CGW120917

WESTERN EDITION

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September 17, 2012 $3.50

MARKETING

2012

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SEPTEMBER 17, 2012

MARKETING 2012 Strong prices look like a boon this year — in fact, they are a boon — but they raise hard questions too. Why did the most sophisticated market programs lose us the most money this summer? And what are those clouds on the horizon? Find out in this special issue.

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OUTLOOK ON CORN PRICES The market needs corn, and Philip Shaw says it’s going to pay for a good long time, unlesss…

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CORN HEADS WEST Behind the forecast 10 million acres of Prairie corn are farmers like Joel Lawson, looking to score big.

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MINIMIZE YOUR FERTILIZER BILL Gerald Pilger shows how to use your marketing skills to cut your nitrogen costs next spring.

Our commitment to your privacy At Farm Business Communications we have a firm commitment to protecting your privacy and security as our customer. Farm Business Communications will only collect personal information if it is required for the proper functioning of our business. As part of our commitment to enhance customer service, we may share this personal information with other strategic business partners. For more information regarding our Customer Information Privacy Policy, write to: Information Protection Officer, Farm Business Communications, 1666 Dublin Avenue, Winnipeg, MB R3H 0H1.

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SEPTEMBER 17, 2012

GUIDE HR — THE WRONG BELIEFS Taking a hard look at your personal biases takes hard work, but the payoff may make it worthwhile.

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THINKING OUTSIDE THE FENCE Marketing their farm’s environmental quality helped Alberta’s Jenkins family find a succession fix.

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GUIDE LIFE — PEACE IN THE FAMILY The holidays should be a time of family harmony, but on the farm, they can need some help.

THROW OUT YOUR MARKETING PLAN? Most market advisers told you to sell crop in the spring, before the run in prices. Is it time to change?

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THE STORAGE QUESTION Canada’s countryside is becoming one vast on-farm elevator. Now, what’s the best way to make it pay?

MOTIVATE WITH MEANING Employees are a crucial part of more farms. Too bad employee management isn’t seen as crucial too.

MORE FROM THE MARKET “Know your customer” seems like hot air to everyone except the farmers using it to build more income.

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SO YOU THINK YOU CAN MARKET If two-thirds of our crop get sold in the bottom third of the market, are those high prices a mirage?

GROWING THE BRAND AGCO says the global battleground is here in North America, and it has a plan to win.

FUELLING FAMINE? Oxfam tells us why they’re fighting Canada’s ethanol standards (and how Ottawa isn’t listening).

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EVERY ISSUE 8

MACHINERY GUIDE Big tractors, big performance, and an increasingly big choice for Canada’s big farmers.

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HANSON ACRES When the lawyer’s kid comes to stay, the Hansons find out that on the farm, some facts don’t change.

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GUIDE HEALTH Everywhere we turn, someone wants us to buy fish oil supplements. Will they really make you healthier?

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PETUNIA VALLEY The boys along the sideroad are getting pretty bent out of shape, and paying for the privilege.

CONTENTS

BUSINESS

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 Fax (204) 942-8463 (204) 294-9195 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 Cell (204) 227-5274 (204) 954-1414 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

When a thing is right Grain markets are acting exactly as they should. The commodity prices we’re seeing this fall are a true reflection of the actual value of the grains and oilseeds that our farms are producing. As the livestock sector adjusts, soon the exchanges will show a truer valuation of our animal production as well.

There is nothing in today’s markets for agriculture to apologize about, or for that matter to gloat over either. It’s cold reality.

The world is recognizing the wealth that farmers create. Full stop.

We’ve always known food makes life possible, but increasingly food is valued because it makes quality of life possible too, enabling billions of people for instance to consume meat and dairy. Yes, it comes at a cost, but the benefit is so great, the cost is worth bearing. That is what the market is telling us.

Of course, we’ve also always known that farmers don’t only produce food.

Farmers have always produced leather and wool and cotton too, as well as lubricants and paint ingredients and all manner of processed and industrialized inputs.

Now, agriculture produces ethanol as well, and some analysts — including some that we quote in this issue — would have us believe that this is somehow new fangled and wrong headed, and that ethanol is only a good idea in times of depressed prices.

They couldn’t be more wrong. The world has a choice, either to cope with peak oil by slashing and rationing our energy use, or to commit to a bold but realistic vision of a future where more energy is sustain4 country-guide.ca

ably produced, and where energy won’t be a constraint that prevents us from thriving.

There is a cost to ethanol. Who would deny it? But there is a benefit too in the lives it saves and the lives it enhances.

Pumping more barrels to replace the fuel we should be producing from corn would only mean borrowing even more from the future, using petroleum reserves that should be held back for coming years so we can avoid paying our share of the price now.

Nor does anyone know how long the bull market will last. It won’t last forever. We know that because we know high prices encourage high production. This is what they are meant to do, and we can be confident we will see the world’s farmers respond to today’s markets with enormous enthusiasm and skill.

We also know that in order to get to the point where they can prosper, today’s farms have wrestled with lean times.

Often, they have wrestled for generations, using only their grit to pull them through the long, tough hauls between the occasional years of stronger returns. And it isn’t as if today’s prices are shielding farmers from the risk of poor decisions. Every farmer who looks at the price of the farm down the road, or the cost of a new combine, knows the intimate meaning of risk.

But be sure to find some time away from the decision-making this year. Celebrate your success. When a thing is right, say it. I’m at 519-674-1449, or email me at tom.button@fbcpublishing.com . Let me know what you’re thinking.

Advertising Services Co-ordinator: Sharon Komoski (204) 944-5758 Fax (204) 944-5562 Email: ads@fbcpublishing.com Publisher: Bob Willcox Email: bob.willcox@fbcpublishing.com Associate Publisher/Editorial Director: John Morriss Email: john.morriss@fbcpublishing.com Production Director: Shawna Gibson Email: shawna@fbcpublishing.com Director of Sales and Circulation: Lynda Tityk Email: lynda.tityk@fbcpublishing.com Circulation Manager: Heather Anderson Email: heather@fbcpublishing.com Designer: Jenelle Jensen Contents of this publication are copyrighted and may be reproduced only with the permission of the editor. Country Guide, incorporating the Nor’West Farmer and Farm & Home, is published by Farm Business Communications. Head office: Winnipeg, Manitoba. Printed by Transcontinental LGMC. Country Guide is published 12 times per year by Farm Business Communications.

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Call toll-free 1-800-665-1362 or email: subscription@fbcpublishing.com U.S. subscribers call 1-204-944-5766 Country Guide is printed with linseed oil-based inks PRINTED IN CANADA Vol. 131 No. 10 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.

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opinion

Big Idea To farmers, biofuel mandates are a step in the right direction, producing green energy, weaning the world off petroleum, and supporting agriculture. Who could object to that? Well... aid groups are stepping up their campaign to blame ethanol for solving our energy problems on the backs of the world’s poorest and hungriest. Here's how.

Fuelling famine?

By Gord Gilmour, CG Associate Editor

To us in the wealthy, developed world, food insecurity means running out of milk and having to wait for the next trip to the store. But for millions around the globe, food insecurity means imminent malnutrition, starvation and death. Now, aid groups are intensifying their call for a rethink of biofuel mandates that divert a significant portion of major food crops — 40 per cent of the U.S. corn crop, for example — to fuel production. Country Guide recently spoke to Oxfam Canada executive director Robert Fox to find out what they’re saying about ethanol and food, and what response they’re getting.

Country Guide: Oxfam has been one of the loudest global voices calling for a reconsideration of biofuels. Can you tell us a bit about how the organization got here?

Robert Fox: Oxfam has a detailed analysis of the global food system and we strongly believe that it’s broken at this time.

It’s broken for a number of reasons and biofuels are just one part of that, but they’re a very important part. They’re increasing competition for food at a time when supply is falling for a number of reasons, and when competition — other than biofuels — for that food resource is also increasing.

I think it’s very important to note that Oxfam isn’t advocating a cheap food policy, but we need to look at how food prices have been increasing and consider that in a global context. The average Canadian family spends about 15 per cent of its income on food.

Say commodity prices increase by 50 per cent — for most Canadians that might mean having to switch from a brand name to a generic product, or consuming a bit less of certain expensive products. But in the communities where we work, in places like Africa, Latin America and Asia, those families are spending 60, 70 even 80 per cent of their income on food. If corn goes up in price 50 per cent, in that case it doesn’t mean a little less consumption. It means you don’t eat.

CG: So when that price increase hits one of these vulnerable regions, how does it play out in the lives of the people? I recall reading during the last food crisis in 2008 about extremely poor Haitians who were baking dirt pies and eating them out of desperation — I could barely fathom that. Is it difficult for us to understand this in wealthy countries?

RF: The impact is devastating, especially on women. When families are food insecure it’s always the women who eat last and least. We’re very concerned about West Africa right now — there are 18 million people living there who are on the cusp 6 country-guide.ca

september 17, 2012

opinion of famine in some parts of the region. When we see these huge increases in corn prices and the knock-on effect in wheat, soybeans, rice and other food crops, it’s a huge problem.

In the African Sahel — that’s the southern transition zone out of the Sahara desert — women will leave their villages and walk out into the countryside and find an anthill. They’ll then jam a stick into the anthill because they’re trying to disperse the ants from the anthill, so they can harvest the grains, weed seed and husks and chaff the ants have stored.

They’re doing this so they can feed their kids.

CG: With the grain price increases we’ve seen lately, are we then looking at another food crisis looming? Do you expect this to increase pressure to review biofuel policies?

RF: We’re certainly concerned about the dynamic where we have these mandates in developed countries like the U.S., Canada and much of Europe that require all fuel to contain a portion of biofuels like ethanol in the mix. These mandates are especially frustrating because if you let the market prevail, oil companies would almost certainly be using more petroleum and less corn, which would moderate the price of food crops. In essence what biofuel mandates do is they take a bad situation, from a food security perspective, and make it worse than it needs to be.

As for whether there will be another global food crisis, that remains to be seen, but there are signs it’s coming. Corn prices have increased by 50 per cent and all the other food crops are following them.

