong side of the market are in a financial squeeze. They panic, buying their way out of the inferno and driving what is called a short-covering rally. Yet at the same time, open interest rises. A fresh flood of speculative buy orders forces the market into a buying vacuum, where everyone is a buyer, and no one is selling. The weather market roars to a final blow-off top. Phase 3. Finally, the market peaks and begins its dive. The rush of buy orders vanishes. The number of open contracts or open interest suddenly declines, a precursor to a market drop. Speculators are now racing to liquidate their long (buy) positions. The sell-off begins, and the market plummets virtually in freefall. Phase 4. The market drops so quickly that it actually gets oversold. Margin calls that force buyers to exit the market are starting to ease up. What was once market panic turns into calm. As selling pressure eases, the market finally rebounds toward its true value. Weather markets can be a wild price ride, to say the least. For farmers, they can be either highly stressful or extremely profitable depending on how they are

handled. Basically, it boils down to market planning. You may start by scaling in cash grain contracts. The key advantage of a cash grain-company contract is that it lets you reserve fall delivery space while not adding exposure to margin calls. But remember, you are obligated to follow-through with delivery. Failure to live up to your part of the bargain can create contract payout penalties. Don’t contract beyond your comfort level. That may be 20 to 50 per cent of your expected fall production. So let’s suppose you are already contracted to this level, and the market still flares higher. This is the time to purchase or scale in put options in a rising market. Put options are price-insurance policies for a falling market. You pay a premium for this protection, but there are no delivery obligations or market-call risks. Another pricing alternative is to sell futures outright as a short hedge. The danger is that weather markets increase the likelihood of margin calls, and financial pressures may distort even the best intended market plans. If you have a short (sell) futures position with a commodity broker, you may want to eventually convert it to a deferred delivery contract with a grain company once your production is better known. In other words, buy back your futures once you find an attractive fall cash contract. This strategy reduces your margin call risk, but it does commit physical delivery of the grain. Weather markets don’t need to be just a game of price roulette. These fasinating market events offer opportunities for profits to excel. Be ready to hook those attractive profits. Know your tools, develop a plan, and get ready for when the weather spurs the market bull to buck once again. CG Errol Anderson is author of ProMarket Wire a daily grain and livestock risk management report. He is also a commodity broker located in Calgary. He can be reached at 403-275-555 or email: prowire@shaw.ca. country-guide.ca 7

machinery

Have a gas

Will the farm be next? By this time next year, truckers in Canada and the U.S. will be converting from diesel to natural gas. It’s cheaper, cleaner and… ...did we mention cheaper? By Scott Garvey, CG Machinery Editor ike most people, you probably want what happens in Vegas to stay in Vegas — unless you’re the president of the United States. In January, Barack Obama chose to make an important policy speech in that city, which he hoped would be heard — and heeded — around the country. The topic was energy, and Obama started by comparing U.S. natural gas reserves to Middle East oil capacity. “It turns out we’re the Saudi Arabia of natural gas,” he is reported to have said. Independent sources confirm this is something of an exaggeration — the U.S. ranks sixth in natural gas reserves, not first. Still, Obama was right to the extent that the U.S. does have a lot of natural gas in the ground. And so does Canada. What was significant about the Vegas speech — stretchers aside — was that it may become the catalyst that sparks a profound and rapid change in the pattern of energy use in several major regions across all of North America. The U.S. president encouraged a wholesale switch from diesel to natural gas consumption, and by doing so, he gave the T. Boone Pickens Plan a giant shot in the arm. Pickens, a former oil baron, has for several years now been a strong advocate of burning natural gas instead of gasoline and diesel. His plan has several “pillars,” as his website describes them, but essentially it goes like this. Use as much wind and solar-generated elec8 country-guide.ca

tricity as possible and convert as many vehicles as possible to natural gas. The president’s speech in Las Vegas was made at a UPS warehouse, because that trucking company is one of a few that is starting to convert some of its diesel-powered fleet vehicles to LNG (liquified natural gas). That fits nicely with the Pickens plan. Not only would a large shift to natural gas reduce U.S. dependence on foreign oil, it would also greatly reduce greenhouse gas emissions. Natural gas engines are much cleaner burning than gasoline or diesel versions. Pickens says his plan will also create new jobs to help cure America’s economic ills. In his plan, LNG is seen as a “bridge fuel” buying time until other clean energy sources can be developed to completely eliminate the use of fossil fuels. Pickens labels U.S. dependence on foreign oil as a threat to national security, as have many other prominent Americans. At the Ag Connect Expo event in Atlanta last year, the Case IH booth hosted a discussion with retired U.S. general Wesley Clark who put forward that same thought, encouraging farmers to support ethanol initiatives for the same reason. “In the month of June we (the U.S.) sent $25 billion abroad to pay for imported oil,” Clark said. The concern is that much of economic transfer goes straight to oil-rich governments that are unfriendly to the U.S. Hanging the label of national defence on an issue south of the border seems

to give it a lot of velocity, making it hard for politicians to oppose it, and the Pickens Plan, along with other alternative energy programs including ethanol are riding that whirlwind. But LNG may go forward even if the politicians don’t. Even as Washington observers warn the president’s proposal to provide tax incentives for converting diesel engines to natural gas may not get Senate approval, industry is already moving ahead to create the ultimate incentive: a new opportunity to use LNG to reduce costs and increase corporate profits. With new natural gas engines starting to hit the market and a related program launched to increase the number of LNG refuelling stations, corporate executives are starting to see a clear cost advantage in following the Pickens doctrine, and this corporate change of heart may have more impact than any government incentive. In particular, the trucking industry is the primary target of current LNG marketing efforts, because some fleets could greatly reduce operating costs. The promise of relatively stable and low fuel prices holds an extra appeal now with renewed unrest in the Middle East. With the turmoil there, oil futures continue to move higher March 29, 2012

machinery

Several truck manufacturers are now offering models equipped with LNGpowered engines right from the factory. Navistar, builder of International-brand trucks, recently announced it will offer a wide range of models with that capability. “One of the major obstacles in customer transition to natural gas has been the lack of a gas-powered range of engines designed to meet the multiple requirements without compromise,” said Jim Hebe, Navistar’s senior vice-president, North America Sales Operations. “When the MaxxForce 13L is introduced in mid-2013, customers will have a capable range of natural (gas) engines and trucks, from 7.6-litre to 13-litre with horsepower ranging from 200 to 450.” Meanwhile, Vancouver-based Westport Innovations has already partnered with Cummins to produce 12- and 15-litre engines suitable for on-highway trucks that can burn both CNG (compressed natural gas) and LNG. If demand for these engines reaches 1,500 units per year, Cummins will incorporate them into its mainstream production and marketing program. But getting an LNG engine included in a new heavy truck comes with a hefty price tag, roughly US$50,000 more than diesel power. Navistar and Clean Energy Fuel Corp., though, have teamed up to offer March 29, 2012

buyers a way to eliminate that extra investment. Those who agree to purchase 1,000 equivalent diesel gallon units of LNG through CEFC’s new refuelling stations in the first year of use get to have the LNG premium of their new truck cut in half. CEFC plans to create “America’s Natural Gas Highway” through 33 states by building 150 new LNG refuelling stations, 70 of which are expected to be operational by the end of 2012. Canadian trucks regularly running north-south routes might also be able to capitalize on that offer. Operating LNG-powered trucks in Canada will also soon become more practical. We too will see our first fully served natural gas route established this year. Shell’s first major LNG project in North America is the “Canadian Green Corridor,” which will follow a route from Fort McMurray, Alta., to Vancouver. It’s designed to provide for the refuelling needs of heavy trucks hauling along that highway. But is all this bound to directly affect farm fleets? Will tractors and other farm machines soon be rolling off assembly lines with natural gas engines? “The application for farmers is more difficult,” says Mike Sulatisky, principal research engineer at the Saskatchewan Research Council, which has conducted natural gas vehicle research.

“Natural gas can reduce the price of driving pickup trucks by half,” Sulatisky says. “If you’re looking at cutting costs to farmers, pickup trucks are a good place to go. Doing farm tractors though, that’s a huge problem, because they have high loads and you need to get a lot of gas on (board). And you’d need fairly substantial fuelling stations on farms to fill them.” The inability to store enough LNG or CNG on a tractor or combine is a major disadvantage for farmers. It takes nearly two litres of LNG to do the work of one litre of diesel, and nearly three of CNG. So fuel tanks on heavy-fuel-use machines would need to be much bigger and heavier — a problem the trucking industry is also grappling with. LNG also needs to be stored at -260 F. As the fuel inside an LNG tank warms up, it begins to vent off pressure, so some is lost over time. That makes it even more impractical for use in vehicles like farm machines that sit for long periods. Given all these obstacles, will diesel remain the fuel of choice for farmers in the near term? “I think so,” Sulatisky says. But it’s clear the continental pattern of energy use is set to become the patchwork of different fuel types predicted by experts a few years ago. CG country-guide.ca 9

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insight

So your kids want the farm Len Davies asks, Do you have what it takes to transition the farm to them? By Madeleine Baerg ook yourself in the mirror. If you’re in your 50s or 60s, think back to what you looked like 30 or 40 years ago. Remember hotdogging around in your pickup? Remember the music and the parties, and remember how much fun school was, except the classes? Then ask yourself this question: Knowing what you know today, would you have given yourself the farm? Understandably, you probably worry about whether you should pass your farm on to the next generation. The job today is so different from the one you inherited, the numbers and the risks are so big, and the challenges are only going to get harder and more demanding. Do your children really have what it’s going to take for success? Or would you just be setting them up for failure? But don’t forget the other, equally important question. It’s the one that could spell the difference between transition success and failure. Do you have what it’s going to take to help your son or daughter be successful? “A lot of farmers are starting to realize that their son or daughter has to be better than them to be successful,” says Len Davies of Davies Legacy Planning Group in Muirkirk, Ont. But a good bit of that worry is misplaced, Davies says. Farmers fret about whether their sons or daughters will be successful, but they often don’t realize that it’s what they as parents do or don’t do that will have huge bearing on the outcome. Specializing in succession and financial planning, Davies helps farming families through the often emotional, usually complicated, always time-consuming process of transitioning a farm’s operations from one generation to the next. Luckily, he sees some concrete steps towards success. “First, I always stress the importance of getting the order of succession right,” says Davies. “When you transfer, you need to transfer in this order: management first, then growth, then ownership and control.” Start young, he advises. Help your kids grow into management. Communication is key. The family discussions around the dinner table with preteens and teenagers can provide the foundational knowledge that your kids will depend on when it comes time to start taking over management. 12 country-guide.ca

Len Davies Talk openly about your operational and financial decision-making, both in terms of the final decision and the steps that went into getting you there. Also allow them to participate in discussions about goals and plans. They need to know early on where you see the farm going, and you need to hear what they want too. Create an environment that nurtures your child’s decision-making ability. Allow your children to make small decisions early on. Then grow the size and importance of the decisions as they mature. Though this can be a stumbling block for many farmers who are used to being independent and in charge, remember that you can’t expect your children to have any idea of how to make big decisions if you haven’t allowed them to make small decisions first. When you can go away for two or three weeks and the farm operations stay strong, you’ll know that your kids can run the farm. But that’s just the operational side, points out Davies. “They need to understand not just the day-to-day management of the farm,” Davies says. “They also need to be looking out for the long-term goals and business direction.” March 29, 2012

INSIGHT

“I can’t stress enough how important it is that the younger generation learn to work on the business before they work in the business,” Davies adds. “Understanding how management decisions are made has to be a top priority. A lot of young guys want to drive that great big combine, but that’s not what running the farm is about.” Once the younger generation understands where the farm is going, work together on how you’re going to get there. “Business is changing so much that we have to keep learning. I always say, ‘If you don’t grow your mind, you won’t grow your business,’” says Davies. “Talk about where they are going to get the (necessary) skills, be it online, through courses, or elsewhere. Maybe we need to have this child work off the farm for a bit of time, so they can get an understanding that we’re working in a global economy.” Also make sure the younger generation has opportunities to learn every part of the business, not just what they’re good at. “The books are a good example. They need to know how they are done. It doesn’t mean that they actually have to do them, but they do have to know

how they are done,” says Davies. “If you have really good strengths, don’t neglect those strengths and work solely on your weaknesses. But any business is only as good as its weakest link. You can correct your weakness, or you can farm it out, and then you can keep growing on your strengths. Most importantly, get comfortable with your new role. Once you’ve handed the reins over to your son or daughter, you need to move from a management to a leadership role, says Davies. You will still play an incredibly important role, but it’s a less immediate and less hands-on role. Your new responsibilities are to help your son or daughter to think outside of the box, make wise financial decisions, and grow the business. “Your son or daughter should treat you like a banker. You’re involved, but a step back. You need to stay out of their face. Don’t dampen what your son or daughter wants to do. You might think you’d do something differently, but as long as it’s producing black ink, it’s OK.” Finally, remember Davies’ best advice: “Your son or daughter will make some mistakes — you did too in their position. And it’s OK. In fact, it’s necessary that they do.” CG

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MARCH 29, 2012

country-guide.ca 13

business

Farming 2.0 Drone technology is a game changer for Idaho’s Robert Blair By Gord Gilmour, CG Associate Editor

For Robert Blair, the future is to connect remote field and crop analysis to his management decisions, and to do it in real time.

hen Robert Blair took over operation of his family farm in western Idaho a decade ago, things were old school to say the least. In fact, most of the record-keeping was still done using the old-fashioned pen-andpaper system that Blair had inherited from his great grandfather, who founded the farm in 1903. It’s safe to say that great-grandpa wouldn’t recognize the place today. In fact, the 1,500-acre operation has become a Silicon Valley of sorts for precision agriculture in the U.S., and the 41-year-old Blair has the distinction of being one of the few farmers ever featured in the pages of the high-tech pop culture magazine Wired. Blair has even earned a Wikipedia entry of his own, and along the way he was also named the U.S.’s Precision Farmer of the Year in 2009. Taking the time to speak to Country Guide after returning from a whirlwind business trip to the eastern U.S. on behalf of the Idaho Farm Bureau, where he’s an executive member, the admittedly travel-lagged Blair was effusive about how he sees farms changing in coming years, mainly on a foundation of new hightech new tools that still seem ripped out of the pages of science fiction.

14 country-guide.ca

“We went from horses to tractors and now I have tractors that steer themselves, and an unmanned aerial vehicle on my farm,” Blair said. “That’s today. That’s existing technology. I can only imagine what we’re going to see in the next while.”