In many ways the canary in the coal mine here are the feed buyers. They’re frequently among the first to feel the effects, and in this case they’ve been the first to begin to put pressure on Congress in the U.S. They’ve recognized that the cost of their feeds is spiking and that’s going to impact their livelihood.

Again, this plays out completely differently depending on where you are and your personal circumstances. In Canada, for example, for most of us it means we might find a steak or pork chop on sale as they reduce their stock — before prices start to climb again. In less wealthy places it might mean meat disappears from your diet because the rest of your diet is now more expensive. In the poorest places it might mean even the grain disappears from your mouth.

CG: So what might the solution be? Is it really as simple as removing biofuel mandates and subsidies? Or is it more complex than that?

RF: It’s not biofuels alone that’s causing this recent price rise, clearly. It’s mainly droughts and crop failure in the U.S. Corn Belt, and a similar crop failure in Ukraine. The key is that biofuel mandates increase that pressure and competition for food resources at a time when there’s a serious problem with food security.

I’m also concerned that we’re moving evermore september 17, 2012

into the dynamic that food is just another commodity. There was an article I saw recently on Reuters that quoted Glencore — they’re the large commodity trader that recently purchased Viterra, though I’m sure you and your readers know far more about that than I do. They were quoted as to how they were anticipating a good year because of these high prices and volatility. There’s certainly lots of volatility and for them that’s good. But I’m far from sure that it’s good for farmers, and I know that it’s not good for consumers. And I know that it’s devastating and even life threatening for the poorest of them.

CG: If you had one chance to look every grain grower in Canada in the face and tell them about Oxfam’s biofuel position, what would your message be?

RF: I would say that food-based biofuels aren’t a sustainable response to challenges like energy security and climate change. They’re a bad policy that’s distorting the market. Biofuels that aren’t made from food crops might have their place, but when they’re made from food crops they’re destructive and they’re putting lives at risk.

I would also encourage them to visit our website and review our policy at (www.oxfamcanada.ca). In my experience farmers make good decisions when they have the facts.

CG: So what response are you getting, especially among politicians and policy-makers?

RF: Oxfam is raising our concerns with governments around the world. In Europe and the U.S. we are finding lots of support among policymakers for our concerns; in Canada, less so. CG country-guide.ca 7

Machinery

By Ralph Pearce, CG Production Editor

Larger, powerful, adaptable, innovative. These machines aren’t just bigger, they’re built for durability, performance and efficiency, with an increasingly complex array of electronic, monitoring and control options. It’s part of a trend that acknowledges the growing complexity of farming in Canada, together with the demands of larger farming operations. Check out the lineup we’ve assembled in this month’s instalment of Machinery Guide.

case ih steiger rowtrac 

challenger mt800c and mt900c

Following the logic of “four tracks are superior to two,” Case IH is introducing its new Steiger Rowtrac, featuring a four-track, positive-drive system that is the only such factory-integrated system of its kind. Built to handle larger implements, the Rowtrac will be available in three models (i.e. the 350, 400 and 450) providing Quadtrac technology for primary and secondary tillage as well as field applications. This new system also uses independent, samesize tracks for more power to the ground with less slippage when pulling large planters and tillage implements. Growers also have greater adaptability and versatility for different cropping systems, with 20-, 22-, 30- and 40-inch spacing options. As with other Steiger models, the Rowtrac machines “boast the boost” with Power Boost extra power, on demand. www.caseih.com

Aside from performance and power, the one focus that their engineers say they aimed to build into MT800C and MT900C tractors is “the Challenger Difference.” Whether it’s the Caterpillar engines that deliver 410 to 585 engine horsepower, or the ability to maintain power while towing heavy loads, or managing the tough spots on your farm, the MT800C and MT900C are built to handle the demands of larger farms. At the same time, engineers strove for a balance of strength with agility to achieve maximum performance with enough flotation to reduce compaction. Time isn’t just money, it also counts for efficiency on the farm, and Challenger says its heavy-duty tractors go beyond in-field excellence with a revised cab that offers greater comfort and easier operation, no matter what the time of day. www.newfromchallenger.com

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September 17, 2012

fendt 933 scr and 936 scr  For Fendt, today’s higher-powered tractors are definitely larger, but the key word that comes to mind with the company’s 933 SCR and 936 SCR tractors is “value.” Value comes in various forms and Fendt offers technologies as standard features, such as the Variotronic electronic control. This device allows the operator complete control of all tractor and implement components, including camera functions, operation documentation and auto-steer functions, all using the touch-screen Varioterminal. Plus, Fendt says the 330-horsepower 933 and the 360-horsepower 936 provide more of what farmers want, including productivity and efficiency, with the utmost value in mind. www.fendt.com

 New holland t8 and t9 Whether you choose the New Holland T8 or T9 series for your farm, there are objectives that the company says it designed into both, including “power and productivity,” “lower operating costs” and a commitment to comfort and easy operation. The T8 series boasts a lineup of 330, 360 and 390 engine horsepower, while the T9 series offers six models with a range of 390 all the way up to 670 engine horsepower. When it comes to control, New Holland has gone to the source, asking farmers what they want for throttle, transmission and hydraulics. The result is the Sidewinder II, a control armrest that brings comfort and performance together for greater efficiency and command. www.newholland.com

versatile 4-wd tractors  Versatile has a strong brand presence in Canada, committed to the concept that size and dependability matter. In 2012, Versatile offers six models ranging from 350 to 550 engine horsepower with engines ranging from 11.9 litre to 15 litre. Versatile’s four-wheel drive tractors come with either manual or powershift transmissions on most models. The engines are also designed with an Exhaust Gas Recirculation/Diesel Particulate Filter (EGR/DPF), which helps reduce exhaust noise and enhance fuel efficiency when used with the Variable Geometry Turbo (VGT) system. That provides a quieter ride, greater environmental awareness, and still lots of power. www.verstaile-ag.ca

john deere 9r/9rt John Deere is a serious player in large tractors with its 9R and 9RT series, featuring five wheeled models from 360 to 560 engine horsepower plus three tracked models from 460 to 560 horsepower. Each comes with advanced engine control, meaning these tractors can sense changes in engine speed and loads 100 times per second, allowing the engine to instantly adjust its fuel quantity and injection time. Plus the cab combines advanced technology and operator comfort, that help push productivity to a new level. www.deere.com September 17, 2012

country-guide.ca 9

doing More. using less.

A series on being ready for the farming challenges ahead

Maximizing yields requires more than good genetics The basics of crop rotation and proper soil management need to be applied — including in North America

A

few years ago a University of Manitoba soil science professor delivered a presentation of how to grow 100 bushels of canola per acre. He looked at the yield claims of several products and pieces of equipment, added them up, and concluded that if you purchased every one, you could grow 100-bushel canola.

His point, of course, was that this was impossible. Once you are already using good genetics and the right basic management practices, the law of diminishing returns starts to apply.

The role of good genetics in achieving the yields we have today is well known, as is the need to improve them further. But in a world where higher yields are needed to feed a growing population, is too much pressure being placed on the plant breeders and not enough on the farmers? Are they following those basic management practices?

North American farmers often assume that they lead the world in management, but is that the case?

It’s hard to argue with U.S. dominance in corn yields, but wheat yields tell another story. The U.S. five-year average wheat yield from 2006-10 was 43 bushels per acre. That’s more than Canada at 40, but most of the U.S. production is winter wheat, with an inherent yield advantage over spring wheat, and grown in an area with a longer growing season and more precipitation.

The U.S. average yield is the same as in Ukraine, still faced with the challenges of emerging from the Soviet era. Uzbekistan, in the same position, averaged 66 bushels, and France 102 bushels.

Back to the basics Those statistics suggest that in the U.S., many farmers are not doing the basics — fertilization, good soil management and proper crop rotation. In that last regard, many Canadian farmers will admit they are not following recommended practice recently, particularly in following the one-in-four-year rule for seeding canola on the same field. That’s understandable given its high price relative to other crops, but it does mean fewer tonnes grown in total. As the world’s demand for food continues, total tonnes will become more important, meaning farmers may need to take a longer-term view of how to maximize their yields.

caseih.com

AVerAge WHeAT Yields (bu./acre) 2006-10 120 100

102

80 60 40

66 40

43

43

Ukraine

U.S.

20 0

Canada France

Uzbekistan

Source: FAO

That means making the most efficient use of all available resources, including fuel, fertilizer, chemicals and the most important resource of all — soil.

Again, some of the basic agronomic principles for maintaining soil health and crop yields have still to be adopted in developed countries, but in the developing countries — where population growth is highest — there is even more work to be done. That will require more than good genetics, but the application of good old-fashioned extension. Farmers in areas such as sub-Saharan Africa have yet to have the same access to public and private extension services, or to farm publications like this one, to learn about the best ways to produce the most crop from a hectare of land.

For many of the developing world’s farmers, one hectare is the size of their farm. That old-fashioned extension will need to include ways to adopt new-fashioned technology on a scale appropriate for farmers and their families.

On a farm, there’s no such thing as a few small chores. You need versatile equipment that works as hard as you do. That’s why we offer a family of tractors and hay tools designed with the power, efficiency and versatility to help you get things done. All built for a level of operator comfort that makes those long, hard days a little shorter and a lot more productive. And right now, you’ll find great offers on our full line of Farmall® tractors, balers, windrowers, and Puma® and Maxxum® tractors. To learn more, visit your local Case IH dealer or caseihdeals.com.

©2012 CNH America LLC. All rights reserved. Case IH is a registered trademark of CNH America LLC. www.caseih.com.

BUSINESS

So you think you can market If Canada’s farmers sell two-thirds of their crop into the bottom third of the market, are those sky-high prices just a mirage?

By Maggie Van Camp, CG Associate Editor

magine yourself in my part of the country at the end of July. Imagine how the dust swirled around the battered old stake truck ahead of you as it creaked into the elevator and dumped the highest-priced winter wheat of the harvest. The farmer had done what he did every year — delivered and sold at harvest.

Meanwhile, you were on your smartphone waiting in line to unload some wehat that you had pre-sold sometime in March — for $300 per tonne less.

It’s moments like these that leave you wondering about the wisdom of price risk management, and that make your jaw drop because of the sheer number of dollars you feel like you just left on the table in these spiky markets.

It’s the same across the country. In

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fact, University of Manitoba research shows that the more actively farmers are in the market, the lower their average price.

It raises a painful question. In today’s volatile market conditions, do Canadian farmers have good enough information or good enough analytical skills to identify profit opportunities? Does anyone?

Farmers today are more likely to use more marketing tools and to have marketing plans. The number of agricultural clients with trading accounts has steadily grown for Bert Caputo, CFA and investment adviser with RBC Dominion Securities Inc. in Waterloo, Ont. Caputo thinks the younger generation of farmers is more comfortable with commodity marketing tools, and he believes too that the convenience of

SEPTEMBER 17, 2012

BUSINESS

mobile communication and Internet information has made it easier for farmers to stay informed and trade on the go.

“There’s a wide range of producers doing a real mix marketing,” says Caputo. “It varies from producer to producer.”

Usually, Caputo’s clients hedge using a combination of pre-sales and options. They consider options and futures marketing simply as complements to other marketing alternatives, and he is seeing more farmer clients using more puts and call options.

As a rule, he sees more crop farmers using more put options to lock in a floor price, leaving the upside wide open. On the other hand, livestock producers, primarily hog farmers, are more willing to hedge feed costs by using a call option to protect themselves against rising prices, but still benefit if prices fall.

This summer Caputo has seen an increase in volume through his desk. “When prices start to rise, it gets people’s attention,” he says.

With volatile commodity prices, there are more opportunities for grain farmers to use puts and calls in their marketing plans, says Caputo. Correspondingly, there’s also more necessity for livestock clients to incorporate feed hedging as a part of theirs.

There’s also an essential first step, say market analysts. Whatever you decide on for your marketing plan, you need to document it, and then tell someone — your spouse, your adviser, your accountant, someone — so you’re more obligated to it.

Richard Vyn, agricultural economist with the University of Guelph’s Ridgetown campus, is concerned that the unpredictable short market this year can cause some folks to lose sight of their marketing plans. The difference between corn prices in May to the end of July stretched over $3 per bushel and soybeans $3.50 per bushel. “Don’t look at a single year and judge your marketing strategy,” Vyn says.

This year you would have been better to wait, but you don’t see many years like this. “Two-thirds of the time when prices are above costs of production in the spring, they go down by harvest,” says Vyn, based on an analysis of corn markets over the last 20 years.

Vyn’s research involves running simulation models for various corn- and soybean-marketing strategies to assess how on average they perform in Ontario. The strategies that reaped the highest average prices across all years incorporated short hedges using futures contracts for corn. These strategies returned prices about 30 cents per bushel more than the baseline strategy of fall cash sales. The put option strategies he tested generated returns only slightly lower than those of the futures contracts strategies.

In Vyn’s models, making multiple cash sales SEPTEMBER 17, 2012

throughout the year (including elevator storage charges) did not result in significantly higher prices than selling off the combine. Also, his models showed that spreading cash sales out over the year did not actually reduce risk. The statistical variability of returns is greater for these strategies as compared to the baseline, while there is little difference in the probability of generating a price above the cost of production.

Recently Vyn has updated the marketing strategies research to include a similar set of strategies for soybeans. This time, the results are a bit different.

On average, for soybeans the cash sale strategies with sales spread throughout the year did better than the futures’ contract strategies.

A few years ago University of Manitoba econoContinued on page 14

Short market,

long tail

In 1988, Ed U sset was a pi t trader in Ch when the drou icago ght struck early in June. At th the carry-out e time, situation was much more co and of course mfortable , the almost five billion bu corn ethanol shels of demand didn ’t exist. Any ch U.S. biofuel po anges to licies would be game changing That year, pric . es spiked early and quickly, th they drifted slo en wly lower with some volatility ‘short market . “The has a long ta il’ theory is valid Usset. “It has ,” says held up seven out of 10 times Already this ye .” ar some dem and rationing occurred and has will continue in the month Usset says ge s ahead. nerally South America’s clim more reliable ate is than the north and he’s bank normal crop fro ing on a m those region s.

“The three m ost important words for any ducer in the U pro.S. and Canada are ‘forget last he says. “In year,’” 2013 prices will do things imagine but, th we didn’t ey won’t be th e same as 2012 In the wake of .” the massive U .S. drought, st ries are circul oating of farm ers having to contracts or pay out even in quirk y situations ph deliver grain ysically to elevators wh ere that was U ss et re co m re qu ired. m en ds pr e- se lli ng vo lu m es crop insuranc on ly to e production levels.

country-guide.ca 13

business

Continued from page 13 mists, Fabio Mattos and Stefanie Fryza, compared how successful actual farmers were at using different marketing strategies. They compared the CWB’s marketing options versus taking the pool price, and found marketing performance using these producer payment options averaged $16.13 per tonne below the pool — based on analysis of 7,400 farmers over six crop years.

The researchers compared farmers’ marketing performance using these CWB marketing contracts against the final pool price, ranging from $195.14 per tonne in the 2005 crop year to $372.06 per tonne in 2007.

The spread was incredible. Some farmers were

able to get $335.99 per tonne above the pool price, yet the worst result was $186.68 per tonne below the pool.

“On average, farmers did not have better information or analytical skills to time the market, since they actually received lower prices compared to pool pricing,” concluded Mattos.

Although the CWB’s single-desk structure will cease to exist following this crop year, results from Mattos’ and Fryza’s research can be useful in assessing performance of the other marketing tools available through the CWB. Their analysis was based on a summary of actual farmer transactions for Canada Western Red Spring wheat from 2003 to 2009. They focused on farmers who priced CWRS wheat using daily price contract, forward pricing contract or

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business

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basis pricing contract, and Flex-Pro in at least two of the six crop years.

The study showed that the farmers weren’t good at timing the market, yet timing strongly impacted marketing performance. Instead, farmers tended to price their grain just before the middle of the marketing window.

Moreover, the farmers in the survey who used more active marketing strategies tended to perform worse compared to those who were less active.

Additionally, pricing larger portions of the crop with forward pricing contracts and basis pricing contracts tended to reduce performance.

“As they try to be more active and change their strategies every year, farmers are actually trying to time the market and obtain higher prices. The evi-

dence in our study says that being more active led to worse performance,” says Mattos.

Other researchers have found no benefits to actively marketing and making decisions based on price expectations and changing every year. In 2004 Cunningham, Brorsen, and Anderson from Oklahoma State University showed using the same marketing strategy every year, regardless of market information, produced better average prices.

One of the simplest mechanical styles is to always sell at harvest. Anderson advocated a mechanical style of selling equal portions of onethird each in June, September, and November.

Interestingly, Mattos and Fryza also found price Continued on page 16

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BUSINESS

Continued from page 15 variability significantly affected marketing performance. The average performance in the year with the most price variability (2007-08) was $83.16 per tonne worse than in the year with the least price variability (2003-04).

In other words, it was more difficult to price profitably during periods of high volatility in the market, says Mattos.

To manage volatility and uncertainty Ed Usset, grain-marketing specialist for the Centre for Farm Financial Management at the University of Minnesota, believes in keeping the process of marketing in the control of the farmer, not actively chasing com-

modity markets. “It’s hard to do consistently well with outlook-based marketing,” Usset says. “I don’t let luck influence my approach.”

At http://www.cffm.umn.edu/GrainMarketing/Market ingPlans.aspx you can download Usset’s pre- and post-harvest marketing plans for corn and soybeans.

He believes marketing plans should be based on price objectives for the farm together with insight into market trends.

His key to good marketing is to find a consistent approach that works year after year. “I don’t try to sell the top of the market,” Usset says. “I’ve stumbled on it a couple of times, but I go for good average prices.”

Usset also recommends starting marketing plans

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about 10 months prior to harvest, although he readily admits such a system of early pre-selling a portion of the crop didn’t reap as much this year as those who waited to sell into the peak of the July weather market. However, if you’re going to be wrong, at least you still made money and didn’t lose on the crop.

Usset says farmers often build storage for logistical, not marketing, reasons. Removing the delivery bottlenecks allows farms to grow with a limited harvest window. However, having this storage on farm is likely to change how farmers market. “They’ll be more willing to hold grain longer,” says Usset.

He’s not convinced that more farmers are doing a better job at marketing or even that the larger farmers are any better marketers.

Yet today the stakes are higher, Usset warns.

“Marketing problems are more important today without traditional price safety nets. Now you’re on your own.” CG

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BUSINESS

marketing

More from the market All that talk about “who’s your customer” sounds like so much empty air, except to farmers who are using it to make money

By Gord Gilmour, CG Associate Editor he surveys always turn up the same numbers. Three-quarters of farmers feel they’re in the top quarter of good marketers. And there’s good reason for it.

Most farmers obsessively watch the grain and oilseed futures. When the conversation turns to the upcoming USDA crop estimates, they know exactly what the smart money is predicting, just like when it comes to the global grain outlook, they can tell you as much about the weather in Australia, South America and Ukraine as they can about the forecast at home.

Well, those three-quarters of farmers can’t all be

in the top quarter, and the emerging consensus is that more of the farmers who actually are climing their way into that top quarter are doing it by looking at that word… “marketing”… the way the rest of the world does, to whom it means something completely different than it does on most farms.

The tradition in agriculture is to focus almost exclusively on sales, not marketing, they say. Which doesn’t mean sales aren’t important. Price is obviously crucial. It’s just that marketing brings a series of tools and strategies into play in order to reel in the extra cash and the additional lucrative opportunities that the sales focus leaves on the table.

Some of these strategies might even work on your farm.

Marketing is all about three things; creating demand for your products, building an identity for your business, and finding ways to differentiate your business from the one down the road.

“Hold it right there,” you’re probably already thinking. “That’s fine if you’re running a clothing store or selling cars. But we grow commodity crops — emphasis on ‘commodity’ — and you can’t market a commodity like that.”

That might have been true at one point, but no longer. Times have changed, and more farmers are finding and developing new opportunities to truly market their products — even some of the largest commodity producers.

Against the grain

For Jim Pallister, value is what a farmer can create on top of price.