Oversold early It’s a bit surprising that Blair jumped onto the precision agriculture bandwagon with quite as much abandon as he did, since he concedes that his first experience with it back when his father was running the operation in the ’90s was a tad underwhelming. It’s a story that more than one farmer could tell, no doubt. A new combine arrived on the farm, complete with a shiny new toy called a yield monitor. From there it was just a tiny step to customized maps that charted the productivity of zones in the field, or so the salesman had said. “We tried them out, and found out they weren’t really the right thing for our farm,” says Blair. Sure, the yield monitors could tell you what parts of a field were more or less productive — but they couldn’t provide much insight beyond that. The end result was a map, but what to do with it? You might be able to correlate productivity and nutrient availability, for example, but then what? Back up in Canada, it’s a story that’s all too familiar to Curtis MacKinnon, a precision agriculture specialist and vice-president of the Farmers’ Edge organization, a firm that was founded just a few years ago to provide technical services to farmers who had adopted the new production system. By the time he came on the scene, variable-rate applications had already appeared, but they were still limited, he says. “A few years ago, the equipment was starting to appear, but the data just wasn’t there,” MacKinnon told Country Guide recently during a break from a precision agriculture show in Alberta. “Data is extremely important. The more and better data you have going in, the better results come out.” In fact, when MacKinnon is challenged to name the single most important recent development in precision farming, he says it would have to be the ready access to more and better field imagery. “Satellite imagery, in particular, has been very important,” MacKinnon says. “It’s become much more widely available and we’re able to use it as a data source to guide our decisions.” Back on Blair’s farm, he committed himself to technology, even though the yield monitor didn’t live up to its billing. This time Blair invested in an March 29, 2012

business auto-steer system for his tractor, and he’s convinced that purchase has played a major role in eliminating overlap and reducing input costs — vital in an era of higher input prices, he says. Likewise an investment in variable-rate technology also played a similar role. “The rest, as they say, is history,” Blair says. He had become a firm believer in precision agriculture and the high-tech tools the system requires.

Adoption advances McKinnon says when precision agriculture specialists and farmers who have been filling the vital innovator role in the adoption curve get together to talk about the progress that’s being made, the analogy that pops up is another major production change that Canadian agriculture has seen over the past couple of decades — the almost wholesale adoption of zero tillage. In that case there was a burst of interest in the ’70s, a lull in the ’80s and a major renaissance in the ’90s when the bugs had been worked out, he says. “That comparison has been drawn more than once,” McKinnon says. “It’s definitely the same sort of a major management change to adopt precision agriculture.” There’s also been, at least in the early days, the same sort of do-it-yourself spirit. Some of the first VRT systems, for example, were seen in the U.S. Midwest, where farmers were shoehorning the stateof-the-art (for the time) 286 computer boxes into tractor cabs back in the ’80s. From there a few companies sprang up, but their equipment wasn’t much more advanced, according to MacKinnon’s description of the original product offering of what’s now a major precision-agriculture manufacturer. “The original system was a big cathode ray tube monitor, and the computer itself was a big steelencased CPU on the floor of the cab,” he said. “That was the technology of the time.” Today those same companies are producing sleek interfaces based on space-saving technology like the latest tablet computers. “It’s all now much easier to use,” McKinnon says. “That’s definitely been one of the major developments of the past five years.” It’s also become more connected than was ever possible before, with the extension of 3G and 4G cellphone data networks well into the countryside, says MacKinnon. He says just four years ago, he did his first “telekinetic” data package, working in a field on his own farm and streaming data back to his office for interpretation and safekeeping. It was over a nowarchaic cell network, but it worked, and the technology has just gotten better and faster, allowing farmers and consultants like him far more leeway in their work. “I can log in now at the office and monitor what’s happening with an operation on a field that might be 1,000 miles away,” McKinnon says. “I can also log into a system if there’s a problem and fix it — no more talking on the phone to the farmer and asking ‘What screen are you on?’”

Blair’s home-built drone flies a programmed path, snapping pictures along the way

In the army Technology transfers from the military to the farm are driving tomorrow’s productivity Take the Green Revolution, for example. It only happened because chemical fertilizer became widely available and relatively affordable, and that only happened because the U.S. government built close to a dozen nitrogen plants during the Second World War. Once they’d flattened much of Germany using high explosives produced by these plants, governments needed to find a peacetime use for them and fertilizer production was a no-brainer. It was lucky timing for farmers too, because prior to the advent of these products fertilizer wasn’t the easiest thing to come by. If you doubt that, consider that a major source was something called guano — which you got it by scraping bird waste off some godforsaken rock in the middle of the ocean — and it was practically exhausted. A similar path can be traced for other major Green Revolution innovations like crop protection products. DDT, though now out of favour, made the Second World War the first war in human history where more soldiers died from battle injuries than disease. Following the war farms across the continent were eagerly anticipating using this new miracle product on their fields. Today’s farm information revolution has similar roots in the military. Auto-steer, for example, relies on a sophisticated system of geosynchronous satellites launched by the U.S. military. The Internet, and the associated cell networks that stream data from fields, also floats on a sea of Pentagon money. And of course the theory — and technology — behind the farm UAVs owes much to the deadly Predator drones that have become famous — and sometimes infamous — for their work in Afghanistan. If history is any guide, it’s entirely likely that this latest round of military R&D will produce results just as impressive as the Green Revolution — but like the early days of that major shift, it’s tough to tell just where everything will settle out in the end.

Continued on page 16 March 29, 2012

country-guide.ca 15

business Continued from page 15 The advances bring to mind another related revolution that we’ve seen working through our societies for the past 30 years or so — the computer age. There a clear model has emerged — technology seems to do nothing but get better and cheaper. In the computing world there’s even a name for it: Moore’s Law. Boiled down, it means computers stay at the same price and get twice as fast roughly every two years. Lately that progress has slowed, but another interesting development has occurred — prices started to drop. A laptop that might have been $3,000 in the 1990s is now about $300. Will the same thing happen in precision agriculture? Maybe, says MacKinnon. “We’re not seeing prices drop yet, but we’re definitely seeing the technology improve dramatically while staying at the same price,” MacKinnon says. “At some point you’d think the economies of scale would kick in, but there’s also the question — is agriculture a niche market? Either way, I think it’ll take some time to know the answer. In the meantime manufacturers are getting the message and building more powerful equipment. They’ve realized that people in the field are hungry for this and for data.”

Data hunt As newer and better technology has emerged — everything from one-inch accurate auto-steer to variable-rate technology — it’s all served to highlight one of the golden rules of precision agriculture. Data really is king, and currently the data set is both incomplete and occasionally out of date. In large part that’s because of the available data sources, says Robert Blair. Data maps tend to be based on sources that are by their nature slightly out of date. Satellite imagery, for example, can be weeks or months old, and yield monitors tell you what happened last year. Instead, Blair wanted to see something that would give him data whenever he needed it, so he turned to the world of the military to find a solution. What he found were unmanned aerial vehicles like the Predator drone airplane. Blair wanted to adopt the technology to his farm for crop scouting, but at the time nothing was commercially available, so he did what farmers have done for generations. He built his own, using largely off-theshelf equipment. What he has now is a small airplane that he launches into the air by throwing it like a javelin. It then flies a predetermined route over the farm, snapping pictures all the way. These field photos are then analyzed using a computer to find a value known as the “normalized differential vegetative index” that’s then run through a sophisticated computer algorithm to tease even more knowledge out of it. “It lets us find different things within the crop as it grows,” says Blair. “A stressed crop, for example, will look much different than a healthy crop.” This then sets the table for things like rescue applications of nutrients, spot weed and disease control, and the like. 16 country-guide.ca

Farmers’ Edge’s MacKinnon is familiar with both Blair and his UAVs, as well as other commercial offerings that have come on the market in recent years. He says they may turn into an interesting case study in the cross-applicability of precision ag technology to other areas of ag production. “The first time I saw one of these, I said to the company reps, ‘Have you ever talked to a cattle rancher about this?’” MacKinnon says. “To me, that’s a real no-brainer for something like this, especially say for a rancher that has valley land. You could fly it up that valley, then go back to the shop, have a coffee and count your cows and calves and know if you’ve got to go hunting.”

Crystal ball In a nutshell, that unexpected opportunity is what MacKinnon says he expects to see emerge in the coming years — ideas that might just be the faintest glimmers right now will emerge and provide the farmers of tomorrow with new and better ways of running their operations. When pressed a bit about where we’re at in the development of this field, he referenced the classic adoption-curve model, where the early pioneers are dubbed innovators, followed by early adopters, early majority, late majority and laggards. “We’re not even out of the innovators stage yet,” MacKinnon says. “The system and associated technology is going to get more efficient, it will do more, and farmers will get more out of it.” Right now, for example, the Holy Grail of agricultural engineering is autonomous operation of machinery, something he says all the major manufacturers are working on. In fact, he says it’s largely possible today, but there are liability issues that are holding manufacturers back, though some are beginning to find work-arounds already. “One of the technologies I’m most excited about is something I saw from Fendt at the Agritechnica show in Germany,” MacKinnon says. “It’s a system where there’s a lead tractor with an operator, and a following tractor that mirrors what the lead tractor does, and the operator of the first tractor controls the second.” That eliminates many of the liability issues because a human hand hovers over the kill switch and it definitely solves a problem for many farmers. “I think if you asked any farmer about it… they’d tell you one of their biggest problems is finding skilled labour,” he says. “With this system you take a skilled person and you basically double their productivity for field operations.” Both Blair and MacKinnon say they’re convinced that precision agriculture is going to be the next big thing in farming — but both also concede there’s no predicting exactly how it will all shake out in the end. “It’s impossible to say for sure,” MacKinnon says with a small chuckle. “Looking back is easy, looking forward is hard.” CG March 29, 2012

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2/1/12 9:17 AM

BUSINESS

NewFarmInc. Ten ways incorporation can help with succession By Maggie Van Camp, CG Associate Editor At the University of Saskatchewan, economist

A lot hinges on farm size. Of the nearly 6,000

Bill Brown is clear and concise. “The only tool that

Canadian farms with $1 million or more in gross

does not require the exiting generation to lower

farm receipts in 2006, about three-quarters were

their retirement income, or the incoming genera-

incorporated. The proportion of million-dollar farms

tion to have substantial off-farm income, is incor-

identified as family corporations had risen since

poration,” says Brown.

2001 while non-family corporations decreased.

Such black-and-white statements may be rare

As family farms increase in size, they’re incor-

from academics who are trained to pile qualifica-

porating for a multitude of reasons, but the key

tion on top of qualification, but Brown has inves-

driver is often the opportunity to access lower cor-

tigated a wide range of strategies for transferring

porate tax rates.

farm equity to the next generation, and incorporation often wins out.

However, incorporation can also be a tool for a smoother farm-succession plan.

Incorporation can divide ownership and man-

C O U N T RY G U I D E a s s e m b l e d a n i n f o r m a l

agement. That means the farm business can stay

panel of three succession experts to help us

intact and be managed by one beneficiary while

explore the issue, including Kevin Hegedus, a

still allowing a fair ownership split. As well, the

financial planner with DWM Securities Inc.

parents can retain an ownership stake while the

in Saskatoon, lawyer Barrie Broughton with North

next generation profits from the growth that they

& Company in Lethbridge, Alta., and accountant

are driving.

Mike Bossy, president of Bossy Nagy Geoffrey in

“Incorporation doesn't solve all the problems of farm business succession but it’s a tool that could be used more often,” says Brown. More Canadian farmers are incorporating, but they’re still a minority. According to the 2006 census, some 16 per cent of all farms in Canada were incorporated and

Tillsonburg, Ont. These three have helped countless farm families through succession using a corporate structure. They all agree that corporations can be structured in a variety of ways to minimize tax liabilities and to allow for effective transitions, although they emphasize each province has its own rules.

only 1.9 per cent were non-family corporations. A

The take-home is, if succession and growth are

March 2011 survey by the Agricultural Manage-

your farm’s goals, incorporation is not only a tax-

ment Institute in Ontario found that number had

deferral strategy, it may add flexibility and options

risen to 24 per cent.

for your family’s future.

18 country-guide.ca

MARCH 29, 2012

BUSINESS

1. STRUCTURE, STRUCTURE Corporations by their nature are more structured. The rules are etched in a shareholders agreement, which means it’s important that multiple generations discuss and plan for worst case situations first. If that sounds like a drawback, in practice it often turns into a bonus. “Creating a shareholders’ agreement (SHA) tends to force the family to charter their core beliefs,” says accountant Mike Bossy. That approach becomes part of family decision-making. Bossy has noticed that families with their farm in a corporation bring issues to the table and make key decisions in a more formal

business mode. Succession and business plans are more likely to be talked about and written down. “Business planning gets done,” says Bossy. Moving from a sole proprietorship to a corporation also forces farmers to adopt more structured accrual accounting. This stops the year-end scramble to minimize tax liability, often standard fare for farmers using cash accounting, and keeps the focus on long-term objectives. “This (incorporating and accrual accounting) stops the cycle and enables the right decisions to be made at the right times of the year,” says financial adviser Kevin Hegedus.

2. SHARE TRANSFERS Transfer of control and ownership of a corporation can be done by selling or gifting shares. Also, family members or even employees can be given a share in the growth and profits of the business without being given management rights. One of the greatest succession benefits of incorporation is that it allows some flexibility in how ownership transitions happen. Management is transferred to the next generation first, followed by the ownership, with incremental gifting of shares along the way. Additionally, shareholders can determine dividends according to their own personal income needs and to maximize personal tax credits. Parents can also give some of the value of the farm to their non-farming children by gifting them shares. Voting rights and control can be addressed with a shareholders’ agreement (SHA). Often it’s difficult with farm transfers in any structure to value the estate fairly, and to find optimum timing for transfers. With incorporation, one suggestion is to give each child one share per year and then to add an additional two shares for each year the child is

MARCH 29, 2012

farming. After 10 years, the farming child has 30 shares and the non-farming children have 10 shares. The SHA binds everyone to act in a certain way in regards to the business and the transfer. Changing it requires unanimous consent of all shareholders. “A corporation is actually a governance structure,” says lawyer Barrie Broughton. “The shareholders’ agreement is the wise owner’s manual.” If the goal is to keep the farm together, rules in the SHA can put a firewall around the operation. If land titles are broken up and given to individuals, they are often sold off piece by piece, no matter what the wishes of the founding family. Broughton has experienced many times where the farming heir died unexpectedly and the planning based on just one child being the successor instantly fell apart. Being incorporated with a good shareholder agreement is one way to give the family a chance to recover and amend the plan. “Successful farms today are sometimes too big to leave to one child,” says Broughton. “Farms have never been this affluent before.”

3. INSURE IT Typically, life insurance is purchased by the farm or by the successor on the retiring parents with the non-farming children as benefactors as a way to somewhat equalize estates. “The premiums paid generally are about 20 to 40 per cent of what the payout is,” says financial planner Kevin Hegedus. “It’s tax-free cash to pay off other siblings.” A corporation can also buy life insurance on its shareholders. This works well for multi-member farms with a joint policy and a buy-sell agreement. For example, if two siblings own and operate the farm and one dies, the other can use the life insurance payout to buy the shares from the deceased sibling’s spouse. “Within a corporation, life insurance can be viewed as an investment and insurance,” says Hegedus. However, you have to be careful that there are not a lot of passive assets in a corporation and keep the investment portion at less than 10 per cent of the total value of the farm to keep the farm status. Buying life insurance personally with after-tax dollars simply costs more than the corporation buying it with money taxed at a corporate rate. However, whether this is a good strategy all depends on the value of the assets and the estate wishes. Many of the farms lawyer Barrie Broughton deals with in southern Alberta are worth too much to use life insurance as an estate equalizer. “Some farms are worth $10 million or more. You can’t always feasibly insure that large a value.” One slick idea sometimes used by Hegedus and his co-workers at Prairie Wealth, C.A. Mike Tornopolski and CFP Keven Haakensen, is to buy critical illness insurance and then insure the premiums. It sounds complex, but it works. The corporation buys critical illness insurance (for nasty things like cancer, strokes, etc.) on behalf of the shareholder. The shareholder then buys insurance for the premiums paid for the critical illness policy. If after 15 years, no claim is made, the secondary insurance pays out for the full amount of premiums plugged into both policies. If the claims are made, the insurance payout was well worth the cost of both premiums. country-guide.ca 19

BUSINESS

4. SEPARATE LAND ASSETS A common strategy is to leave the land out of the corporation and simply form an operating company with the livestock, machinery and inventory. The corporation then either leases or joint-ventures the land from the farmer personally. Often the main reason for keeping the land separate from the corporation is to take advantage of the family farm rollover position for succession. The Income Tax Act allows for these asset rollovers to apply both to land held personally and to corporate shares. Still, if the corporation has more than 10 per cent of its assets as non-active farm assets at the time of death, the corporate shares will not qualify for the family farm rollover. Many advisers recommend keeping land out of the corporation since only individuals, not business structures like corporations, are eligible for the $750,000 capital gains exemption. As a result, land owned inside the corporation may pay more tax on future growth. Also, if the exemption increases again and all the farm property is already in the corporation, the shares will have to be sold to get the extra exemption. If the farm is financially successful and profits are taxed in the corporation, then the next piece of land is likely going to be purchased in the corporation anyway, says lawyer Barrie Broughton. “Accept

that growth will occur in the corporation,” he says. “Don’t hinge planning on having personal ownership of the land.” Broughton says much of the griping today around farm corporations comes from farms that incorporated and included land before the exemption was created. They failed to think through where the farm was going, he says, and forgot all the advantageous tax savings they’ve had over the years. Remember the long-term implications, and try to match the structure with your goals. “There is a cost of quitting,” he says. If you already have free and clear titles and don’t need the land for the future growth, it makes sense to keep land out of the corporation, says Broughton. However, if you plan to build the business and expand the land base, including land purchases in the corporation may be the better route. Bossy tries to keep the land out of the corporation but also weighs the debt levels and tax implications. There’s also some emotional capital to consider. For the parents land can mean financial security. Even though rent is a poor return on investment, it’s a hard asset that keeps growing in value, and cash rent doesn’t rely on others to manage it. “Mom and Dad have to be financially secure before they feel secure enough to pass on the control of the farm,” says Bossy.

5. THE FAMILY HOME When possible, accountant Mike Bossy suggests keeping the farmhouse out of the corporation. This is primarily to take advantage of the income tax rules around principle residences. The increase in value is not taxable on principle residences. Excluding the homes from the corporation avoids any benefit and emotional issues which may arise where personal use is made of corporate property.

If each family owns their own home, the family feels like they have more control and independence. Ownership can be a very emotional issue, particularly the attachment to the home you share with your spouse and where you raise your family. With multi-member family farms, it’s often advised that each partner in the business should attempt to own their own house or farm where they live for emotional reasons.

6. FREEZE IT An estate freeze lets the parents retain ownership in the corporation as preferred shareholders while also allowing the new generation to participate in growth. Basically the value of the parents’ shares in the corporation are set at a frozen or fixed amount at a predetermined moment. The common (i.e. growth) shares are re-issued and the children come in as new common shareholders, entitling them to any future increase in 20 country-guide.ca

the value of the corporation’s shares and assets. These “frozen” shares can still pay a dividend, yet the parents’ tax liability associated with the value they hold is set forever. If the parents wish, they can retain some degree of control of the corporation by having a class of shares with voting rights. If the parents want to move out of the decision-making responsibility, these shares can be sold or transferred. MARCH 29, 2012

BUSINESS

7. DEALING WITH DIVORCE A corporate structure can also be used to facilitate a share-transfer agreement that reduces the risk that divorce will deplete the future value of the farm. For example, the shareholders have to give one year’s notice and payment would be over 10 years with not interest. “If shareholder wants out, it’s got to be in a way not to cripple the farm,” says lawyer Barrie Broughton. Over the years, he has helped several farmers deal with divorce by having the departing spouse get or retain shares that will ultimately end up with the children of the marriage. The SHA ensures the control remains with the farming spouse. Besides, shareholders can only

vote for directors and dividends, and that requires a majority. “Divorce doesn’t necessarily have to financially burden the farm business, if the parents share the goal of preserving the asset for the children,” Broughton says. In his experience, spouses are oftencontent to remain shareholders and receive dividend income. The shares usually end up with the children anyway. “Why irritate the mother of your grandchildren with something like a marriage contract?” asks Broughton. “As long as control remains with the farm family, it may not matter if they own some shares.”

8. FUND EDUCATION With both a sole proprietorship and corporation, you can pay children for their work on the farm. Then you place a share of that money in a registered education savings plan which the government matches with about $500 for every $2,500 you put in. If the farm is incorporated, there’s another option. About $42,000 worth of special shares are transferred to the low-income student. Then the company redeems the shares and the student gets

a $42,000 dividend. Since students have little income, this dividend will not likely be taxed. If you have no other income in Ontario (it varies in each province), you can earn about $42,000 in a dividend and not pay tax, says Bossy. “But you have to look at it from the context of an overall remuneration plan. Tuition credits, other income and government education support programs all come in to play.”

9. BENEFITS According to the Canada Revenue Agency, a corporation can pay for group and health benefits for employees without the employees incurring tax for those benefits. For a young family or aging parents, benefits can be invaluable. A corporation can also deduct employee’s expenses related to the business, including business use of vehicles. For the new generation, who are likely taking minimum cash out of the farm in exchange for equity, having the company provide a decent vehicle can be also be godsend. However, creating a sense of fairness can at times be tricky. A corporation can also pay death benefits to its employees. Up to $10,000 tax MARCH 29, 2012

free can go to a beneficiary and it can be deducted as a direct expense to the corporation. So if one parent died, $10,000 could go to the other parent. You can set it up ahead but you don’t have to, says accountant Mike Bossy. Another small but good way to make new or retiring entrants or employees feel valued is to give gifts. A farm corporation can give two non-cash gifts (under $500) per year per employee for special occasions. Two non-cash rewards (up to $500 per year) per employee for recognition of special achievement not exceeding can also be given. These gifts are tax-free to the employee and a business expense to the farm corporation.

10. HOLDING COMPANIES Holding companies can be used to hold assets, income and shares. A really useful feature is that these assets can be moved between the farm operating company tax-free and a holding company without triggering taxes. Financial adviser Kevin Hegedus has helped new farmers set up an operating company for the farm and a holding company in which to store the extra farm income. The individual is working fulltime off-farm and doesn’t need the farm cash so it's stored in the holding company. By using an operating company the farm income is taxed at the lower corporate tax rate. The young farmer is able to accumulate capital faster, which eventually gives them more share purchasing power. Again, there are many ways to use holding companies, once you get your head around that it’s just a parking lot for money. For example, holding companies can also pay dividends to family trusts. Trusts are separate entities, sort of like big gift boxes that file their own tax return. The shares, or assets or cash dividends in a trust are not owned by the family personally so when the family or spouse take funds out, it’s considered a gift. In a few cases accountant Mike Bossy has set up a spousal trust that is fed by the corporation. It’s a way to distribute dividends to the spouse after the husband or wife has passed away and not add to their income. This means the spouse stays at his/her current income tax bracket and still get money from the trust. Lawyer Barrie Broughton has wound down several family trusts, dispersing shares to individuals, 20 years later. He warns that it can get messy. Before creating a family trust as a tax-planning tool, remember that the corporation's shareholders’ agreement has to be solid and contain an exit plan. CG

country-guide.ca 21

management

Creditor-proof your farm In the event of major farm crisis, here’s how to make sure you survive with some money in your pocket By Madeleine Baerg

armers pride themselves on being as shrewdly business minded as any other sector, but here’s something that those city businessmen know better than you. In the worst-case scenario, it’s something that could make all the difference to the viability of your farm, the comfort of your retirement, and the legacy you leave to your children. What we’re talking about is managing your risk if your luck goes bad, if your investments go south or if your whole world goes upside down. In other words, it’s what happens if you can’t pay your debts. Although the bank is always going to get its money first, preplanning for financial catastrophe can keep you ahead of other creditors. Three-quarters of non-ag businesses have the safeguards in place. But unless you’re among the maybe one per cent of farmers who have creditor-proofed their farms, you’ll miss out on this protection. Nor is it so very difficult to set up. Yes, it can be complicated, but if your eyes are already glazing over, don’t worry. Sometimes it’s not whether you know the right answers so much as whether you know the right questions.

“ With good advice, you can make this work for your farm.” — Merle Good “A lot of farm press has dumbed this kind of discussion down so badly that people don’t even know what questions to ask their advisers,” says Merle Good, a business specialist with Alberta Agriculture and Rural Development. “If you’re totally confused by this, good. Take it to your accountant and get the conversation started. “It’s definitely not an easy-to-understand concept,” Good adds. “It’s not going to be on the self-help shelf at Chapters anytime soon. But it’s important, and it’s worth talking about.” 22 country-guide.ca

Farmers structure their operations in different ways. Many opt for sole proprietorship, where taxes and finances are calculated and filed personally. But, it isn’t just taxes and dollars that are in the sole proprietor’s name, it’s debt too. When a farm business runs into financial hot water, a sole proprietor is personally responsible for every dollar, and creditors are within their rights to take almost every personal asset, from your bank account to your car to the shirt off your back. Farmers who run their business together with a friend or family member generally opt for a partnership. Rather than splitting the risk in half, though, a partnership can actually double your risk because you are considered jointly and severally (together and individually) responsible for any debts held by the partnership. That means that if your partner is unable to pay their half of any debt, you’re on the hook for all of it. By contrast, incorporation is the only farm business structure that offers personal protection to the business owner. If a lawsuit is brought against an incorporated farm business, only the assets of the corporation can be taken by creditors, while any personal assets are safe (with the exception of assets where a signed personal guarantee is in place, which can be seized by a bank holding the personal guarantee).

All sorts of liability When farmers think about financial liability, many start and stop with the obvious — bank debt and debt on purchases such as equipment and inputs. But farming is full of all kinds of other liability. If someone gets injured on your farm and sues you beyond your insurance coverage, your business will be liable. So too for a million and one other scenarios, from accidentally destroying a customer’s crop when you’re hired to custom spray, to selling pedigreed seed that doesn’t grow, to incorrectly guaranteeing the genetics of your livestock. While you can’t really shield your business and yourself from being responsible for bank debt, you can protect from secondary creditors, i.e. basically everyone other than the bank. Use the following structure. If you have excess equity over and above an Continued on page 24 March 29, 2012

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management

Continued from page 22 amount equal to your bank debt, consider separating it from the operations of your business. Say, for example, you have $500,000 in bank debt but $2 million in assets. You need to keep at least $500,000 (and possibly more) in assets in the business to satisfy the bank, but you can easily remove a large portion of the other $1.5 million to a separate company to protect those assets. Farmers are fairly familiar with shifting land into a separate company so that it can’t be seized by creditors. “It’s very common for farmers to keep farmland separate from the business,” agrees Dean Gallimore, a partner with KPMG in Lethbridge, Alta. “If there’s a debt in the company, creditors can’t look to that land to satisfy that debt.” That can include more than just the land surrounding your house that can be committed to an external business, says Gallimore. “Farmers can separate all of their land from their business and just rent it back to the company.”

The strategy Stay with us: here’s where it starts getting good. For even greater protection, farmers can shift debtfree assets of other kinds into a separate company, or create a debt structure whereby they owe themselves, which means they will get paid before creditors. “We arrange it so that the farming company that we had is now owned by a new and separate company, which we usually call a parent company. What we end up with is a company that may have no interest in the farming company, so the parent company is not liable for any debt held by the farming company,” says Gallimore. “We can move some assets to the parent company or, alternatively, create debt owing from the farming company to the parent company. Then, if something goes wrong, after the bank gets paid, the parent company gets paid before any other unsecured creditor. We’re not trying to get ahead of the bank, but we’re putting ourselves in second place. “It’s not a new idea,” says Gallimore. “It has been used in the non-farming business sector in a big way for a long time. But not a lot of farmers have gone in this direction. I think part of that is because they don’t realize they have as much exposure to liability as they do, and also because they don’t realize they have this option to protect themselves. Unless you’re remortgaged to the hilt and you don’t have any equity, it’s worthwhile.” One of the biggest challenges with succession planning and the transfer of a farm business between generations is the fear of debt. While Mom and Dad love and believe in the child(ren) who is taking over the farm, they are often afraid that the son or daughter could make a major mistake and run up debt. “No matter how good your kids are, you’re somewhat worried about them screwing up,” says Good. 24 country-guide.ca

“The younger generation is by definition, younger, so they have a higher risk profile. They tend to want to take on more. Whether it’s more equipment or more land that they want, they are adding more risk.”

Protect your retirement “Often when we want to involve children in a company, we put a value on the shares based on the current value of the company,” says Gallimore. “Mom and Dad give back their old shares and get freeze preferred shares, which means they are worth into the future what they are worth now. So 1,000 shares at $1,000 each is worth $1 million now and in the future. The children can buy common shares at a nominal amount because they’re not worth anything right now, but they get the growth.” The problem, though, is that preferred shares rank just above common shares when it comes to debt repayment, says Gallimore. If Mom and Dad hold their equity in preferred shares, a son or daughter’s mistakes could make Mom and Dad’s preferred shares worthless, thereby ruining their retirement. “In the event of financial liability, the bank gets paid first, unsecured creditors get paid next, preferred shares get paid second last, and common shares take last place,” says Gallimore. To move Mom and Dad’s position ahead of the unsecured creditors, move the preferred shares into a separate company. Rather than holding them as preferred shares, transfer them into debt owing from the farming company. “Once we create that debt, we can secure it,” explains Gallimore. “The bank gets paid first. Mom and Dad get paid second.” On a related note, another component of ensuring mom and dad’s peace of mind and financial security is to get their personal guarantee back from the bank. When Mom and Dad took on farm debt, likely years ago, the bank probably demanded a personal guarantee. Now, even if they transfer their equity to the parent company, their personal assets may still be taken by the bank if the farming company racks up any debt because their personal guarantee will still be attached to the farm. “If the bank has your personal guarantee, they don’t usually like giving them up. Whatever we have to do to make the banks happy, we should do to get that guarantee back,” says Good. “If you have a situation with the bank where you have adequate security, or even if you have to add another quarter in, get that personal guarantee back.” While all this planning is well and good, it’s only possible in advance. “You can’t do any of this after there is a problem,” says Gallimore. “If an employee got hurt or you had some other kind of major loss today, it’s too late.” And, it’s only possible with the benefit of good advice. “There are some complex tax rules that you don’t want to trip over,” says Good. “But with good advice, you can make this work for your farm.” CG March 29, 2012

business

Ethnic crops get the business Are high prices for mainstream grains taking the oomph out of niche ethnic crops? By Steven Biggs, CG Contributing Editor

ith a smirk, Ahmed Bilal turns his head from the projector screen to the audience and declares, “This picture is not from India!” Bilal is showing us a picture of bearded, turbaned men on their knees picking peppers, their lightly coloured clothes contrasting with the deep-green pepper plants and colourful turbans. Picture location: Copetown, Ont. Bilal’s presentation is part of a discussion panel in Toronto entitled, “New Crops and Marketing for a Multicultural City.” It’s actually geared towards an urban audience, but I figure it’s just as good a place as any to hear about different crops. Actually, it’s probably even a better place. Aside from the white moderator, none of the panel members has a North American accent. The crops sound interesting. Some I’ve heard of. Some I haven’t. Bilal has grown test plots of okra, yard-long bean, Asian eggplant, amaranth, fuzzy melon, round eggplant, maca, tomatillo, bottle gourd, daikon radish, and Indian red carrot. As a culinarily deprived Anglo, I’m not even sure I could figure out how to cook them, let alone grow them. If most Canadian farmers were raised with food traditions similar to mine, I wonder what sorts of farmers are growing these crops. Maybe, though, these crops are like pizza. Once upon a time, pizza was an ethnic food too, eaten by people who spoke English with an accent and had what was then called Mediterranean skin. Now, you can’t get any more mainstream than pizza. Are these new crops going to take that same ride?