18 country-guide.ca

Near Portage la Prairie, Man., Jim Pallister could be called the poster boy for the Prairie commodity grain grower. His Pallister Farms is a large-scale operation easily topping 20,000 acres. It is well known as a grain and “special crops” operation, meaning that in addition to wheat and canola, they produce for slightly smaller, yet still significant, markets like edible beans and other pulse crops.

It’s a business model that pretty much any grain grower in the region would be more than passingly familiar with, one where success is based on a laser focus on efficiency, teamwork and the economies of scale.

But on the Pallister farm, there is one key difference.

That difference isn’t readily apparent in the fields or even in the equipment sheds or in anything remotely like that. Instead, it only becomes apparent when you get Pallister talking about his marketing September 17, 2012

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marketing philosophy (as opposed to his hedging strategy), which gets him spontaneously talking about who his customers are and what they want and need.

“Years ago someone told me — and I can’t even remember who it was, so I can’t give them credit — that farmers were the only group he’d ever seen that thought they were the customer both buying and selling,” Pallister says with a shake of his head.

He lets the statement sit a bit, and then it becomes clear he doesn’t believe a word of it.

Instead, he asks, when you go into the elevator to sell grain, who’s buying your crop? And what do you do to understand that individual’s position and what they need to get from dealing with you?

They’re certainly your customer, Pallister says, so doing a bit of legwork to get your head around that might pay you big dividends down the road.

What might that look like in practice?

It could take almost any form, but at its core is understanding your customer and where they’re coming from. And sometimes it might cost you a few bucks now, in order to better position yourself down the road.

“In about 2005, we had a situation where we ran into some production problems and we sold more beans than we produced,” Pallister recalls. “We went to the companies that we had contracts with, and we said to them, ‘Give us a number, tell us what you need,’ and they gave us a number — and then we wrote a cheque.”

That wasn’t “write a cheque after a protracted argument” or “grudgingly write a cheque while sulking about it,” it was write a cheque without complaint, in order to build and maintain a better relationship with that valued customer.

Did it work?

“Eight years later, they’re still talking about it,” Pallister says. “I think it’s definitely had an effect on how they deal with us. I’m certain at times they give up some of their margin because they know they don’t need that insurance built in when they’re dealing with us.”

Besides those tangible benefits, Pallister is also convinced the goodwill has translated into other breaks when he’s needed them. For example, it’s not much of a stretch for a grain company to make a delivery of No. 2 CWRS into No. 1 CWRS with some strategic blending at the elevator. Ordinarily that would be Continued on page 20 September 17, 2012

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management Continued from page 19 nothing but gravy for the grain company — but for a valued supplier, one with a proven commitment to stand behind their contracts and work with the company? They might catch a break and find their No. 2 is actually a No. 1.

At Penn State All this is very familar to John Berry, an agriculture marketing specialist with Penn State University. Berry has spent his career looking at the entire gamut of farm marketing, from direct sales off the farm to farmerowned processing. For the commodity grain grower — or producer of any commodity agriculture product — Berry says there may be no better strategy than finding ways to address the concerns of their customers and thereby become more valued suppliers to them.

“One of the things I’ve done over the years is spend a lot of time with grain-marketing clubs,” Berry says during a telephone interview with Country Guide. “I’m a member of several, and from the farmers there I’ve learned there are a number of these things that come into play. If the grain from your farm is known to all buyers to be of high quality, you’re going to earn more. If you’ve got a decent driveway and bin yard and a large auger that can fill a truck in a few minutes, not an hour, you’re going to earn more money. If you don’t fly off the handle and you’re decent to deal with, you’re going to get more.”

Reinventing the wheel One of the reasons Berry suggests commodity growers work more closely with their customers is because of the hard and inescapable reality of trying to go it on your own.

While farmers might be tempted to build an onfarm processing plant or a flour mill, for example, they quickly run headlong into reality if they don’t also have a plan to somehow differentiate their products from the competition.

“Take a pasta plant, for example,” Berry says.

“All the other companies are already experts at making pasta, and there’s a significant learning curve.

How do you compete against maybe two or three generations’ experience making pasta?”

Meanwhile, back on the Canadian side of the border, at Guelph, Ont., Martin Gooch agrees with this statement. Gooch is an expert on agriculture value chains at the George Morriss Centre thinktank and he believes that any farmer trying to move into one of these already established markets is going to have to go in with eyes wide open, or come up with a better plan — like maybe working with these companies to build something new where everyone winds up with a bigger share of a bigger pie.

“You can no longer afford, as a business, making decisions based on assumptions,” Gooch says. “You have to look at your customers and ask, ‘What is it they value?’ and, ‘What gives them a real headache?’”

It’s in answering these questions that you might 20 country-guide.ca

find the germ of an idea which could put you down the right path of better returns for everyone, Gooch says, quickly insisting that this isn’t a strategy only confined to boutique growers or exclusive grocers.

“I’m familiar with one farmer out west who, every year before he decides what to seed or buys his seed, goes and talks to his customers,” Gooch says.

“He asks, ‘What issues do you face?’ and, ‘What can I do to address them?’”

It’s a brilliant strategy, Gooch says, because it costs the grower next to nothing, gives them valuable insight into the minds of his customers and just by taking the time and energy to do that, they’ve already differentiated himself from every other grower in the area.

“Simply by reaching out, he’s already establishing the basis for a better business relationship with that customer,” Gooch says. “It really is as simple as trying to understand their mindset.”

Nor should that process stop at the elevator driveway. Farmers can play an important role in driving the establishment of value chains themselves, thus finding ways to build supply chain models that work better for them, Gooch says. Take the example of a relatively small group of farmers in the U.K. “This group of closely co-operating farmers, in conjuction with a miller, went to Sainsbury’s, the secondlargest U.K. retailer,” Gooch says. “They said, ‘We’ll deliver to you a type of flour that will let you bake a really good loaf of in-store bread for your customers.’”

The result was a new market for both the farmers and the miller and a key way for the Sainsbury’s chain to differentiate itself from its competition, all the while garnering positive publicity.

Back in Manitoba Back in Manitoba, Jim Pallister says he’s also noticed a fundamental change in the way his customers are doing business. Years ago they were reluctant to reveal who their end-use customers were, for fear they’d get cut out of the equation entirely.

“Now not only will they tell us who they are, they’ll bring them right out to the farm so we can meet them and talk to them,” Pallister says.

In part he suspects that’s because there’s a growing recognition that a bean canner from the U.K., for example, has no interest in dealing with individual farmers from Western Canada. Instead they recognize that a locally based grain trader brings something to the table, such as local and industry expertise and established relationships.

For a grower, though, it’s an invaluable opportunity to connect directly with the final customer and get a fuller picture of what the customer needs are every step down that chain.

Your choices So should farmers really pursue this strategy? Or is there a certain type of farmer that might be more successful?

The answer to the first question is an unequivoSeptember 17, 2012

management cal yes, says Gooch, and the first and perhaps most important step for most farmers might be to convince themselves they actually bring something to the table.

“Many farmers don’t want to do this — I think they don’t feel they have the confidence to go out and engage in discussions with those down the chain,” Gooch says. “However, I think they’d be very surprised how willing and open the customer is to talking to them.”

One tip he stresses is getting to know the companies a bit before contacting them, something he says the Internet is invaluable for. With just a few keystrokes it’s usually possible to find a wealth of information on most companies out there, including what products they produce, where their major markets are and even how they see themselves and attempt to position themselves in the marketplace.

Gooch also says it might not hurt to talk to other farmers in other places who have pursued some of these strategies, since they’ll have some insight into just what sort of reception you might expect. It’s also probably not a bad plan to start small with a smaller company, where you can learn a few lessons.

“See what you can learn with them, and what you can discover,” Gooch says. “Once you’ve sharpened your teeth and gained some experience, you might go to a larger organization.”

But the opportunity is for farmers to get out there and do it, and work incrementally at making this adjustment to the way they do business.

“I’ve worked with producers who have doubled their profitability in 18 months,” Gooch says.

“They’ve done that by working on this step by step.

Now, that won’t happen for everyone, but if they work at this steadily and methodically, it will work, I promise them that.”

As for the second question, farmer Jim Pallister says he’s convinced that in modern markets there’s an almost infinite variability and just about any farmer can find a fit, no matter who they are or what they produce.

“I’m sure there are people who will say this is only for large farmers — I simply don’t believe that,” Pallister says. “I believe in markets, it really comes down to that, and I think farmers of any size or type can find and develop markets.”

For example, Pallister says he doesn’t understand why some conventional farmers resent the successful marketing efforts of organic growers. “It’s not the seller who defines the value of that product, it’s the customer,” Pallister says. “What does it matter to me if they’re sitting in Osborne Village (an urban Winnipeg neighbourhood) paying more than I know the value of that product is? It doesn’t matter a bit.”

Pallister suggests thinking of other ways people spend their money they don’t need to — such as young men and their pickup trucks. “They all want the chrome and 300 HP,” he says with a laugh. “Do they need it? Of course not. Does it matter they don’t need it? Not really.”

Back down at Penn State, John Berry is nodding September 17, 2012

Value building can be individual, or by groups such as British farmers who built a path straight to Sainsbury’s shelves his head. If anything, Berry says, he’s seen far more success on the smaller scale for these strategies, though he quickly urges all farmers to at least consider them.

Says Berry, “We really are only limited by our own imaginations.” CG country-guide.ca 21

BUSINESS

THE STORAGE QUESTION Storage fundamentally changes a farm. Now, take-charge producers like Jeff Shea are finding new ways to sort out, which way should they go?

PHOTO CREDIT: DAVID CHARLESWORTH

By Maggie Van Camp, CG Associate Editor

22 country-guide.ca

SEPTEMBER 17, 2012

BUSINESS

t won’t surprise any farmer in this country to read that Canadian farmers are building their on-farm storage capacity to its highest levels ever.

Nor will farmers be surprised to hear why. Start with the combination of stronger farm cash flows, stir in extreme volatility in the markets, then add the logistics involved in running today’s larger, high-productivity farms, and it just looks like a decision that has got to be right for virtually any farm.

From the road, on-farm storage is looking like a smart strategic asset, particularly in the new free market for wheat, barley and durham. It also looks like a global competitive advantage for Canada as a whole, which in turn has got to parlay into a stronger farm sector.

“Canada is the only main exporting country that has massive on-farm storage,” says Morley Ayars, regional farm business management specialist for Saskatchewan Agriculture.

Still, there are lots of other ways to invest in farm productivity. You could buy land, lease a bigger tractor, build a new shed, or go for any of a hundred different upgrades.

To take a harder look at the wisdom of on-farm storage, I went to Shea Farms in southern Ontario, a farm we chose because of the way it has tried to benefit from on-farm storage in multiple ways, all at the same time.

And it’s true. You won’t find any second guessing about on-farm storage here. Today Shea Farms grows about 2,000 acres of corn, wheat and soybeans at Watford, halfway between London and Sarnia. The Sheas also do some custom work and Jeff runs a successful seed and fertilizer supply business as well.

Their total storage capacity of 140,000 bushels has been a work in progress since 38-year-old Jeff came home to farm.

“The best investments we’ve made in the 20 years I’ve been farming are tile drainage and bins,” says Jeff. “I tried to max our yields first, then built the bins.”

Indeed, when Jeff looks around at their dryer and storage, what he sees is how the addition of each piece of shiny steel tells a story of trying to make the most of tight markets, setbacks and growth.

But you have to look a little harder to see exactly how broad that impact has been. For Jeff, Tom and Kathy, their commitment to on-farm storage and drying has been a game changer. With storage, they can grow new crops and certified seed, and they can also invest their own sweat equity for lower handling and operating costs.

By avoiding elevator bottlenecks, they’ve also been able to expand acres while building their ability to sell into high-demand markets.

For Jeff, the bins have become a marketing tool. “Not having to sell at harvest has changed the dynamics,” he says. “It puts more control in your hands.”

In other words, the Sheas believe their farm is utterly different with the bins.

Of course, the story goes both ways. If bins made the farm stronger, the Sheas’ strengths made it possible to get the most out of the bins.

That’s because the bins also tell the story of the Sheas’ stubborn, unbridled passion for farming. In the end, it’s that passion that may be the real key to making a bin system pay.

So maybe the question is, Do you have that passion too?

ADVANTAGE #1 More crops, more markets

PHOTO CREDIT: DAVID CHARLESWORTH

W

hen the Sheas built their first bin in 1995 it was to store special foodquality soybeans that are exported to the Pacific Rim to make products such as tofu. At the time, buyers were willing to pay premiums approaching $2 per bushel for winter delivery.

Two years later, that market changed, the premiums dropped, and Jeff began using the bin to store certified seed.

Having bin space allowed the Sheas to expand their crop portfolio. In fact, they still find that on-farm storage opens the doors for storing seasonally purchased crops, and they find too that it can be a huge help in niche

SEPTEMBER 17, 2012

crops with limited buyers, where the ability to control the timing of your sales can be pivotal.

Nor is that true only in the East, or only for steel bins.

“Grain bags have really changed the dynamics (of on-farm storage and marketing),” says Brenda Tjaden Lepp, co-founder and chief analyst of FarmLink Marketing Solutions. She sees more temporary storage with her customers in regions where renting is more common, and where the farms are larger and the crop mix is simpler, such as canola, oats, wheat and barley.

Continued on page 24 country-guide.ca 23

business

Monitor bins by smartphone

By Maggie Van Camp, CG Associate Editor

A

new web-based bin-monitoring system that can be accessed by smartphones is now on the market. Calgary’s Mifarm.ag Management’s system uploads real-time data on grain bin conditions to a cellular network, to help farmers better protect their crops from spoilage and theft. Sensors located in bins monitor grain volume, temperature, and relative humidity, as well as control fans.

The system also uniquely monitors grain levels to warn of theft, an increasing threat.

Instead of buying and installing the system, you sign up for a three-year contract and Mifarm provides the service, including the cables and relay system. This costs about $0.12 per bushel over three years and includes service.

Every 15 minutes the sensors give a reading and within 10 minutes you get an alarm by email.

Mifarm president, Gary Gunthorpe, says the company started installing systems this summer and recently installed a 400-sensor system in a 30-bin storage facility. The information is communicated by cloud-based database that farmers can access via web portal and smartphone applications on both Rogers and Bell. “Our cellphone modem is higher and more powerful,” said Gunthorpe when asked about cellular dead zones. “It has four times the power of your cellphone.”

The development work started in September 2010 with three partners.

Delta T Engineering, ATI Agritronics Inc. an instrumentation company from Saskatoon and Cervus Equipment, a large publicly traded company owning the largest group of John Deere dealers in Canada. Recently, the federal government loaned $750,000 to Mifarm.ag Management Inc. to help commercialize this grain management technology. The project forecasts the manufacturing and installation of 300 systems in 2013 and thousands more by 2016, and will create 15 full-time positions in the process.

24 country-guide.ca

Continued from page 23 Grain bags have also been a good solution for larger-than-expected yields, or for crops that require storage but are only grown once in a three- or four-year rotation, like oats.

In 1997, the Sheas put up two more 9,000-bushel bins, enough for 100 acres of wheat or 200 acres of soybeans, the two crops that are traditional on this flat, heavy-clay land. Having three bins, naturally let them consider a third crop, and they started growing corn.

That same year, Jeff came home from attending DuPont’s Young Leaders program in the Midwest with one word on his lips — ethanol. From listening to other participants, he knew corn demand was going up. He could also see yields going up, thanks to bio-

tech traits including glyphosate tolerance.

Although corn prices at the time were far from stellar, Jeff saw long-term opportunity.

It was an insight that was bolstered by his work as a DeKalb seed dealer and former Monsanto sales representative, where he could see exceptional corn growers in his area starting to really make progress with corn.

That’s when Jeff added the dryer.

“When times are tough is when I build bins,” says Jeff. “These bins are built for $3 corn, not $6 corn.”

In fact, Jeff doesn’t like the risk of storing corn when prices are high and the threat of prices going down weighs heavily. Although the Sheas core all their bins and have heat cables, he’s also well aware of the potential of spoilage.

Advantage #2 Avoid harvest marketing

O

ver the years, Jeff has used his storage to avoid selling off the combine when harvest-time supplies were strong. His first lesson in the power of patience came with his first bin. At harvest some of his wheat graded as feed with greater than 10 per cent sprouting (another challenge in Ontario’s damp climate). Jeff stored that wheat until the end of the winter when he knew supplies were tighter… and the same wheat graded #2 with a healthy premium over feed.

A few sales like that can help pay for the bin, Jeff says.

Jeff leverages his stubborn streak with some good market information. In 2003 the Sheas added 50,000 bushels storage and at the next harvest corn was only $2.80 a bushel. Jeff filled the bins and held… and held… and held. By September corn finally got to his sell point of $4.

It’s during market downtimes when having bin space really pays, says Jeff.

When prices dipped two years ago, the Sheas built a 60,000-bushel bin. “In the summer of 2010, I still had 90 per cent of 09’s corn stored, and then in August I bought all our 2011 fertilizer,” says Jeff.

“Corn was $3.75 per bushel in the fall and by June it was $4.40.”

However, Jeff adds that it doesn’t always work to his advantage.“Sometimes my dad says I’m too in love with the grain…”

A major player in Ontario’s grain sector agrees that marketing from on-farm bins takes judgment.

Anyone who operates grain-handling facilities needs to clearly understand their costs and know that storing grain will not always be a good marketing strategy, says Wes Thompson, president of Thompsons Limited in Blenheim, Ont. “Get either of these principles wrong, and profits evaporate.”

Commercial elevators use storage for their own account only after careful analysis, says Thompson. “Generally, one in four years, storage is a waste of money.”

In 2010, storing grain for a sale later in the year was clearly a winning strategy, but in 2011, storage looked like a mistake by the end of the winter, although the Midwest drought later turned that situation completely around.

The lesson, says Thompson, is that it can be hard to predict the returns to storage, and it’s impossible to guarantee that storage will pay for itself in any given year.

For wheat, Tjaden Lepp also takes a cautious approach, recommending partial sales and then holding some crop for sales into early 2013. “Some pricing before harvest is a good risk management strategy,” says Tjaden Lepp.

Continued on page 26 S e p tember 1 7 , 2 0 1 2

Protect Your Investment

Grain, seed, fertilizer, fuel – for everything you store on your farm there is a Meridian product to fit your needs.

We design and build our equipment with you in mind, which is why our Meridian hopper bins and fuel tanks feature our premium powder coated finish and useruser friendly safety features. Protect your investment and be field ready with hopper bins and fuel tanks from Meridian Manufacturing.

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business

“ When times are tough is when I build bins,” says Jeff Shea.

“These bins are built for $3 corn.”

Continued from page 24

Advantage #3 Physical instead of paper hedge

O

n-farm storage can also restrict your marketing opportunities. Commercial delivery often means growers can sign basis contracts, for instance, and elevators also offer forward contracts out more than one year, something most end-users do not offer.

There’s also a price discovery trigger within this system. “Commercial elevators always have a price for grain in storage, whereas end-users may, or may not, be offering a price,” says Wes Thompson.

Although Jeff Shea follows markets daily, he’s not comfortable holding a call or put option. He says the fees with options are too costly, especially in years when the margins are tight. Instead he prefers to sell physical grain in increments rather than using options or hedging with paper. The cost of storing is balanced by the confidence that still owning the physical crop gives him in his marketing decisions.

“Not that I always get it perfect but I follow the advice of sources I respect — a market report from

26 country-guide.ca

Missouri, the Van Trump Report, my wholesale fertilizer dealer and the folks at DeKalb,” says Jeff.

Jeff also listens carefully for indications that the time may be right to sell, and over the years has seen some patterns develop. “If the Cargill buyers call, there’s likely four or five days left in the price.

If they’re trying to shake some grain loose, it’s a good indication that things are getting there.”

One advantage Jeff sees in having his own storage is the ability to balance basis against his actual storage costs. Current basis spreads were adding up to only about $0.05/bushel/month to carry. “$0.25/ bushel to store it from harvest until June is telling us not to store corn,” says Jeff. “Besides, Dad’s happy when they (the bins) are empty.”