Bilal is a research associate at the Vineland Research and Innovation Centre in Ontario, where his job is to identify and develop new horticultural crops. He rhymes off a few statistics that make the audience gasp. The one that strikes me is that $800 million per month is spent on imported vegetables in the greater Toronto area. Then, Bilal tells us about an Indian grocer in the Toronto area who sells twopound bags of local orange carrots for $1.99, while selling imported red carrots by the pound for $4.99 — 2-1/2 times the price. Continued on page 26 March 29, 2012

country-guide.ca 25

Photo credit: Deborah DEVILLE

Promising “new” crops

BUSINESS

A carrot isn’t just a carrot for grower Jason Verkaik. It’s a taste of high prices and risks

Continued from page 25 I instantly start wondering how well red carrots grow here. Bilal is quick to note that there are many world crops that grow perfectly well in Canada. It’s no surprise, really. Most of the countries that are sending large numbers of immigrants to Canada aren’t tropical. Instead, they’ve got climates remarkably similar to our own. Talking about Indian kaddu, a type of vegetable marrow, Bilal says, “I found that this crop performed better than back home in Pakistan.” Then he enthuses about Chinese red-hot peppers, saying, “This crop can be grown successfully and one can make a lot of money from it.” Pepper yields at his trials have been between 17,000 and 23,000 pounds per acre — and at current market prices, he says, growers can get from $0.99 to $1.50 per pound. I have just finished scrawling out, “hot peppers, $17,000 — $34,000 per acre” in my notebook when an audience member asks about distribution of such crops. Bilal pauses, says, “That’s a big challenge,” and then adds that some crops, including the peppers, are also very labour intensive, requiring multiple pickings. When I stop in at Vineland Research Centre to visit Bilal, we head to the field plot. He picks a green, striped eggplant 26 country-guide.ca

to show me. As we talk about eggplant, I ask Bilal about white eggplant, which I’ve heard is popular in the Middle East. He knows it well — and knows that it grows well here — but has a caution. While white eggplant is sought after for Middle Eastern cuisine, it’s not widely used by other cultures. That means the market potential is limited. Okra, on the other hand, is used by many cultures — and that’s why he has high hopes for it. Having a crop with a broad appeal, such as okra, is only part of the equation. It should have traits that resonate with shoppers, too. Bilal tells me about the okra variety AB Pari (a variety that he developed in Pakistan). In the Urdu language, pari means beautiful, and as okra goes, he says, this one is the belle of the ball. It’s slender and soft with a dark-green complexion, and it’s smooth, having no hairs on top. Having fuzz on a fuzzy melon, meanwhile, is exactly what shoppers for the vegetable popular in the Chinese community want. Bilal recounts the comments of a Chinese woman at a community association to which he donated fuzzy melon from his test plots. “That’s the first time in Canada that I saw fuzz on a fuzzy melon,” she delightedly exclaimed. Bilal explains that during long-haul shipping and storage, fuzzy melon loses its fuzz.

SMALL-SCALE GROWER DIVES IN Back at the Vineland meeting, Margaret Zondo takes the mike and tells the audience about her background as subsistence farmer in Zimbabwe. She now farms 2.5 acres in Brampton, just northwest of Toronto. It’s at an incubator farm, and what got Zondo thinking about growing in Canada, she says, was seeing Chinese merchants in Toronto’s Chinatown selling pumpkin leaves, a food from home that she greatly missed. “I really wanted to grow my own pumpkin leaves,” she says. Now she grows approximately 40 herbs and vegetables, which she sells directly to consumers. By early October last fall, she says, she was already sold out of okra, callaloo, and yard-long beans. Does Zondo see a future in these crops? “All those things are coming to be part of the Canadian diet,” she tells the audience.

LARGE-SCALE GROWER WADES IN As I head home from the discussion panel, I think of Bilal’s comment about an Indian grocer selling red carrots for $4.99 per pound. After a couple of phone calls, I have tracked down Jason Verkaik at Carron Farms, a mostly wholesale vegetable grower in the Holland Marsh, north of Toronto. Unlike Zondo, who MARCH 29, 2012

business ing, “People are going to eat what they’re used to — so if they can access this food locally, it’s a win-win.” He adds, “If you look at the cultural diversity we have in Toronto, we have to start looking at some other vegetables if we’re talking about (supplying) local food.”

Large-scale grower… holding back

has a small acreage, Verkaik is a largescale vegetable grower, farming about 250 acres, of which 100 are in carrots. His experiment with red carrots began about 10 years ago. “We have a lot of East Indian help,” he explains, adding, “One of the gentlemen said that in India, a lot of carrots are red.” Verkaik wondered if those red carrots might be a business opportunity, and began trialling them. Today two out of his 100 carrot acres are planted to red carrots; while about 15 acres are devoted to “heirloom” carrots, in colours such as purple, red, yellow, and white. The rest of the acres are in conventional orange carrots. I wonder why he has only two acres of Indian red carrots. Verkaik begins to explain, saying, “I thought I had a winner…” I suspect there is a “but” coming. He then talks about that winner, a red carrot variety that grows very well here, one that looks really nice too. He was happy to find the variety because some of the varieties from India aren’t suited to the growing conditions here. Getting to what he was leading up to, he says, “What I learned is that it’s not the same as their red carrot.” His advice for anyone considering growing ethnic crops? “You have to understand the market,” he says. He couldn’t sell those red carrots to the East Indian market in Toronto because they weren’t the same. March 29, 2012

“It has to be as close to identical as possible,” he continues, adding, “If it’s not, they’ll tell you and they won’t buy it — they’ll buy it from an importer.” When I ask Verkaik about market research, he talks about the fruit and vegetable food-box program from Carron Farms, which had about 300 subscribers in 2011. They work with other farmers in the area who grow vegetables and fruit they don’t. “It’s a great test market for introducing new ethnic products,” says Verkaik. It’s great for non-ethnic, specialty crops too. He’s excited about the garlic scapes they included this year. The scapes are often treated as a waste product — but they were very popular with subscribers. “The response we got from that was incredible,” he says. His most recent experiment with ethnic crops — one that has had a good response — is tomatillos, used in Mexican cuisine. In 2011 he trialled threequarters of an acre, and he thinks he’ll grow five acres in 2012. It started when a customer asked if he could grow some. I wonder how many acres of red carrots he’ll grow once he gets the right seed. He’s not sure, but says, “I don’t think it will ever be a stand-alone market.” While he figures red carrots will always be a niche market, he is bullish about ethnic crops as part of his business, say-

That picture of turbaned men working in a field in Copetown, Ont., from Bilal’s presentation led me to chat with Joan Beck of J. Collins and Sons, the farm where the picture was taken. Beck says they grow radish, parsley, cilantro, dill, and carrots — all for the wholesale market. So far, they aren’t commercially producing ethnic crops. “We were just trialling them,” says Beck. Although Beck says she will likely field test more ethnic crops next year, she’s cautious, not ready to raise them commercially… yet. “There’s still work to do in marketing,” she says, as she talks about packaging and promotion. She adds that she did initially try to sell some of the small okra harvest. “We did try selling some, but I knew I wasn’t doing very well with it.” She ended up giving it to her employees. Another cause for her caution is pests. While diseases and pests weren’t a problem on the test plot, Beck feels that could quickly change. “That will happen,” she says, talking about new insect pests. When that pest arrives, she explains, it will be a big problem for her because there are no sprays registered for such specialty crops. Harvesting, too, is different. “We go into a field and clean it out — but some of these crops you go in a number of times,” she explains. Does she think ethnic crops offer farmers a potential new market? Definitely. She knows by simply talking to her staff, all of whom are East Indian. “Our people here tell us how expensive the vegetables are, and that they’re imported and not always that fresh,” she says. For some growers, such as Zondo, ethnic crops can be the mainstay of the farming operation. For others, such as Verkaik, they may be part of a larger operation. At least, the basic question of whether the crops are adapted to Canada is getting settled, Beck says. “The okra grows quite well. Any of the peppers did very well here,” she says. “So did Asian eggplant, bitter melon, and Indian kaddu.” CG country-guide.ca 27

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business

Local quandary Across Canada, local-food farmers see huge growth ahead. Others forecast a day of reckoning. With so few statistics, is anyone right?

amie Reaume is between visits to farmers, driving down a back road near the Holland Marsh, around 80 kilometres north of Toronto, when he warns me over the staticky line that if his cellphone signal drops, he’ll call me right back. Reaume is the executive director of the Holland Marsh Growers’ Association, an organization that represents farmers in a particularly lush area of Ontario’s greenbelt. He speaks about the importance of eating seasonally, and about how the localfood movement’s sudden surge in popularity a few years ago affected the Marsh Growers’ success. “Whether that’s timing, whether that’s fate,

“People have their own mechanics and doctors,” says Jamie Reaume (above). “Now they want their own farmers.” 30 country-guide.ca

whether it’s good luck, who knows, but we caught the front end (of the local-food movement),” says Reaume. “And here we are in 2012, and the conversation is now about how to source more local food.” Given the pounding the Canadian economy took in 2008, it would be natural to think the local-food sector, with its price premiums, must have suffered. But it didn’t. The sector grew in the face of a recession, and still grows now despite rising food prices. By January 2012, food prices in Canada had risen 4.2 per cent on a year-over-year basis. Partly spurred by rising energy costs, prices had started to jump in early 2011. Mainstream media have covered the issue thoroughly — food-price-related stories published in The Globe and Mail last year included “The grocery gouge” and “Debt and food”— reminding already price-conscious consumers how much more they’d be paying for groceries. Yet while hard data on local food consumption is scant, anecdotal evidence suggests the local sector is still booming. March 29, 2012

Photo credit: Deborah DEVILLE

By Chelsea Murray

BUSINESS

Guelph University economist John Cranfield says local food in Canada is still a small and emerging niche market which — like a lot of niche markets — has a rapid growth rate. As local food becomes more ubiquitous, though, the market will plateau and premiums will drop. In fact, it’s possible the price gap is already narrowing because transportation costs, which represent the bulk of price increases for food, are so much less significant in local food. This is something Reaume believes: “When transportation costs go up, you will see the global food marketplace shrink,” he says. Population growth will change the picture too, he believes. “When they can’t grow their own food anymore, they’re not going to ship it to Canada just because we’re nice people.” Food and agriculture economists can’t say for sure how many Canadians are buying local food, or by how much the sector is growing. That’s because there’s still no real way of measuring it. “We can’t actually go out and measure demand for or the disappearance of local food,” says Cranfield. “We can measure demand for beef, but within beef it’s very difficult to measure what’s local and what’s not.” Instead, researchers are watching symptoms that seem to indicate the local food sector is growing. Among their findings is that the number of farmers’ markets across Canada jumped from 503 in 2009 to an estimated 600 in early 2012. A study conducted by Farmers’ Markets of Canada in conjunction with Agriculture and Agri-Food Canada estimates that farmers’ markets generate over $1 billion in annual sales and have a total economic impact of over $3 billion. Growers’ associations are also becoming more business savvy and they are marketing more strategically. “A lot is coming together for local food right now. It’s something that’s been in mainstream media. It was an election issue in last federal election,” says Anna Weier, co-ordinator of the Manitoba Alternative Food Research Alliance. “There are still barriers to providing local food on a large scale, but a lot of exciting things are happening.” Rony Erdmann, president of Alberta Farm Fresh, echoes Weier’s sentiment: MARCH 29, 2012

an agricultural-themed “soft ‘Dragon’s Den,’” where 12 farmers showed up to pitch their business plans to the board. In the end the board set a goal of selling 100,000 shares at $100 apiece by the beginning of March. They reached that number by the end of January. Some in the industry, like Reaume, credit the high quality of local food with the industry’s success, or the fact that local-food consumers who support the

“Local food has all of a sudden become important, more front and centre. It’s out there.” For an example, take FarmWorks Nova Scotia. A community-based investment fund, it was established in April 2011 with the help of Nova Scotia’s Community Economic Development Investment Fund program to support farmers and to inject capital into the province’s agriculture industry. Last October, during the Fall Food Fair in Wolfville, N.S., FarmWorks held

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business Continued from page 31

32 country-guide.ca

Photo credit: Anne De Haas

sector are staunch supporters of their local economies and small-scale farming. To them, price is an afterthought. “We’re in a society now where the majority of people have their own mechanics and doctors, and now they want their own farmer. They want that knowledge,” Reaume says. It also could be something simpler. Even with local food premiums, groceries are still relatively cheap, especially when compared with historical prices. Statistics Canada numbers show that in 1969, food made up 18.7 per cent of spending in the average household. By 2009, that number was 10.2 per cent. While the local-food sector struggles to find its own statistics, however, other long-standing questions are unanswered too. Writer Michael Pollan, author of The Omnivore’s Dilemma, says consumers have been more frugal in the past few years, and he believes it’s possible that people are rediscovering the kitchen and buying more unprocessed food. “It’s a mixed bag and there are some contradictory trends going on,” Pollan commented in The Globe and Mail in June 2009. “On the one hand, McDonald’s is doing very well — so certain people are trading down to cheaper restaurants. But then you’ve got a lot of people who are cooking who weren’t cooking before.” Nearly three years later, there still isn’t convincing proof, although many in the local-food movement think the hypothesis continues to describe the customers they’re serving. Either way, large food companies are responding to local food’s popularity. Last spring Loblaws launched a program to sell labelled Ontarioraised beef, and grocery chain Longos — which from its inception in 1956 has always purchased from local farmers first — has started working with its Ontario producers to grow a wider variety of produce, including Asian vegetables like bok choy, and varieties with longer growing seasons. Still on the crackling cellphone line, Reaume mentions another reason why local might be selling so well. It tastes better, fresher, crisper. And it feels, to some, more authentic, anchoring us to the seasons. “That’s the real selling point,” Reaume says. “Not just that it’s local, but that it tastes like real food.” CG March 29, 2012