Markets are changing constantly so it’s difficult to compare the validity of basis versus storing. “Carry charge strategies are only one layer of marketing decisions,” says Tjaden Lepp. “Basis contracts are not a good risk management strategy.”

September 17, 2012

business

Advantage #4 Lower handling fees

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n average their bins cost the Sheas about $1.25 to $1.50 to build. That doesn’t include the augers, legs, overhead bin or propane dryer. Two years ago the Sheas doubled their drying capacity. Now that they’re growing 500-plus acres of corn, the payback also comes from lower drying and handling charges.

Automatically filling the dryer means it can run through about 800 bushels an hour. The overhead bin and legs cost a total of $120,000 but make unloading, drying, and loading much more time efficient.

They can load out grain in multiples of three and blend with the same load-out pipe. The blending gains are similar to those at commercial elevators.

Lost interest and bin depreciation or bag costs for grain bags popular in Western Canada are major additional costs and should also be included. Last winter, Morley Ayars, regional farm business management specialist for Saskatchewan Agriculture, compared total average bin cost per bushel for various storage systems, including required unloaders, augers and carts. Used and new bins averaged about $3.83 per bushel for hopper bottoms and $2.45 per bushel for flat bottoms. Grain bag setups averaged $0.94 per bushel, plus $0.34 per bushel annually.

When calculating costs, farmers usually only include the direct capacity per-bushel capital costs and not the labour and operating costs of doing the work themselves, says Ayars. However, in the Prairies there’s a trend toward building hopper bottom bins instead of covering the costs of shovelling out flat-bottom ones. “Farmers in Saskatchewan are struggling to find good-quality labour so they are investing in capital instead of labour,” says Ayars.

The clear benefits of on-farm storage occur when a farmer has lower operating and capital costs than a commercial elevator, plus the commercial elevators requirement for profit, says Thompson. On top of the capital costs of construction, elevators also consider their opportunity costs, the operating costs like labour, propane and electrical,

opportunity costs and shrink loss incurred through drying, handling and spillage.

“On-farm drying may appeal to some farmers, but commercial drying is nowhere near as profitable as many farmers think,” says Thompson.

Each delivery to a commercial elevator is adjusted to the exact correct moisture level so there’s no additional shrink from drying or handling.

Unlike a commercial grain company, most farmers don’t include their own effort involved in managing and building storage when they look at P&L numbers. For the Sheas, no budget is big enough to include the planning they put into their facilities or the stress of dealing with problems. In 2004, when using the overhead bin and legs and dryer for the first time, the overhead bin collapsed due to faulty engineering. Fortunately no one was hurt. Unfortunately, the insurance company wouldn’t cover the damage because it wasn’t due to fire or weather. The Sheas had to go through the energy-sucking process of litigation to get a proper settlement.

However, some of the paybacks of having their own storage and dryer are unaccountably soft. His dad enjoys running the facility and his parents built a beautiful home on the yard site. They can blend to meet quality requirements, making the most out of their crops. Also, increasingly important has been their ability to give their sharecropping partners a break in handling, drying and storage fees. It’s helped build long-term relationships.

Although Jeff has plans to continue to expand storage, he’d like to install his own scale first in order to save trips to town for weighing for his sharecroppers.

With land prices in Ontario increasing astronomically, Shea Farms’ future growth may be tied more strongly to sharecropping and renting. “Farmers are getting older, and if they’re not carrying any debt and prices are good, they’re having the time of their lives right now,” says Jeff. “Why would they quit? Instead sharecropping is a good option for them.”

Advantage #5 Break the bottlenecks

A

voiding lineups at the elevator is another advantage of having your own storage. This added efficiency is worth a great deal when your harvest window is limited. With all three members of Shea Farms working at off-farm jobs and only one full-time employee, much of their harvesting is done at night, yet the local elevator closes at 7 p.m.

The efficiency of not having to wait in line to unload has made a huge difference, allowing September 17, 2012

the Sheas to expand their cropping acres, Jeff adds. The harvest window in this part of Ontario can shut rapidly as they’re prone to November streamers coming off of Lake Huron. It’s called the Snow Belt for a reason. Additionally, heavy fall rains on this clay notoriously bog down combines and trucks.

Says Jeff, “Storage allows us to farm the way we want to farm.” CG country-guide.ca 27

TOOLMAN

Throw out your marketing plan?

By Errol Anderson

t’s time for some straight talk. Listening to some market advisers — including me — may not have been the best medicine this crop year. The disastrous American Midwest drought of 2012 not only shook up U.S. and global grain and oilseed markets, it shook up farmers’ marketing plans as well, and it has certainly shaken a lot of people’s confidence in what they thought they knew about marketing.

In hindsight, your best strategy in 2012 might have been to throw out your marketing plan. But who could have known the severest U.S. drought in decades was on our doorstep?

When there are major global weather events, there can be years when tossing out the marketing plan might be the strategy that pays off the best. We’ve seen it happen before, and the American drought of 2012 may be another example.

What has happened in the U.S. this year is nothing short of a disaster, and the ramifications will be felt for months, extending well into next year. Growers who followed traditional advice this past winter and spring likely sold a good chunk of their production before drought shot prices up.

So it begs the question, wouldn’t it have been smarter if you had ignored all the advice and simply held your grain until you got the best price?

Before you jump to a conclusion, consider this. If markets go up and never come down, the short answer is that market planning and forward pricing is of little use. But in reality, we all know that this isn’t possible.

Markets simply do not act that way for the long haul.

No matter how bullish the bull market, it will always have a shelf life.

This year the scale of the drought losses is no doubt staggering, and it will be some time before that grain can be replaced. It will be months before new crop production from South America hits the global stream, replenishing export supplies.

So you ask yourself, what if Brazil and Argentina suffer production problems? Is this the beginning of short crop after short crop? Is this the beginning of a global food shortage?

But that’s looking at only half the equation.

One thing markets do very well is to drive substitution and eliminate demand when supplies get tight and prices soar. This will definitely be put to the test in 2013.

Industries find a way to survive. The cattle business is a key example. Burnt-out pastures will market cattle more quickly and various types of forage (including corn) will act as replacement. The cattle cycle will eventually repair itself, but it takes years. Grains will as well, but at a much quicker rate.

Any major global weather event can make best-laid plans of little use for weeks or even months. So yes, a year like this might mean that the last grower to sell is the one who wins. But no matter how bullish a market is, there will be price setbacks. And the old saying, “expect the unexpected” may haunt us before it’s all over.

28 country-guide.ca

Despite this incredible bullishness, with any sharply rising market comes an eventual price peak. The sky is not the limit. Higher prices ration demand. It’s a system that works, even in this market.

Then, a price correction ultimately occurs. Eventually, prices reach a point where demand is truly rationed or a new global event possibly in the financial world surprises commodity traders.

Marketing through volatile times can be highly stressful or extremely profitable for growers depending on how it is handled. No doubt, it’s during these times that prices and profits can really excel.

But you have to look at yourself in the mirror. Do you simply want to speculate on unpriced grain? Or do you want to ensure a profit?

These are two different individuals.

Day-to-day market swings are watched closely by the farm speculator whose goal is to sell at the peak of market prices. This individual calculates the money lost if the top of the market is missed.

By contrast, a farm business manager has long-term growth foremost in mind. This is a person who calculates production costs and assesses the cash price needed to cover expenses, and who often includes marketing objectives in the farm’s financial and production plan.

The gold standard for grain pricing in my opinion is to maintain a market plan that ensures some form of pricing discipline even during the incredibly bullish crop year we are now in. Prices can go up quickly, but down quickly as well. And without a pricing plan, marketing opportunities may be entirely missed even in the drought year of 2012. Even worse, some growers get caught up in speculative furor adding even more risk to their farm business. Buying futures while leaving grain unpriced in the bin is high risk and a recipe for market losses. This market gamble is fondly known as a Texas hedge.

Remember that while the futures market takes no hostages, a savvy marketer can race to the finish line taking advantage of sweet price gains along the way — even if prices will never be at the top without a whole bunch of luck.

So, is it best to throw out your marketing plan?

Maybe in the 2012-13 crop year, the answer will be yes.

Or maybe it won’t. The year isn’t over yet.

And what about next year? Well, the answer really goes back to what kind of farmer you are. Are you the kind to bet everything on a hunch? Or are you the kind to manage your way to long-term profitability, which gets us back to the original question. Is it better to throw those marketing plans out this year?

You know where I stand. Market plans and pricing discipline always have their place in a well-run farm business. CG Errol Anderson is a commodity broker located in Calgary and authors ProMarket Wire, a daily grain and livestock risk report. He can be reached at 403-275-5555 or email prowire@shaw.ca.

September 17, 2012

business

Outlook on corn prices Buyers need North American corn and they’re ready to pay us for it. So what are those clouds on the horizon?

By Philip Shaw orn producers have been enjoying some good times. Prices have been buoyant especially since the advent of ethanol and the birth over the last few years of the demand-driven market.

Now, those good times may get even better, thanks to the worst drought in over 50 years in the American Corn Belt and prices soaring to record levels in late July of 2012.

So, as we peer into the future, you can almost hear the corn planters being dragged out of their sheds before the combines even start rolling this fall.

The world wants our corn and Canadian producers are certainly poised to provide it.

Crop prices are obviously a major factor in building the momentum for corn going into the planting season of 2013. But let’s remember that price isn’t the only thing that corn has going for it. Corn has other advantages, which scream out over other grains when it comes to those planting decisions.

Modern corn hybrids have had traits placed within them that fend off pests and consistently produce higher yields on a relative basis compared to soybeans and other grains. This trend continues, and in turn it is adding even more optimism to the crop, helping explain why Ontario farmers planted 2.3 million acres in 2012.

Where do we go from here? It surely will be a long story because the devastating drought of 2012 completely changed the market for corn not only in Ontario, but in the United States and in the rest of the world.

Coming out of the South American drought in the winter of 2012, the world needed big U.S. crops to maintain global ending stocks. However, that didn’t happen. The USDA in its August 10 report said the United States is set to produce 123.7 bushels per acre of corn this year, down from the 166 bushels per acre they predicted on March 30.

This was what in the trade is referred to as an “unexpected Tuesday,” which arrived in June and July of 2012. Nobody saw it coming. Certainly the market was unprepared.

The 2012 U.S. crop had gotten off to an early start and looked very good in the early spring, with the USDA reporting in its June 29 report that 2012 corn acreage would be 96.41 million acres. Then, a once-in-a-half-century drought chopped 43 bushels per acre from the March estimate.

With corn being abandoned and going for silage because of the devastating drought, the harvested September 17, 2012

acreage will surely be reduced further. It is scorched earth across the American Corn Belt, and it raises several questions as we move ahead.

What will be final yield of the U.S. corn crop in 2012? As August wound down, 123.7 bushels per acre seemed high, with many prime corn-producing areas like southern Illinois looking at yields under 100 bushels per acre. If yield goes lower, will prices go higher for old crop and new crop as we look into 2013?

Or, will demand be destroyed, both in the short term and the longer term by these higher corn prices?

Already, wheat is being substituted for corn at every junction to reduce costs.

And what about the non-commercial speculative interests who pump millions and millions of investment-fund dollars into agricultural commodity markets, helping drive prices to their current highs?

How reliable is their participation?

Will the continuing debt problems in Europe drive the fund money into U.S. treasuries, boosting the value of the U.S. dollar, which is always negative for commodity prices?

And what will the weather do? That is always the ultimate question, the great equalizer in 2012.

The record prices that corn made in July of 2012 have been a great boon for people who have corn.

It surely gives the industry hope. However, will the effect of these high prices be to encourage more production next year? Or will super-high prices simply destroy demand to a point where supply and demand ultimately find a new balance?

We could already see a potential warning signal by looking at demand for corn in the late summer of 2012.

With corn prices rising, demand for corn stagnated and then fell off fairly dramatically. For example, since the initial USDA estimates in May, demand has fallen for corn in three major categories, with feed, exports and ethanol falling 25, 32 and 10 per cent respectively.

Total corn demand has plunged 18 per cent.

That’s almost one of five corn cobs which were projected to be produced in the United States early in 2012, a huge hit on demand.

As well, North America’s high corn prices are a loud market signal to other nations which can produce corn.

While it’s true that in Ontario, corn acreage will be held back because of the likely increase in wheat plantings this fall compared to 2011, the globally higher prices for corn will encourage production in South America, Continued on page 30 country-guide.ca 29

business

Continued from page 29 Ukraine and other corn production regions. At the same time, wheat will be substituted for corn whenever possible, further stabilizing the price of corn.

Simply put, the 2012 drought in the U.S. Corn Belt combined with the higher price of corn will see production shifts throughout global agriculture.

If the 2012 run-up in corn prices was the result of a perfect storm of news all coming at the same time, we also shouldn’t forget the key driver is still U.S. ethanol policy and the American renewable fuel standards (RFS). They are the major reason for the huge increase in corn demand from ethanol.

Nor should we underestimate that demand. Ethanol usage has fallen 500 million bushels this year, down to 4.5 billion bushels out of a total crop of 11.225 billion bushels. Even with that decrease in demand, however, ethanol still represents 40 per cent of the corn grown in the United States.

With corn prices having run up to record levels this past summer, there has been much talk of the suspension of the renewable fuel standards by the American government to facilitate lower prices for the food and livestock sector.

That is the biggest black swan or unexpected Tuesday that could hit this corn market from left field. If this market wakes up one day and learns that the renewable fuel standard had been suspended, the price of corn will drop precipitously into a new lower price range. That 4.5 billion bushels, representing 40 per cent of corn demand, is nothing to sneeze at.

If U.S. political leaders change their ethanol policy, the whole psychology of the corn market in the U.S. and the world will face a paradigm shift back in time. Even in an election year in the United States, 30 country-guide.ca

there are forces on both sides of this issue which are bringing it to the fore.

It is unpredictable. Some analysts say it won’t happen, but if we have learned anything from the 2012 growing season, it is that in corn, we should never say never.

At this early juncture, measuring 2013 corn acres versus all other grains is a bit of a flyer, especially when this year’s crop is yet to be harvested. However, the world is facing reduced corn stocks as well as much higher prices, which in turn are garnering the spectre of 100 million U.S. corn acres next spring.

Yes, that corn acreage figure for 2013 seems preposterous, but make no mistake, there will be a huge push for corn acres over the winter and into spring, and as always, the weather will be critical.

If it were only about the supply and demand for corn it would be so easy. However, the non-commercial speculative interests in the grain market manage huge pools of investment money, which flow in and out of agricultural commodities at a moment’s notice.

Their choices affect currency values and corn prices usually in very significant ways. They accentuate trade volume, which in turn, makes for higher highs and lower lows. Price volatility is usually the result.

The challenge for Canadian corn producers is to measure how their management choices fit into this corn environment. Corn has so many advantages with its superior economics compared to other grains. As we move into the fall harvest and then look toward spring, surely there will be visions of 200-bushel yields sold at $6, $7 or $8 a bushel in 2013.

As said above, if the 2012 corn-growing season proved anything, it’s that you can’t take things for granted. As we look ahead, though, Canadian producers are poised to produce. CG September 17, 2012

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business

Corn heads west Ten million acres of western corn within 10 years?

By Allan Dawson

32 country-guide.ca

rain corn plantings hit a record 300,000 acres in Manitoba this year, and Joel Lawson, who farms at Miami, an hour south of Portage la Prairie, accounted for 315 of them. The 29-year-old, in his second year of farming with his dad Ray, quadrupled his corn acres from last year.

“I did it because of the potential for a higher net return,” Lawson says. “The dollar value exceeds wheat and other cereals.”

With 2125 corn heat unit genetics in 2011, Lawson’s 70 acres yielded just over 150 bushels an acre, and it came off almost dry, making it seem a simple choice to plant more in 2012.

Now, DuPont Pioneer wants to replicate Lawson’s success and take corn across Western Canada.

“We see 10 million acres of corn in Western Canada in a 10-year time frame,” says Greg Stokke, DuPont Pioneer’s business director for the company’s Western Canada commercial unit, and he talks in terms of corn “transforming” western Canadian agriculture.”

New corn acres will come from feed wheat and barley, Stokke says.

September 17, 2012

business DuPont Pioneer has already invested in bricks and mortar, opening a facility in nearby Carman in 2009 to breed corn as well as work on canola and soybeans. Earlier this year the firm also opened a new research centre in Edmonton.

And as DuPont Pioneer invests so heavily in western Canadian corn, its competitors are watching, and might not be far behind.

The task ahead seems even more radical in the face of the crop’s checkered past in the West — a past that has kept it from breaking out.

Manitoba isn’t the only player, however. Alberta planted 70,000 acres of grazing and silage corn and 20,000 acres of grain corn last year, with 60 per cent grown south of No. 1 Highway and the rest north.

About 30 per cent of the West’s corn is now used for grazing or silage and 70 per cent for grain, but eventually Stokke says 95 per cent will be grain.

Most Manitoba hybrids are in the 2200 to 2400 corn heat unit (CHU) range, but DuPont Pioneer also sells a 72-day maturity (2050 corn heat unit) variety.

“If we get to a 70-day corn hybrid, that opens up about 10 million acres (in the West),” Stokke says.

“When you get down to that 68-day corn hybrid you open up about 20 million acres in Western Canada.

In 10 years or less we’ll be at 68 day (1900 CHU).”

In fact, DuPont Pioneer, formerly known as Pioneer Hi-Bred, estimates there are 40 million acres in the West with the right soils and sufficient rainfall to produce corn. The hurdle is to breed hybrids that can mature early enough.

The next canola?

Theresa Bergsma isn’t surprised Manitoba farmers seeded record corn acres this spring. The secretary-manager of the Manitoba Corn Growers Association (MCGA) says the industry had been expecting it for several years, but until 2012 the springs were too cool, too wet or both.

Future production depends a lot on prices, Bergsma says.

“If prices stay strong like they are now, corn acres will grow,” she says. “But it also depends on the spring.”

Corn is a heat-loving crop. It needs to be planted early and to get out of the ground fast in order to mature before the first killing frost, which on the rare occasion has struck in late August in the Red River Valley, where most of Manitoba’s corn is produced.

Next year’s seed supply could also be a factor due to drought in parts of Ontario and the United States where corn seed for Manitoba is produced, Bergsma says.

As well, competition for seed may be intense, based on farmers around the world chomping at the bit to increase acreage for a chance to sell $8 crop.

If Lawson could grow a repeat 150 bushels, and if prices did stay as high, that would be an astounding $1,200 gross per acre.

The reality will likely be less astronomic, but it explains the urge to plant.

September 17, 2012

When Joel Lawson started farming last year with his dad Ray near Miami, Man., he wanted to try corn, a crop Ray hadn’t grown for a few years and which had a troubled past in the province. A good crop and good returns, however, saw Joel quadruple his corn acres this spring, contributing to the record 300,000 acres of grain corn seeded in Manitoba in 2012. The corn in this field was almost 10 feet tall when photographed Aug. 30.

A better start

In the countdown to harvest, crop watchers are keeping a close eye on the Manitoba crop.

“The majority of Manitoba corn growers were able to plant their 2012 grain corn crop by late April or early May, knowing that an early seeding date often allows them to achieve maximum yield, top quality (test weight) and low per cent kernel moisture in grain corn at harvest,” says Pam de Rocquigny, Manitoba Agriculture, Food and Rural Initiatives’ (MAFRI) cereal crops specialist based in Carman.

“As well, corn has benefited from the higher temperatures seen over the growing season.”

The big question is, were the rains timely enough? Most cornfields could have used more, but in late August observers were still hoping for an above-average provincial yield. Farmers lucky enough to get adequate moisture were crossing their fingers for a bumper crop.

The five-year average yield for corn in Manitoba is 97 bushels an acre, according to crop insurance data. The record — 118 bushels an acre — was set in 2007.