BUSINESS

RETURN OF THE MILKMAN One hundred and sixteen years after his great-grandfather became the first Canadian to put milk in bottles, dairyman John Miller aims to repeat his success… with Ontario’s milk board watching closely

PHOTO CREDIT: BRAD QUARRINGTON

By Chelsea Murray

riving past the faded Jersey Canada sign that hangs at the end of John and Marie Miller’s laneway, you can barely see the name Jalon Farms, the lettering is so pale above the emblem of the brown cow. But that’s OK. If there is a stereotypical southern Ontario dairy farm, the sort of thing you would expect to find in a tourist brochure, this is it, with its old wooden barn and three silos nestled beside a quiet country road. For good measure, towering maple trees border the lane that then leads to the Victorian redbrick home and the farm that looks every inch as if it has been in John’s family for six generations, which it has. It’s, well, picture perfect. But there is one important exception — the half-finished building next to the dairy barn, house-wrap insulation still exposed on a snowy winter day. Continued on page 34

MARCH 29, 2012

country-guide.ca 33

BUSINESS

For the first time since Ontario introduced supply management in 1965, producers will be processing and selling their own fluid milk Continued from page 33 In another month, this construction site will become Jalon Farms’ own milkprocessing plant, called Miller’s Dairy, and one of the first on-farm fluid-milk processing facilities to open in Ontario, where Miller will process and bottle his own milk and ship it to local grocery stores. It’s a combination of tradition and entrepreneurship, and it’s what you get with John Miller. Wearing his vest unzipped with jeans and a black and red “Jalon Farms” hat, Miller explains his business plan: “I’ve heard people say that this is a bold step for us, and I guess they don’t say it’s foolish, they just think it’s bold. “We need people to take bold moves, to change things,” Miller says. “The time is right for us to do this.” Starting a dairy has long been a dream of Miller’s, especially given his family history. In 1896, his great-grandfather, 34 country-guide.ca

Graham Bissett, was credited with being the first person in Canada to put milk in a glass bottle. His company, Bissett Bros. only closed in the early 1970s. Miller feels the connection. “It’s fitting that his great-grandson is returning to put milk in a glass bottle in 2012.” Miller remembers Bissett Bros. fondly. He’s even hung an homage to the old dairy in his family’s living room. Old receipts, remnants of cartons and ice-cream bar wrappers are framed on the wall near the entryway. He used to visit his grandparents’ plant in Goderich, Ont., where they processed butter and ice cream, and can still describe the way the ice-cream bars tasted, pulled fresh out of their thin paper sleeves. Now Miller wants his own dairy to have a similarly home-spun feel, and a positive influence on the community. He believes that small, localized farms can change Canadian agriculture for the better, but Miller’s no crusader. He’s simply

drawn to the challenge and excited by change. And, he says, it makes economic sense for him. “How is (the agriculture industry) going to change? I don’t know. Are we going to change it? I don’t think so,” Miller says. “But we are going to create a new path into a niche market and create our own prosperity.” His wife Marie, who’s also a student taking Early Childhood Education at nearby Georgian College, was skeptical in the beginning. It took a five-day trip through New England in August 2010, visiting similar facilities, to convince her. In fact, the trip was so successful, the couple have stayed friends with two farmers they visited, Paul Kokoski and his wife Lianne, who operate Mapleline Farm, a Jersey farm in Massachusetts. The couple has become a sort-of mentor to them, offering advice whenever they need it. Continued on page 36 MARCH 29, 2012

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business

Continued from page 34 John and Marie’s scheme would have ended right there in New England, if Dairy Farmers of Ontario hadn’t been preparing to launch a joint pilot project, called Project Farmgate, through which the DFO is encouraging farmers to get into processing by providing market development support. The Ontario Ministry of Agriculture, Food and Rural Affairs has granted DFO, through the Rural Economic Development Fund, $906,053 to help fund five of the farm-based milk-processing plants, including three cheese processors, and, on the fluid side, Miller’s Dairy and Kathie and Francis Groenewegen’s Limestone Organic Creamery at Elginburg, Ont. The pilot project marks the first time since supply management was introduced in Ontario in 1965 that producers will be processing and selling their own fluid milk. (Up until this year, a few producers had been processing cheese, yogurt and ice cream in the province, but not milk.) In fact, since 1975, the number of processing plants in Canada has dropped by half, with a handful of large companies — Parmalat, Saputo and Agropur — now processing nearly 80 per cent of milk in the country. For Loretto, Ont.-based Sheldon Creek Dairy owners, Bonnie and John Den Haan, who are part of Project Farmgate opened up a door they’d been trying to figure out how to get through for about five years. They were handed an opportunity instead of, as Bonnie puts it, “having to battle” DFO regulations. The Den Haans will be processing about 6,000 of the 55,000 litres their 50 Holsteins produce each month, selling whole and chocolate milk direct to consumers at their farm gate market as well as through a few independent grocery stores. The Groenewegens, who milk 35 head in a mixed Holstein and Jersey herd, will be selling from their farm store direct to consumers and through home deliveries only. The Millers’ operation will be the largest. All of the farms in the pilot project will still operate within supply management. “The most important thing I could wish to see is that the integrity of our marketing system stays in place,” says Miller. “And it will.” 36 country-guide.ca

“ We need people to take bold moves, to change things. The time is right.” — John Miller The farms will sell their milk to DFO as a regular producer would, then buy it back. And the Millers, Den Haans and Groenewegens are all happy about that. “The unique thing that will happen, though, is that the milk will never leave our farm,” Miller explains. “It’s just a piece of paper that we’ll transfer between the DFO and ourselves.” Inside Miller’s half-finished processing building, John points to the ceiling, indicating where the walls will go up, and describes the purpose of each room. He’s excited to show off where they’ll pasteurize, where the bottles will be cleaned, where the delivery truck will back up to load. The $800,000 plant (partially funded by Project Origin) will be filled with equipment John and Marie bought from a now-closed dairy in South Carolina. And they’ll process pure Jersey skim, one per cent, two per cent, whole, chocolate milk and cream in one- and two-litre bottles, as well as smaller 250-ml or 320-ml jugs for kids. They were going to go with the 250ml bottles, but had friends with children tell them the size just isn’t big enough. The Millers will run the plant just twice a week because it’s easier and less costly to process larger volumes of milk fewer times than smaller volumes more days a week. Since DFO doesn’t allow farmers to hold milk in one tank for more than 72 hours, Miller will keep milk in the barn tank for 48 hours, then he’ll transfer it through underground pipes to another tank beneath the dairy. They can then refill the barn tank and have four days’ worth of milk. Once the bottles are filled, they’ll be delivered to independent stores around Simcoe County and sold for around $2 a litre. Local-food-crazed Toronto is just an hour’s drive south, but Miller says he isn’t thinking about going even that far down the road. His marketing strategy hinges on two things. First, that his milk is pure Jersey, with its high butterfat and creamy taste (“People are drinking sheep’s milk, goat’s milk, water buffalo milk, so why not give them Jersey milk?”). And two, that it’s ultra-local.

Because of the small area they’re supplying, Miller had set a goal of processing just 50 per cent of his milk by the end of the first year and 100 per cent by the end of the second year. Some 20 locations — including grocery stores, specialty stores, restaurants and bakeries — have committed to selling Miller’s Dairy products. So it turns out his original estimates may have been a bit low. “When I made those projections, I hadn’t been approached by such enthusiasm in the community,” says Miller. “So I think our goals are realistic.” If in a few years, his business has grown so much that there’s more demand for his milk than he can produce and he’ll source more from DFO. But the catch is that the outside milk will have to come from nearby, and it will have to be pure Jersey too. Nearly 200 people showed up to see the Millers break ground in August 2011, and the local Business Improvement Association wants to put on a milk festival and shut down the main street in town this summer to celebrate the dairy opening. Miller is looking forward too, and not just to the day he turns on the machines in his plant, or delivers his first truckful of milk, the glass bottles tinkling as they’re unloaded. In starting Miller’s Dairy, John and Marie wanted to carry on the Bissett Dairy legacy, but they also wanted to create a future for their son, and for others in the industry. “It’s the young people that need opportunity,” says Miller. “I see this as an opportunity for my stepson. He’s interested in agriculture, but this is a step in a different direction. It’s great when you’re 20 years old and something different comes along.” The dairy isn’t even up and running, but already Miller is talking about his next potential project, installing a methane digester and using the excess energy that doesn’t go into his farm, home, or the grid to pasteurize his milk. In his eyes, he’s just doing what makes sense to him. “We have to look after ourselves,” says Miller, “and this is why we’re doing this.” CG March 29, 2012

management

Speculating on grain prices When the U.S. slaps news limits on grain speculators as early as this spring, will it take all the energy out of Canadian crop prices? By Gerald Pilger re today’s grain prices real? Do they truly reflect supply and demand? When I raise such questions, most farmers respond with a resounding yes. It’s clear, they say, that we’re in a new global era with a demand-driven market that is going to have to pay farmers to produce. Maybe that’s true. Probably it isn’t. These farmers point to the growing world population and to the economic growth in Asia that they believe will enable Third World consumers to increase their spending on food, thus bidding up demand for meats and for feed grains. They also point to supply problems such as last summer’s drought in the southern U.S. and earlier droughts in Russia and Kazakhstan. They believe this year’s frigid winter weather in eastern Europe will continue to support prices, and that climate uncertainty overall means that weather-related shortages will continue to support prices. Then these farmers point to the cost of production and say that higher prices are needed to encourage farmers to plant more crops, because without those prices farmers won’t be able to pay the high costs of fertilizer, equipment, labour and land. However, global supply-and-demand figures don’t seem to support these arguments. Looking at the past decade our current production, carry-over, and March 29, 2012

demand more closely reflect the mid-2000 years when commodity prices were much lower than in 2007-08 when production shortfalls sent prices skyrocketing. If our current prices aren’t supported by supplyand-demand fundamentals, what else could be supporting them?

Speculation in commodities Many economists and politicians are pointing their fingers at speculators. In 2009, the U.S. Senate permanent subcommittee on investigations released a report entitled “Excessive Speculation in the Wheat Market” which found “commodity index traders, in the aggregate, have made such large purchases on the Chicago wheat futures market that they have pushed up futures prices, disrupted the normal relationship between futures prices and cash prices for wheat, and caused farmers, grain elevators, grain processors, consumers, and others to experience significant unwarranted costs and price risks.” The report concluded there was excessive speculation in wheat by index traders, and that this speculative activity increased futures prices relative to cash prices, led to artificial price changes, and caused an undue burden on commerce. There is plenty of data presented in the report to Continued on page 38 country-guide.ca 37

management

Continued from page 37 support these findings. Index traders have invested billions of dollars in the wheat futures market since 2000. In fact the number of wheat futures contracts held by index funds grew from 30,000 in 2004 to 220,000 outstanding contracts in the summer of 2008. Total investment in all commodity indexes rose from US$13 billion in 2003 to $317 billion in July 2008. Perhaps most tellingly, at the same time that speculator interest shot up, the price of all 25 futures commodities rose, and the average increase of all commodities was over 200 per cent. A major irregularity was also noted in the wheat futures. There was a dramatic widening in the daily basis levels, steadily climbing from an average 13 cents per bushel in 2005 to 34 cents in 2006, 60 cents in 2007 and $1.53 in 2008. In just four years the average basis had increased 10 times.

“ Traders are trying to infer demand from prices rather than setting prices based on supply and demand.” — Kenneth Singleton

the maximum extent practicable in its discretion in order to protect against excessive speculation and manipulation while ensuring that the markets retain sufficient liquidity for bona fide hedgers and price discovery functions are not disrupted.” There was wide public support for this call for limiting speculation of commodities. The Commodity Futures Trading Commission (CFTC) website states the commission received 15,116 comments on the proposed position limits with a large majority supportive of limits. Only about 55 respondents wanted this change altered or withdrawn. Position limits were supposed to be introduced within 270 days of the passage of the legislation. That was later extended to Oct. 2011. However, the CFTC, which is responsible for setting the position limits and regulating the traders to ensure those limits are adhered to is still debating what those limits will be and it is trying to come up with a definition of agricultural swaps and how limits will apply to them. David Gary, spokesperson for the CFTC says discussion is on schedule and he expects position limits to be introduced late this spring. However he says it is very possible these limits will be challenged in court by commodity traders and investment firms, so full implementation of position limits could be further delayed.

Implications for Canada The widening basis led to an even bigger problem. Futures prices and cash prices stopped converging at the expiration of the futures contract. Convergence of the futures and cash prices is essential if the futures market is to be used for price discovery. In a press release, Senator Carl Levin chairman of the Senate subcommittee complained “the bottom line is that excessive speculation in commodity indexes has created losers throughout the wheat industry, from wheat farmers to grain elevators, grain merchants, grain processors, and grain users like bakeries and cereal companies. Those groups can’t manage their price risks.” Not only that, said Levin, but the speculative freefor-all would drive up costs for consumers, and also burden the U.S. treasury with increased crop insurance liabilities, and increased costs of farm revenue support programs.

Limiting speculation The Senate report found solid support in the halls of government and the report’s recommendations for limiting speculation in commodities were included in the Dodd-Frank Bill passed by Congress July 10, 2010. Specifically, this legislation calls for the establishment of federal position limits on speculative investment in physical commodities and option contracts for all commodities for which there are futures markets. Section 4a of the legislation states: “the commission shall set position limits as appropriate and to 38 country-guide.ca

This legislation has implications for Canadian farmers, but what exactly those implications will be remains unclear. When asked what effect the position limits will have on farmers and farm gate prices, Gary declined to comment. Kenneth Singleton, distinguished professor of management at Stanford University presented a paper in March 2011 titled “Investor Flows and the 2008 Boom/Bust in Oil Prices” looking at the impact speculation has had on oil prices. When asked if speculation is also impacting agricultural commodity prices Singleton said: “I imagine the same speculative forces that affected oil prices also affect agricultural commodity pricing. There is the potential for similar effects on prices.” Singleton does not see position limits as a silver bullet that will stop market manipulation by speculators. Based on the most recent rumours of what the position limits will be, Singleton says such limits would have only stopped a very small number of traders who took on very large positions in the markets in the past few years. He expects even with the introduction of position limits, speculation will continue to cause extreme volatility in commodity prices and periods of boom-and-bust pricing. Singleton says overly optimistic predictions of commodity demand are leading factors in the flow of money into commodity markets. “There is expectation of major demand from Asia. This belief is March 29, 2012

MANAGEMENT

resulting in herding behaviour by traders as they rush into commodities. Traders are trying to infer demand based on prices rather than setting prices based on supply and demand.” According to Singleton, more disclosure and better market information is needed to break the boom/ bust cycle caused by speculators. “More and better information is needed on commodity production amounts, production costs, available supply, supply rules, and real numbers on growth rates and demand of the commodity to ensure fair prices are set by physical hedgers and based on actual supply and demand,” he says. On the other hand, Dwight Sanders, associate professor at Southern Illinois University has co-written two papers looking at the role of speculation in agricultural commodities and he believes supply-anddemand fundamentals rather than speculators are still determining the price 99.9 per cent of the time. However, Sanders is also leery of the impact that position limits will have. He says position limits could increase the cost of hedging and reduce the market liquidity that farmers need when using futures contracts to reduce price risk. In the worst case, Sanders feels such new rules could even push speculators to take physical delivery, which could then lead to hoarding and have a detrimental impact on both prices and the delivery system. Without question, attempts to manipulate prices of commodities have happened recently. In the spring and summer of 2010 the British hedge fund Armajaro tried to corner the cocoa market by buying up huge number of cocoa bean contracts as well as purchasing seven per cent of the global cocoa production and storing it in European warehouses. As a result of these actions, cocoa prices rose to a 33-year high even though supply and end-user demand did not change. Speculation in commodities has increased greatly over the last decade. There are now hundreds of billions of dollars of speculative money invested in long futures contracts, primarily because commodities are viewed as a safe haven in uncertain economic times and commodities are considered to have good potential for growth over the long term. Every producer needs to decide if they believe today’s commodity prices are a reflection of real supply and demand or are merely the result of speculative investment. It is more important than ever for producers to use tools which will lock in prices and minimize price risk due to increased market volatility. Second, all producers need to evaluate the pricing signals being sent out by the futures market when considering what crops to plant this spring. If the futures prices are not truly reflective of supply and demand but rather overoptimistic wishes on the part of speculators, the danger of dramatic price declines due to overproduction increases dramatically. MARCH 29, 2012

Third, decisions on capital purchases, land acquisitions, and even rental rates need to be based on realistic expectations of future prices. Can purchases be justified if current prices are not truly representative of long-term supply and demand? Farmers who are seriously interested in learning more about the role speculators are playing in agricultural commodity markets can also read the U.S. Senate subcommittee report: http://www.levin.senate. gov/imo/media/doc/supporting/2009/PSI.WheatSpeculation.062409.pdf. At 247 pages long, it is basically a book on speculation in the wheat markets. However it is written in understandable, everyday language. It presents both sides of the issue of speculation in the wheat market. It is also well documented with footnotes allowing a reader to find the original sources of the information presented. CG

Backgrounder on commodity futures markets The futures market was created in the late 1800s, growing out of a need by both producers and consumers of agricultural commodities for price discovery and for the transferring of price risk. Both producers and consumers benefited by being able to establish and lock in a fair price for a commodity. In the early 1900s financial speculators began to dominate commodity trading and as a result food prices became more volatile, rising and falling sharply. In the 1930s the Roosevelt government determined excessive speculation in commodities was a problem that contributed to the 1929 Wall Street crash, and his administration introduced legislation to limit speculation in commodity markets. Investigative journalist Matt Taibbi, in his book GRIFTOPIA, outlines the deregulation of the commodities markets beginning in 1991. According to Taibbi, in that year Goldman Sachs created commodity index funds which allowed pension funds and other large investment funds to invest in securities which mirrored the commodity futures markets. But to insure these investments, firms like Goldman Sachs needed to make offsetting investments in futures contracts, something which the 1930sera regulations prohibited. Intense lobbying by the investment banking community resulted in letters of exemption being granted to 16 investment banks; allowing them to trade without limits in the futures markets. These letters were legitimized by the Commodity Futures Modernization Act in 2000. This bill exempted commodity futures trading by investment banks from regulatory oversight. This act enabled banks and investment funds to park large sums of money in commodities without the hassles of production, delivery or storage that true hedgers must deal with. To those making these investments, the current futures prices do not matter. They are simply betting commodity prices will go up over time.

country-guide.ca 39

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Mastering foreign markets

Canadian farm machinery manufacturers export nearly half of their production, but doing business in other countries can be expensive and market access isn’t always assured By Scott Garvey, CG Machinery Editor few weeks ago, an article appeared in the business section of the Globe and Mail discussing the challenges that subsidiaries of U.S. companies face in matching the profit margins of their parent entities at home. Because the subsidiaries face higher costs of doing business away from the mother ship, they typically net lower profit margins. The same situation often applies to Canadian companies operating abroad, including those that manufacture farm machinery. So that raises the question: if it costs more to do business away from their home turf, is it worth moving into foreign markets where profit expectations are lower? “The majority of our members export an average 40 per cent of their production abroad,” says Jerry Engel, president of the Agricultural Manufacturers of Canada. Without tapping into sales in other countries, Canadian manufacturers would have to curtail production by roughly half, leaving them on a much less secure financial footing. Which means exports are essential. Besides, Engel notes most companies already have strategies to deal with the issue. For instance, most export their machinery through established distributors in other countries rather than create their own foreign subsidiaries. When Vaderstad, the company that markets Seed Hawk air drills in most overseas markets, reorganized its distribution and closed its Australian subsidiary, Seed Hawk, a Saskatchewan-based manufacturer, was left to take over its own marketing in that country. Management looked at a variety of options. “We considered a subsidiary,” says Pat Beaujot, president of Seed Hawk. “But there is a lot of expense there that is redundant. When you set up business in a different country, then you have legal and accounting expenses that are not productive, but you can’t avoid them. And they are kind of redundant because you already have an accounting and legal group here, but you need a new one. All of 42 country-guide.ca

a sudden you’re paying for two accountants and two lawyers to talk to one another.” In the end, the company opted to go the route travelled by most other Canadian firms. It sells to a foreign distributor, bypassing those additional expenses. Morris Industries is another Canadian implement manufacturer that chose to use distributors when marketing its products overseas. “We haven’t built any facilities outside of Canada,” says Don Henry, chief operating officer. The company has stayed with that strategy, Henry says, because it’s the lowest-cost alternative. But no matter how you do it, marketing machinery abroad still involves added costs. However, the scale of those extra expenses depends on a variety of factors, and their timing is variable too, with much of the burden coming early in the expansion phase. “If there’s a different language (used in the new country), then you have the whole aspect of operator’s manuals and consoles,” continues Beaujot. “Everything has to be in a different language and it has to be professional, so there is a fair bit of cost in translating.” And the old expression “divided by a common language” has some meaning for manufacturers. “Even if the language is the same, there are some differences in terminologies,” Beaujot notes. That means that hiring people who are native to foreign countries is important in getting those jobs done to a professional standard. “We have some really talented people in our office who help with interpreting,” agrees Henry. “It (language) adds a challenge to doing business, there’s no doubt about that. We can’t just pick up the phone and talk to Kazakhstan.” So the problem continues to add costs through the long haul. The need to be able to navigate through foreign languages and cultures also changes conditions at a home office. Recruiting and retaining some staff who understand the conditions in foreign markets and can communicate in other languages becomes March 29, 2012

business

Germany’s Agritechnica helps Canadian manufacturers build brand awareness. important. “That’s something Morris identified a few years ago,” says Henry. While access to foreign markets helps insulate implement manufacturers from localized demand swings caused by factors like weather — which can reduce farm incomes and therefore impact sales numbers regionally — getting established in other countries first requires a good cash flow at home. Before a manufacturer can consider exploiting sales opportunities elsewhere, it needs to be on a very solid financial footing in its home market. “I would agree with that,” says Henry. Even marketing through a regional distributor doesn’t eliminate the problem of added costs entirely. And initial sales numbers in new markets can be low. “You do start to incur some costs,” Henry says. “Once you establish a relationship (with foreign customers) and they want to purchase some product, you do have some revenue, but you have to have some followup as well. How are you going to provide service? How are you going to provide parts? Do you need to provide some agronomy training to those who are going to be operating the equipment?” Simply getting a company’s name out and creating brand awareness in an entirely new country will add expense. “Going into another country, you’re starting all over again — and you’re foreign,” notes Beaujot. “So I think you have to spend more time and money on it (marketing) than you would domestically.” Just being a foreign manufacturer can be a marketing disadvantage in some countries. Nowhere is that more true than in the U.S., where “Buy American” is something that is advocated from the White House down to the general population. “With the economy what it is right now, President Obama and everyone in the States is saying buy American,” says Engel. “It is happening and we have no control over it.” Overall, though, Canadian farm equipment companies are generally well regarded in other countries, especially in eastern Europe. “The Russian farmers March 29, 2012

would almost prefer to buy Canadian made than Russian made,” observes Beaujot. But trade barriers and a move by government there led to the recent establishment of import duties that have hurt sales of some imported equipment. Protectionism has been rising in eastern Europe, says Henry. “When the economy is challenged, people pull the reins in and start looking internally to generate economic activity rather than importing. I think that was the main driving force in eastern Europe.” According to DLG, the German Agricultural Society, imports of farm machinery into Russia grew by an astonishing 57 per cent in 2010 and the demand for farm equipment was forecast to grow by another 7.5 per cent in 2011. That prompted the country’s first vice-prime minister, Viktor Zubkov, to state publicly he was displeased with that level, because it slowed growth in the country’s own equipment industry. Engel believes that kind of protectionist attitude is likely to become increasingly common in a variety of countries in the future, noting some of the major global manufacturers are addressing it by setting up foreign production facilities. “The reason they’re doing that is to get around tariffs,” Engel says. “If Deere, for example, manufactures and assembles its products in Russia, the (Russian) farmer doesn’t have to pay those import taxes. I think you’re going to see that happening in a lot of countries overseas.” Having to duplicate production facilities like the major manufacturers have could make it necessary to create those foreign subsidiaries Canadian firms have so far avoided. But doing that might be too much for many smaller manufacturers, effectively shutting many out of some overseas markets. “Someday we may have to have a facility in a different country and provide some production there as well in order to minimize the impact of any potential tariff,” says Henry. “It’s something we have to be more conscious of.” CG country-guide.ca 43

management

Time to grow With precision agriculture finally ready to fulfil its promise, will you have to expand even faster to stay competitive? It turns out the answer depends more on time than money By Maggie Van Camp, CG Associate Editor he predictions came fast and furious when relatively accurate GPS units first made their debut outside the military a decade ago. In essentially the twinkling of an eye, we were told, precision agriculture would begin slashing our use of inputs and we would apply only what we needed where it was needed, with medical precision. Precision ag would improve our environmental stewardship too, and it would have even bigger implications in the farm office. Suddenly, large farms could have the same kinds of insight into their fields that until then only smaller farmers could have, and large farms would be able to match the kinds of painstaking management that until then had meant that smaller farmers routinely pulled off bigger yields of higher-quality crops. Data would outcompete Daddy, so to speak, and crop production would take a giant leap toward industrialization. The truth, however, is that it hasn’t quite turned out that way, at least not on all farms. Instead, precision agriculture has often stumbled along, unable to break out of its early stages. Adoption has lagged behind the predictions, and actual utilization has lagged even further behind with all sorts of yield maps sitting in computer files that never get opened. The technology simply hasn’t been as useful or predictable as previously envisioned. Nor is it a uniquely Canadian problem. Only half of the 2,500 commercial farmers in a 2007 Ohio State University survey owned even one piece of precision farming equipment. But that was then. Now, the tide may be turning. Statistically, larger farmers have scooped up the technology more quickly. Nearly 85 per cent of the largest farmers in the Ohio survey had adopted at least one of the precision agricultural component technologies. Marv Batte, the survey’s author, concludes that the rate of precision agriculture’s adoption was seven times faster for the largest farm class than for the smallest class of commercial farmers. This rings true with economic theory. After all, fixed costs do put a limit on which business sizes are likely to adopt any new technology. Plus, the more uncertain the technology, the more likely it is that it 44 country-guide.ca

will only be adopted by larger farmers who are able to spread out those fixed costs even further. As the price goes down, more people buy into new technology. “The rate of adoption — and which precision agriculture component is adopted — are dependent on a number of factors including farm size, annual sales and what kind of crops are being grown, like high-value fruits, vegetables, corn and soybeans, or low-value crops like hay or pasture,” Batte says. Even so, adoption rates vary a great deal, even between similar-size farms growing the same crops in the same regions. Obviously, the decision-making process on precision agriculture is more complicated than simply looking at return on investment. As it turns out, the process is surprisingly emotional as well. In particular, risk aversion is having a large negative impact on the adoption of information technologies. As well, younger farm managers who are familiar with personal computers are more likely to use precision agriculture equipment. Researchers have found that the type of farmer matters as well. As crop yields go up, the use of precision agriculture goes up too, as it does on farms with more no-till and on farms that rely more on agricultural income. Surprisingly — or at least it is becoming more apparent the further we go — uptake is also limited by human capital. The technology requires individuals to install and learn something new. It is technical and sometimes very complicated, and it therefore takes an investment of time and energy, two resources that are always in short supply on the farm. Recently, the USDA’s Agricultural Resource Management Survey (ARMS) looked at adoption in major field crops of yield monitors, variable-rate application technologies, guidance systems and GPS maps. Yield monitors were the most common technology, used on 40 to 45 per cent of U.S. corn and soybean acres in 2005-06. The likely reason is that yield monitors are available as standard equipment on some new farm machinery or can be installed with the fewest technical difficulties, especially with plug and play. For similar reasons, guidance systems such as march 29, 2012

management

auto-steer showed a strong upward trend, with 35 per cent of U.S. wheat producers using it by 2009. Conversely, the least-adopted precision agriculture equipment is variable-rate application of pesticides and micronutrients. The U.S. survey found GPS maps and variable-rate technologies were used on only 12 per cent of corn and eight per cent of American soy acres. That’s surprising considering the same survey found that adopters of GPS mapping and variablerate fertilizer equipment had higher yields for both corn and soybeans. Also, “adoption” statistics can be misleading. Owning the technology isn't the same as making management decisions based on it. Sometimes yield monitors are just bragging tools, or a GPS system is used simply to find fields. Every farmer is different, so the way the technology is applied varies, making it difficult to nail down payback. Brent VanKoughnet, farmer and owner of Agri Skills Inc. in Carman, Man., says it isn’t the cost that is holding farmers back. Nor is it the payback, or the capability of the technology. It isn’t even farm size, geography, or the type of crop on the farm that limits the usefulness of precision agriculture technology. Precision agriculture’s constraint, says VanKoughnet, is people power. “Management hunger is the limiting factor,” says VanKoughnet. “It’s best for those who believe in continual improvement, and it doesn’t matter what size the farm is.” “Some big farms bought the technology faster simply because they were flipping equipment faster,” says VanKoughnet. “But that doesn’t mean that they are using the tools better. The smaller farmer who went though the hassle of adding yield monitors really knows why he bought it and has a purpose for it.” Some farmers say there are just too many uncontrollable variables impacting yield to make the VRT tweaks pay in the long term, unless in extreme situations. As well, since multiple variables can affect production, it’s important to isolate key issues based on information, review information about them, and then maybe try different solutions. VanKoughnet says it just takes discipline to analyze and criticize what you’re currently doing and link it to research and real data. “Rather than just having visual observations, yield maps can tell exactly what worked and what didn’t,” says VanKoughnet. Although the variables can randomize the results, at least you have some knowledge to base your decisions on. With so many natural variations, it’s sometimes hard to tell what’s really because of the change or not, says Dick Shoney, agricultural economist from the University of Saskatchewan. Last spring, Shoney asked a small group of western Canadian farmers he describes as “leading march 29, 2012

edge” about the factors influencing the role of technologies. The participants said VRT was great if you knew the topography of the land and had good-quality software. “They said the problem with early adoption of variable-rate technology was quality of the software. It just wasn’t that accurate,” says Shoney. Also, adopting VRT requires extra commitment and knowledge. Taking the leap from auto-steer to creating and using GPS maps and VRT equipment demands an extra level of expertise, more data management and additional cost. Besides, with the speed, ease and effectiveness of glyphosate-tolerant crops, why bother with variable rate? One of the biggest values that VanKoughnet sees for precision agriculture technology for his clients is it allows for on-farm research on the fly without disrupting the commercial operation. “In my experience some larger farms have a champion who is the driving force within,” says VanKoughnet. “It’s remarkable how often those individuals lose the fight and are considered playing when they are trying to do on-farm research.” VanKoughnet says on-farm research is becoming more common and generally the results are not shared with neighbours. Instead he sees farmers giving their conclusions in confidence to crop buyers under an IP agreement. “Intelligence is becoming the limiting factor for farming,” VanKoughnet says. “Who you share that information with will depend on the strategic nature of the relationships.” CG

Is now the time to invest in precision ag technology? Or next year? Competitive pressures may help you decide.

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management

In with precision smart farming So you think you know what “precision” really means? By Scott Garvey, CG Machinery Editor

mere decade ago, to be on the cutting edge of precision farming meant using a GPS receiver equipped with a light bar guidance system to help you steer a straight line. That receiver relied on the standard WAAS signal with its one-metre accuracy, a technological breakthrough. Today, that equipment no longer fits into anyone’s definition of precision farming. In fact, many in the industry think it’s time for an entirely new term to explain the direction in which modern technology is pushing agriculture. Their term is “smart farming” and they use it to describe an overall strategy for intelligent, efficient and sustainable production. To get “smart,” farmers need to adopt a wide variety of the newest and best technologies and practices from industries everywhere. These are efficiencies that can be achieved, says Roland Hörner, head of technology at DLG, the German Agricultural Society that organizes Agritechnica, the world’s largest farm machinery show held in Hanover, Germany. “Precision agriculture is still riding the steering wave a bit,” says David Swain, AGCO’s manager of AFS marketing for North America. “The next wave is going to be telematics.” Already starting to make its way to the showroom, this new wave integrates multiple technologies and objectives, including the communication of CAN(BUS) information back to an office, sending a map from the office to the field and then confirming the completed job back for the office after the fact. It also includes, says Swain, “what you’re seeing now, which is some of the lead-follower technology and the ability for autonomous vehicles.” By integrating all those capabilities, telematics goes to the heart of what the term smart farming encompasses. “Put simply, smart farming allows the agricultural industry to bring management levels more typical of trial plots to field-scale crops,” says a recent DLG press release. 46 country-guide.ca

Even supporters of the name change however warn that the new terminology mustn’t obscure the fact that precision farming hasn’t achieved everything it said it would do. “What precision farming has not so far achieved is to make general data management on the farm compatible and simple,” says Hans Griepentrog, Max Eyth professor of instrumentation and test engineering at the University of Hohenheim in Germany. “It is precisely here that smart farming aims to tackle the problem and develop precision farming further.” While discussing smart farming strategies at Agritechnica, Griepentrog stressed he sees the need to blend data from a variety of sources in order to improve famers’ ability to make real-time field decisions. Griepentrog also thinks farmers must have the ability to use that data to achieve varied, even competing objectives if they choose. For example, a combine operator should have the option of choosing between managing his machine to minimize loss or to minimize time spent in the field so the machine can cover more acres in a day. “What are required here are strategies that support the operator and offer him genuine choices,” Griepentrog says. Some of the major manufacturers are already driving toward that capability with the telematics products they’ve introduced in the last 12 months. For example, John Deere’s JD Link allows farmers to evaluate the fuel efficiency of a particular field operation by recording how much of the tractor’s available horsepower was used during a specific task. A farm manager can look at the data and decide if a smaller tractor might be able to perform that operation more efficiently next time. “We’re going to have products come out of the woodwork that you wouldn’t even think of today, and they’ll be here in three to five years,” says Swain. “Agriculture will pull more non-agricultural technology into the industry.”

And you can’t talk about importing technologies from other sectors without discussing robotics, which are now widely used almost everywhere outside of agriculture. “Once people start seeing that it (autonomous equipment operation) is working and the risks are not as great as originally thought, it will come fast,” Swain predicts. AGCO used Agritechnica to unveil what may be agriculture’s first marketready autonomous technology, called Guide Connect. Introduced on the company’s 900 Series Fendt tractors, it allows one operator to control two machines working in the same field. Dubbed the “electronic draw bar,” Guide Connect doubles the productivity of one worker, putting two tractors under one individual’s control. That same two-tractors-one-driver idea was built into the Valtra ANTS concept tractor that AGCO unveiled about a year ago as part of a forward-looking design for the more distant future, which seems to confirm Swain’s belief new autonomous equipment options for farmers are about to start coming fast and furious. One of the more subtle advances that farmers will see in the nearer term in precision agriculture is the move away from dedicated in-cab monitors. Swain believes they’ll be replaced by docking stations for generic tablets. “I think we’ll see more use of tablet computers running apps rather than have a terminal that runs a system in a vehicle, ” he says. That too has already started. Bill Baker, president of Saskatoon-based Agtron, was at Agritechnica introducing his company’s seeding rate and blockage monitor system, which connects wirelessly to a standard smartphone using a dedicated app. “At this point we’re offering it for the Android phone,” Baker says. “Of course we’ll have it available (soon) for the iPhone as well.” The Agtron system is expected to hit the market by the summer of 2012. CG March 29, 2012

Managing incompetence (in yourself and others) By Pierrette Desrosiers, psychologist and coach

hen we ask for advice we assume that the person we are asking is knowledgeable because of the position they hold. This should be all the more true because the higher this person is in the hierarchy, the more competent they should be. After all, weren’t they promoted into this position? What, however, if sometimes we’re wrong about that assumption? The Peter Principle holds that employees tend to rise through the ranks until they reach their ultimate levels of incompetence, and that, over time, every position will be filled by someone who is incompetent to carry out those duties. But does this well-known management principle apply only to employees, or are entrepreneurs also victims? Statistics show that 70 per cent of family businesses do not survive into the second generation and 90 per cent do not make it into the third. This phenomenon could be partly explained by the Peter Principle. But how? Two important points show how those running a business may, theoretically, eventually reach their levels of incompetence. 1. T he Peter Principle as it applies to consultants: If we assume that certain “experts” have reached their level of incompetence and that these same experts have advised entrepreneurs on their development, it is easy to understand how they have contributed to entrepreneur incompetence and have led them to make poor business decisions. I have met entrepreneurs who have been told by “experts” what they should do, or what would be good for them. These experts, however, miss many pieces of the puzzle. For example, they could tell you that you should expand because you have

march 29, 2012

the equipment, the land, or because it is the future, without knowing anything about your tolerance to stress, your health, or the skills that you need in order to be successful with that new business model. Or they could be completely unaware that your partner suffers from bipolar disorder and how that affects every aspect of your life. Finally, many “experts” may have financial interests in your business development. 2. The Peter Principle as it applies to the entrepreneur: The director of a business will also tend to rise to his level of incompetence, because it is human nature. We humans suffer from an “egocentric bias,” a concept that makes us think we are better than we actually are. In order to feed and protect the ego, humans generally tend to overestimate their skills and, at the same time, underestimate their weaknesses. Anyone who starts a business is convinced that it will succeed, just like 100 per cent of the people who get married are also convinced of the success of their marriage. To succeed, some self-assurance is needed, but when it becomes unrealistic, it leads inevitably to a fall. A balanced assessment of strengths and weaknesses is indisputably the best measure of success. What is the secret to protecting yourself from the Peter Principle and controlling the damage it can cause? • Surround yourself with devil’s advocates, people who are able to confront you and challenge your ideas. • R egularly ask for feedback on your strengths and weaknesses. • Accept constructive criticism. • Limit the amount of risk in a project. • Have a plan B. • Ask others: How can I be a better manager, leader, boss or associate? • Accept that you cannot know every-

thing and that, from time to time, you need people who are more experienced and stronger than you in other areas. •W hen you are convinced of something, ask yourself what the consequences would be if you were wrong. Could you live with this consequence? Peter Principle protection for consultants includes: • Use advice from consultants in moderation. Take some and leave some. •W hen a decision is important, consult with more than one expert. • Keep an open mind but think critically. •A sk what the consequences would be if the other consultant was wrong. Could you live with this consequence? Remember: •W hat works for your neighbour may not work for you. •T here is often more than one solution, and none are perfect or miraculous. •W hen you meet experts who say they are the only ones with the truth, or that they know what is good for you, avoid them like the plague! •R elying solely on consultants or solely on yourself inevitably has risks. Once again, the key is avoiding extremes. If you doubt the Peter Principle, just look at the way our managers manage us, how our politicians make seemingly good decisions, and how highly placed bureaucrats operate. Then think about taking a peek at your neighbours. You will probably find several little “Peters.” Enjoy this food for thought! 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.

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By Leeann Minogue

The last piece of pie As the Hansons learn, even if you’re a close family, farm relationships will find a way to add extra tension ll four generations of the Hanson family were home for dinner on Easter Sunday. The smell of almost-cooked ham spread through the house while Dale and Donna, their daughter Trina, their son Jeff and his wife Elaine, and Dale’s father Ed relaxed with a pre-dinner cocktail. Jeff and Elaine’s toddler shrieked and ran through the house — thrilled to be getting some extra attention from his aunt Trina, who was home from university in Saskatoon. Jeff and Elaine were passing around a glossy brochure. “It’s going to be great,” Elaine said. “They say they can move it in as soon as spring road bans come off.” “I think they’re well built, too,” Jeff said. A few months earlier, Jeff and Elaine had made a trip to Steinbach, Man., to look at the ready-to-move houses. Their days of living in Jeff’s grandparent’s old house had come to an end soon after a racoon had made its way in through the crumbling chimney and tried to get between Elaine and the toddler. That would not be happening again. “It looks nice,” was all Trina said when the brochure got around to her. Then she excused herself and went upstairs, to her old bedroom. A few minutes later, when Trina hadn’t come down, Donna climbed the stairs to make sure every48 country-guide.ca

thing was alright with her daughter. She knocked before she went in to find Trina crying silently. “What’s the matter?” asked Donna. “Nothing,” said Trina. “Is everything OK at school?” Donna pried. “Yes,” Tina said. In one more month Tina would graduate with a degree in agriculture, and if final exams went as she expected, she would finish in the top 10 per cent of her class. She had a job lined up in Winnipeg, with the same chemical company she’d worked for the previous summer. She’d even lined up an apartment. “Still seeing Brian?” Donna asked. “Yes.” “It must be hard, with him in Winnipeg,” Donna pried some more. “It’s OK. We met up a few times this winter. And I’ll be living in Winnipeg in a month. Really, Mom, everything’s fine.” Then the oven timer dinged. “That must be the scalloped potatoes,” Donna said. “I’ll get them,” said Trina, and she wiped her eyes and went downstairs to the kitchen. Donna followed, puzzled. Elaine had made pumpkin pie for dessert. “She even grew the pumpkins herself,” Jeff said. “That’s the only way to make pie,” Grandpa Ed said. “Remember, Trina? Your grandmother taught MARCH 29, 2012

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you how to do that when you were barely big enough to reach the counter.” This time, Trina didn’t have time to hide upstairs before tears started rolling down her cheeks. Elaine spoke up first. “Trina,” she said, “I hope you don’t think I’m trying to take your place here.” “Of course you’re not,” Trina said. “It’s just like what they’re always talking about,” Ed said. “I even saw a video on the Internet, on that AgCanada.com website — ‘Please fix our daughter-in-law.’” Elaine frowned at her grandfather-in-law. “You were a lot more polite before I passed you a piece of that pie.” “What’s this about?” Dale asked. “It’s not Elaine’s fault,” Trina said. “But I know how you feel,” Elaine said. “It must seem like I’ve stepped into your place.” “It’s not really that,” Trina said. “It’s just that I’m not sure where my place is anymore, on the farm. If I even have a place here.” “Don’t be crazy,” Dale said. “You know how things are set up. You’re part owner.” When they’d incorporated Hanson Acres five years ago, Dale and Donna had taken all the advice. They’d talked to a consultant and a farm succession planner, looking for a fair way to provide for themselves, Dale’s father and both of their children. After much discussion with experts, and family, and with each other, they’d given Jeff and Trina each 10 per cent of the corporation. Ed had another 20 per cent, and Dale and Donna had the rest. With Jeff and Elaine moving home last year to live and work on the farm full time, they knew that, eventually, it would make sense to renegotiate this arrangement. But until Trina settled into a career, it didn’t make sense to reopen a semi-sealed can of worms. They still had room for flexibility. Each family member had been issued a different type of share. Hanson Acres could declare different amounts of dividends for different shareholders. Jeff and Elaine could be paid wages for their work on the farm, and also dividend payments to compensate them for all the time and effort they were putting in. For the past few years, Trina had been issued dividend payments to help pay for her education. “I know I’ve got a share in the corporation,” Trina said. “But I’m not really part of the farm. I barely even come out here anymore. I haven’t even seen the new tractor yet. Then when I see you two planning to bring in a new house… it just seems so final.” “But you don’t really want to live here,” Jeff said. “Do you?” “Well, no,” Trina said. “You have a job in Winnipeg. And a boyfriend,” Jeff said, not unkindly. “Last spring you told us you were working on a career,” her father said. “You took a city job instead of coming to work here for the summer.” “I know,” Trina said. “It was a great job.” “And isn’t Brian getting a PhD in soil science? I can’t imagine he wants to move to a farm.” “No. But that’s not the point. It’s just that… I don’t feel like I’m part of the Hanson farm anymore… And I love this place. Amber and I used to have so much fun. Snowmobiling out in the fields. Learning to drive in the summer.” MARCH 29, 2012

“Your friend Amber’s teaching in San Francisco,” Donna said. “Her mom says she loves it down there. Amber hasn’t been back since last summer.” “I know,” Trina said. “I know all of that. It’s just hard. To think of all of you out here, carrying on without me.” “Of course it’s hard,” said Grandpa Ed. “That’s why there’re so many people making money selling advice about farm succession. Heck, you can’t even open an ag magazine without reading something by that Elaine Froese.” “Trina, if you don’t spend some time off the farm you might always feel like you missed something,” Donna said. “Even Jeff spent a few years working in Regina before he moved out here.” “Well, I know that. Look, I’m sorry. I don’t want to upset everybody. And I don’t want to take anything away from Jeff. It’s just a change. I know you’re not trying to take my place, Elaine. Don’t worry — I’m not jealous of you. Having to live with my brother.” “Hey,” Jeff piped up, but not too loudly. Having Trina make some kind of a joke, even a lame one, meant they were making some progress. But this wasn’t something that could be solved in one Easter dinner. “If you people are just going to babble and blubber,” Ed said, “I might as well be useful and clean up that last piece of pumpkin pie.” CG

New programs for a new era The grain-marketing landscape is changing. But your farm business needs are the same. You want a good return, solid risk management and timely cash flow. Our team is ready to work for you. Whether you choose pooling options, futures-based contracts or cash prices, you can have confidence in the CWB. Our programs are built on 75 years of grain-marketing experience, backed by government guarantees and focused on farmers. Don’t miss out. Register now for program updates at www.cwb.ca/email .

Prairie strong, worldwide country-guide.ca 49

life

The boys need your help

A girl starting high school is 50 per cent more likely to qualify for university than a boy who starts the same day and goes to the same classes. What’s wrong? By Helen Lammers-Helps

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e’ve always known that young boys lag behind girls on standardized reading tests, but now that gap persists all through school, while girls have erased the gap that used to see them get outscored on math tests. The effects are far reaching. Today, there are 50 per cent fewer boys on university campuses than girls. Do our schools favour girls? Are they holding our boys back? Can we help our own sons reach their full potential? Michael Reist, a teacher with 30 years of experience, father of four children, and author of Raising Boys in a New Kind of World (Dundurn, 2011) says there are many factors that make it harder for boys to be successful. First of all, Reist agrees with what a lot of parents have been saying. Boys and girls learn differently, but the current school system favours the learning styles of girls. For example, boys learn best

when they’re moving, whether it’s squirming or rocking or doodling or playing with SillyPutty, says Reist. Not only are those behaviours not encouraged in most classrooms, they simply aren’t tolerated. “We must change our thinking about “boy energy” and see it as something positive to be harnessed and channelled rather than something innately disruptive,” says Reist. Another way in which boys differ from girls is their ability to process language. Boys would rather be doing than talking, says Reist, and since most teachers in the elementary schools are women there tends to be a lot more talking than boys would like. When there’s too much talking, boys turn off. Research has shown that there is an 18-month difference in maturity between girls and boys. “Girls are naturally ahead,” says Reist. Girls read earlier and their printing will be neater. The problem is that boys conclude that they are dumb and this pattern becomes set throughout March 29, 2012

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school. Impulse control also develops later in boys. “We need to be aware of the differences and stop comparing boys and girls,” he says. Deb DeJong, director of family and community solutions at KW Counselling Services in Kitchener, Ont., has also seen these differences between girls and boys. She says the recent focus on early literacy has put additional pressures on boys who usually start reading later than girls. Another major influence today is the amount of time kids — usually boys — are spending in front of screens, including video games, computers, smart phones and TVs. Boys tend to have a better spatial sense than girls and this is further developed by the amount of time they spend playing video games, says Reist. When they play video games there is the sense of movement they don’t get in the classroom, so they are very attracted to this technology, Reist continues. “Playing video games also puts them in the driver’s seat.” They are in control and if it’s boring they can move on to something else with a simple click, he says. The problem is that when they get to school they have no control so they zone out as a coping mechanism, says Reist. Since kids are spending more time in front of screens, they are spending less time reading, with the result that academic performance suffers even more. Written language is the dominant form of both delivery and evaluation in schools, says Reist. While the world around them today is becoming an increasingly visual-spatial one, schools are slow to change. “Right now to be successful in school you’re going to have to decide to be print-literate, to turn off the electronics and practise reading and writing,” he says. Reist would like to see changes in the curriculum and in the way kids are taught. Schools should be more tolerant of boy energy and appreciate gender differences, he says. He encourages teachers to adapt their teaching and evaluation methods to accommodate differences between girls and boys. Gym time in elementary schools is critical and he says taking away recess should not be used as a punishment for boys with behaviour problems. “It’s counter-productive,” he explains. In high schools, he’d like to see more handson projects, vocational courses, co-operative programs, apprenticeships and even the use of screens. But it isn’t just up to the teachers and schools. There’s a lot that parents can do at home. “Parents can play a major role in helping their sons to develop literacy,” says Reist. “Read aloud to kids as long as they will accept it,” Reist says. “They become better readers when they hear it done aloud.” Parents should limit screen time. His recommendation is that a child not spend more than an hour at a time in front of any kind of screen, and for every five hours of free time, not more than two hours should be spent in front of a screen. For example, if your child gets home at 4 p.m. and goes to bed at 9 p.m. then MARCH 29, 2012

Further Reading: • RAISING BOYS IN A NEW KIND OF WORLD by Michael Reist (DUNDURN, 2011) • BOYS AND GIRLS LEARN DIFFERENTLY by Michael Gurian (John Wiley& Sons, 2002) • ONE MIND AT A TIME by Mel Levine, M.D. (Simon and Schuster, 2002)

they shouldn’t spend more than two, onehour blocks of that time in front of a screen. It’s not about eliminating electronics, it’s about balance, says Reist. When it comes to selecting reading material, both parents and teachers should allow kids to focus on their passion, whether it’s comics, hockey or dinosaurs, emphasizes DeJong. “Reading and writing about something we’re not passionate about is much harder to do.” It’s also important to set up routines in the home, says Reist. Homework should be completed at the same time and in the same place every evening. “It’s best to link homework to other times, such as right after school, or right after dinner but before TV or video games,” he suggests. He also advises having kids do the hardest work first. Big projects can be broken into smaller chunks to make them more manageable. A timer can be used to set work and break times, and it’s all right for kids to doodle or fidget. Reist also recommends that parents set consistent morning and bed-time routines and ensure children get adequate sleep. DeJong encourages parents to have a daily check-in time with their kids, after school or before bed, to discuss what went well that day at school and to find out if there are any problems to resolve. “Daily check-ins give the message that it’s OK to have problems at school and it’s OK to ask for help,” she says. Building a connection with teachers and the school is another way to help boys succeed. “Attend school events, plays, barbeques, and volunteer if possible to get to know the staff and the other parents,” DeJong advises. Reist sees a special role for fathers. “Boys need a strong father figure. Too many fathers are absent from their kids’ lives,” he says. Boys will turn to video games or substance abuse as a distraction from the pain of missing their father, he says. While research shows there are natural gender differences in the brains of typical girls and boys, Reist stresses that not all boys and girls will fit into these categories. “We all operate on a continuum and it’s important not to stereotype kids,” he says. If we want boys to achieve their full potential, we need to set the stage for success and help them develop the tools they will need to pursue success. And it all begins at home. CG country-guide.ca 51

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Hay fever – blame it on snow mould? By Marie Berry

f you are experiencing sneezing, watery eyes, or runny nose and think it may be hay fever, but then think it can’t be because it’s too early, you may be wrong! Hay fever is specifically an allergy to plant material, and snow mould — the crusty white or black debris or film left on your yard as snow melts — could be the cause. Often, hay fever is caused by inhaled tree, grass, and weed pollen, but it can be caused by mould spores as well. There is a seasonal difference. Grass and tree pollens are common in spring and summer, with pollen from weeds (especially ragweed) being more prevalent in late summer and fall. Mould can occur at any time during the year, and it can be produced indoors as well as outdoors.

When you shake out just one bale of hay, you may inhale 1.5 billion spores Moulds thrive and produce spores in decaying organic matter. Garages, sheds and barns are ideal environments, as are many stored crops, including baled forages. Going indoors may not get you away from mould because indoor plants, humidifiers, damp basements, and garbage containers are all ideal environments for moulds as well. Hay fever or seasonal allergic rhinitis affects 15 to 30 per cent of Canadians. The condition usually develops before age 20, but the severity may diminish with age as your body adjusts. There is also thought to be a genetic link, so if one of your relatives has hay fever, you have a greater chance of having it too. You’ve probably heard of shingles, and if you have experienced the condition, you will certainly be familiar with the irritation and pain. Recent research has looked at the most effective treatments and even produced a vaccine for prevention. Next month, we’ll look at the viral infection that causes shingles as well as the newer therapies.

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Hay fever is an allergy. You inhale a grain of pollen or a mould spore and your body recognizes it as a foreign substance or allergen. Your body then develops antibodies to “fight” the allergen. However, the antibodies attach themselves to mast cells in your respiratory tract, causing the mast cells to rupture and release various substances including histamine. It is the histamine that overstimulates your respiratory tract and produces the sneezing, itching, and runny nose and eyes. Your best approach to hay fever is to avoid pollen and spores, although that can be difficult. Indoors you can use air purifiers and make sure that your home is “mould-free.” Outdoors, you can wear a pollen mask or breathing apparatus. You can also avoid being outdoors when pollen counts are high or on hot, windy days when pollen is easily spread. Other air-borne irritants such as dust, debris, or even fumes can complicate hay fever. If you have another breathing condition like asthma or chronic obstructive pulmonary disease (COPD), it can complicate hay fever and vice versa. Antihistamines are the first line treatment for hay fever because they block the actions of histamine and stop the symptoms. However, you need to take them about an hour before going outdoors so they are circulating in your body in order to block histamine release. The drawback with antihistamines is the potential drowsiness that they can cause, because you certainly don’t want to be operating any farm equipment when you have any degree of sedation. The newer antihistamines like cetirizine and loratadine have less sedation. However, ones with sedation like diphenhydramine may be suitable at bedtime, especially if you have nighttime symptoms that keep you awake. Prescription nasal sprays are another option in that they reduce inflammation, keep airways open, and alleviate some symptoms. These sprays are meant to be used regularly during your hay fever season to prevent problems. Hay fever can be a bothersome condition, but while it affects the quality of your life, it is not considered fatal. In the meantime, keep the tissues handy for those sneezes and sniffles. Marie Berry is a lawyer/pharmacist interested in health care and education.

March 29, 2012

I am daydreaming during the sermon. To be honest, I slept for a few minutes. I heard about a survey of people who nod off during a church service. Apparently there are quite a few. The survey concluded: “If all the people who sleep in church were laid end to end… they would be more comfortable.” This morning the preacher is talking about prayer and the nature of God. She says sometimes we expect too much of God, and we ask too much. She uses the example of a man who prayed to God for help to build a new barn. When no answer seemed forthcoming, he said “I’ll just have to do it myself.” The minister went on to say, “We may pray for early retirement, but it may never come.” She conjectures that “early retirement” is a notion conceived by advertising executives but enjoyed by few people. I get back to daydreaming. With so many needs in the world, is early retirement for fortunate North Americans high on God’s agenda? The prospect of retiring to take life easier is enticing, but retirement is more than an adjustment. It is a challenge. It is not easy to give up a farm, business or occupation that has consumed our working hours for many years. I think men build their identity around their work. What we do for a living seems to define us, while women find meaning in who they are as persons. When I hang around the parts counter looking for repairs for my 1945 John Deere AR, I hear men describing where they farm or what they produce. They have feelings, but what they feel is held in reserve and usually not for public display. When I sit down for tea with the women at the museum, I hear a different kind of conversation. The chatter is about grandchildren, sewing, a tea or bazaar, visiting sick friends or a project at church. I know generalizations do not fit everyone. My argument is that men define themselves by their work, while women define themselves by their caring, nurturing nature. During my working years I described myself as the minister of such and such church, or the bishop of the diocese. Over the years I became so absorbed in my work that finding a new identity in retirement was a challenge. I did not know how to respond to people who said, “Now you are free to do whatever you want.” I had been doing what I wanted for many years! I enjoyed my work. Other people said, “Now you are free to travel.” Travel satisfies my curious nature, and my wife Jacqueline is accumulating travel brochures, but travel has only a moderate appeal. I travelled often during my working years. I don’t relish packing my suitcase as a regular activity, but I look longingly at my bookshelves. I collected books, promising myself I would read them when I retired. Will I live long enough to get through them? Not likely, but I should enjoy more than I do. A.C. Grayling, author of The Good Book, says, “The first step of the good life is to seek wisdom and give up fear. Wisdom teaches what is worthwhile and what is illusory. It brings proportion and measure, it dispenses with the false glare cast by human vanity and cupidity, by fashion, falsehood, ignorance and folly. The fear that hampers life is the fear of loss…” Suggested Scripture: Proverbs 8, Hebrews 4:9-13

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Rod Andrews is a retired Anglican bishop. He lives in Saskatoon. March 29, 2012

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Va l l e y

On the front line of food safety Dan Needles is the author of “Wingfield Farm” stage plays. His column is a regular feature in Country Guide

ILLUSTRATION: RICK KURKOWSKI

buy two steers every spring to fatten for the freezer. Every year without fail, they shake their national identification tags off somewhere in the pasture. It seems to me they should make the tags out of fertilizer and grass seed so that when they fall off they break down and do some good for the land. Maybe they’ve already thought of that. But, all the same, I do believe that farmers serve on the front line of food safety and we must do our part to ensure traceability of our products. The first time the tags went missing, I got all lathered up in a fret and dashed off to get two new ones from the guy who sold me the steers. Then I went next door to ask Vern Bunton if I could borrow his ear tagger. Vern shrugged and told me not to worry. “Three out of 10 of my cows shake those tags off,” he said. “Just wait till the day before they go off on the truck and re-tag them then. But you don’t

54 country-guide.ca

have a head gate or a squeeze, do you? Well, just put the tags in your pocket and hand them over when you get to the kill plant.” But I’d heard all these horror stories about snotty inspectors and “button cops” who enjoy using their superpowers to reduce people like me to a pool of thin Jello. So I hatched a plan. The steers had big holes in their ears where the old tags had been. I decided to use my cattle-whispering skills to the point where I could rub their ears while they were eating their grain. And then, just a few days before the truck came I would gently position the taggers over the hole and crunch!… I would be a law-abiding cattleman once more. “Okay,” said Vern. “A word of advice. Don’t try to do both of them the same day and don’t hang onto the taggers after you squeeze them.” Since these steers were illegals, I named them Frank and Jesse (James). They were Simmentals… well, actually

a cross between a Simmental and something else, like a Cape buffalo. I know there is no quiet breed of cattle but cozying up to these two was like trying to make friends with a meat inspector. I could have written a novel in the time I spent edging up to them at the feed trough, gently scratching them over the withers, gradually working down to the ears. By October, I was handling the ears pretty freely, but the James brothers always kept one eye fixed on me, alert for treachery. Then, on Moving Day Minus Five, which was circled in red on the calendar, I went to the barn with the taggers. I picked Jesse, because he was the spookier of the two, worked my way down to his ear, gently eased the tagger spike into the hole and squeezed. Jesse exploded like an oil drum full of homemade champagne and went romping out into the barnyard with the taggers hanging from his ear. After a bit, they dropped out and I retrieved them. Frank gave me a long look that said maybe I should wait a full three days before trying this trick again. On Moving Day Minus Two, it was Frank’s turn. When I reached his ear, he stopped chewing for a brief moment, as though he remembered something, but then he sighed and went back to his grain. I squeezed and let go and Frank took off like a winged Pegasus. He fishtailed and bucked and the taggers flew up in a high arc, clattered onto the barn roof, then slid down into the eaves trough. “Phew! at least he’s tagged,” I thought and went inside for the ladder. Steel ladders do not grip very well on steel eavestroughs. This is a lesson that registers very strongly when you are dangling 16 feet in the air wondering if your bicep muscles are going to pop off your elbows. My wife heard my screams and scampered out to the rescue, so the story had a happy ending. But she did say that if farmers are going to serve on the front line of food safety, their widows and orphans should be given generous pensions by the state. March 29, 2012

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