Now, that 2007 record looks like it might be beatable. At the very least, it no longer looks like a fluke. In four of the last six years the provincial average exceeded 108 bushels an acre.

Back in 1981 when the previous plantings record was set at 225,000, Manitoba’s five-year average corn yield was 63 bushels an acre — a third less than it is today.

Grain corn has come a long way in Manitoba.

Production got a kick-start in the 1960s when Seagram built a distillery at Gimli. It wanted to make whisky, including its prestigious Crown Royal, from Manitoba corn. The company helped teach farmers how to grow corn and would later sponsor the annual corn-growing competition.

In 1971, the province’s farmers established the MCGA and seeded 9,000 acres of corn, with a harvest of 440,000 bushels.

For many years the distillery was a major market for Manitoba corn and it paid a premium for high quality. Now, however, most of the crop goes for alcohol of a different sort. Husky’s ethanol plant at Minnedosa buys nearly 60 per cent.

Moving on to clay Once restricted to the loamy soils in the CarmanMorden-Altona triangle (south-central area), which also traditionally records the highest heat units and Continued on page 34 country-guide.ca 33

business Continued from page 33 longest frost-free period, Manitoba’s corn acreage is starting to spread out and the crop is being successfully grown on heavy clay soils, which are slower to warm in spring and can be trouble under wet conditions.

Keith Murphy, president of et al Inc., a company that runs variety trials under contract, says improved drainage and genetics have helped. Earlier-maturing varieties especially are driving higher yields.

As well, herbicide-tolerant varieties have made weed control easier and more consistent.

But corn acreage hasn’t taken off the way soybeans have, even though corn has been in production here much longer. Prices for frost-damaged soybeans are discounted, but can still earn a return,

yet growers remember several years where much of Manitoba’s corn was either too immature or too mould infested to harvest, meaning it earned no income at all.

Corn has the potential for high yields, but it’s a costly crop to grow. And it requires specialized equipment, including a planter and corn header for the combine.

Soybeans by contrast can be produced with conventional equipment, although more and more farmers are buying planters and flex headers to better produce soybeans.

Lawson uses his dad’s corn planter and combine header, but he estimates both, which are 30 years old, could be upgraded for about $6,000. He uses the same planter to seed soybeans and sunflowers.

B:16.25” T:16.25” S:15”

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business A one-in-10 wreck

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Roughly once every 10 years or so Manitoba corn has a wreck. The coldest growing season on record in 2004 saw Manitoba farmers harvest an average of just 1.3 bushels per planted acre. In 2009 corn averaged 44 bushels an acre due to a cold spring and cool summer. In 1993 excessive moisture resulted in an average yield of 19 bushels an acre, and the year before the average was just 20 bushels due to frost.

That’s why Bergsma urges farmers to hedge their bets by planting early-maturing hybrids, with fewer acres devoted to later maturing, but potentially higher-yielding varieties.

Each year the MCGA’s annual yield competition

provides insight to what is possible with corn. Last year Baker Colony Farms near MacGregor didn’t just break the competition record, it shattered it with a yield of almost 272 bushels an acre. The old record was 253 set in 2008.

That contest is based on hand-picked cobs, not field-scale harvests. Still it points to a crop with potential.

Stokke for one is a believer. “We have 75 per cent market share in Manitoba because of our people. We’re just going to replicate that across the rest of the Prairies. We have the model, the knowhow, the funding — we can do it. We’re committed to Western Canada.” CG (With files from Rebeca Kuropatwa)

T:16.25” S:15”

T:7”

S:6.25”

L156H

management

Minimize your fertilizer price Increasingly, it pays to use the same skills when buying your nitrogen as when you’re selling your crops

By Gerald Pilger ne of the biggest decisions farmers face each year is when should they price their fertilizer needs. Not only is fertilizer the biggest input expense in many crops, but prices can change dramatically in a relatively short period of time.

Purchasing at the “wrong” time (i.e. when fertilizer prices are high) can seriously impact the farm’s financial situation. But how can a farmer know when the time is right?

Here are four strategies to consider in the new era of increasingly volatile fertilizer prices.

1. Pre-buy Pre-buying fertilizer months before it is required has become standard practice for most growers, with the goal of taking advantage of the seasonal nature of fertilizer prices.

In most years, fertilizer prices are lowest in the late summer or fall. Growers with fertilizer storage capacity and available cash or credit can save money by purchasing in this time period. However, this is not always the case. Growers who bought their fertilizer in the fall of 2008 found they paid nearly twice as much as those who waited to purchase theirs in the spring of 2009.

That year, the commodity price crash was largely responsible for the sharp drop in fertilizer demand and prices between fall and spring.

On the other hand, in the spring of 2012 fertilizer prices shot up by more than 50 per cent in three weeks at seeding time, largely due to a shortage of supply. In fact some growers simply could not get as much fertilizer as they intended to use at any price.

As well, many farmers experienced delays in delivery of fertilizer even though they had pre-paid for all they needed.

These are all symptoms of an increasingly volatile fertilizer market, and in light of this, it’s easy to see why combining pre-buying with on-farm storage is becoming common practice, with growers trying to build as much certainty into their fertilizer supply as possible.

At Minnesota State University, agricultural economist Mike Boland says there are a number of factors which impact fertilizer prices. Factors which can affect fertilizer prices include crop prices, crop supply and demand, expected fertilizer supply and demand, natural gas costs, exchange rates, transportation costs, government policy decisions, and consolidation within the fertilizer industry.

Boland also emphasizes that fertilizer is now a 36 country-guide.ca

globally traded commodity, and farmers and fertilizer retailers have very little pricing power.

2. Lock in a profit margin Jonathon Driedger, a market analyst with FarmLink Marketing Solutions, suggests growers should be looking to lock in a profitable margin rather than simply trying to pick the lowest fertilizer prices.

Driedger recommends forward selling grain at the same time that you pre-buy fertilizer in order to ensure profitability.

Minnesota’s Mike Boland agrees, recommending growers link the purchase of needed crop inputs with futures sales of the crops you will be growing.

3. Hedge nitrogen prices Farmers are well aware of the value of using hedging to lock in commodity prices. Unfortunately, there are no futures contracts for fertilizer.

Until 2005, natural gas futures could be used as a proxy for nitrogen fertilizer hedging because nitrogen prices tended to follow natural gas prices relatively closely. After all, natural gas is the primary component of nitrogen fertilizer, accounting for up to 80 per cent of the cost of nitrogen fertilizer production.

However, there has been a decoupling of the natural gas/nitrogen fertilizer relationship. Instead, grain prices now are a bigger influence on fertilizer pricing, with higher grain prices resulting in higher fertilizer prices.

At least one major retailer of fertilizer publicly acknowledges this new pricing relationship and in fact is offering farmers a risk management contract that connects fertilizer prices with canola prices.

This fall Cargill has introduced the Nitrogen Risk Reducer Contract. A grower pre-buying nitrogen fertilizer from Cargill has the option to purchase a contract which adjusts the price of pre-bought nitrogen should the average price of canola decline between the time of fertilizer purchase and March 16, 2013.

For every dollar per tonne the averaged futures price of canola drops during the contract period, growers are refunded $1 per tonne of fertilizer purchased (or booked) and protected under this contract.

The premium for Nitrogen Risk Reducer Contract is $20 per tonne and must be paid at time of purchase or booking of the fertilizer. It is up to growers to determine how many tonnes of their fertilizer purchase they want to protect with this contract, although there is a minimum of 25 tonnes and growers cannot protect more fertilizer than they purchase. september 17, 2012

management While not a true hedge, this contract is intended to provide peace of mind to growers faced with the current high fertilizer prices. Growers can purchase their fertilizer needs in the fall when prices have historically tended to be the lowest, yet still be partially protected should canola prices drop which in turn would likely result in lower fertilizer prices during the winter months.

4. Cost averaging The simplest way to reduce price volatility risk is dollar cost averaging. Few farmers sell their entire crop on just one day so why are farmers willing to risk locking in their biggest crop input cost on just one day?

Instead, the cost-averaging strategy would see farmers buy a portion of their fertilizer needs throughout the year, thereby averaging out the cost of fertilizer over the year. For example, a grower could arrange with a retailer to purchase one-twelfth of their annual fertilizer needs on the first day of each month.

Or perhaps a grower might decide to purchase quarterly. For example, they could purchase a quarter of their next year’s needs on June 30, followed by subsequent quarters on Sept. 30, Dec. 30, and March 30. Actual timing of purchase would vary between growers depending on cash flow, tax considerations, storage, and other factors.

An average purchase strategy may also benefit the retailer. Typically retailers place fertilizer orders months in advance, which exposes them to risk because dealers also have no way of hedging the price.

Plus, unlike farmers who know fairly closely how much fertilizer they need, the loss or gain of customers can significantly change sales volumes for retailers.

In this context, customers who are willing to commit to purchasing their next year’s requirements a year in advance reduce the risk to retailers when they are ordering their supply.

Interestingly, none of the four fertilizer retailers I contacted had any type of contract whereby a grower’s fertilizer needs could be purchased in equal portions throughout the year. But three of the four representatives of these companies could see value

in offering such a program and they said they would pursue the idea further.

The one independent retailer I spoke with stated he had never even considered something like this, but would certainly work with any producer who wanted to purchase fertilizer in increments over time.

Will such a strategy become a popular choice?

At this point it’s hard to say. Much will depend on whether farmers feel motivated to seek some level of price protection. If your goal is to get a good fertilizer price — at least in relative terms — then averaging may not look attractive. On the other hand, if your goal is to avoid a bad price, then it may look like an appropriate tactic.

As fertilizer prices continue to gyrate, we may be about to find out which attitude is the better basis for building a successful farm. CG

Fertilizer price outlook When asked for an outlook for 2012-13 fertilizer prices, most of the experts I talked to say farmers should expect a similar pricing pattern as in 2011-12.

Farmers have had a number of years of good crop prices and most have relatively strong balance sheets, says Mike Boland, economist at Minnesota State University. Even farmers who are experiencing severe drought this year most likely have crop insurance which will provide the cash flow needed for fertilizer purchasing.

In that scenario, it’s hard to see fertilizer demand dropping, especially with the outlook for another year of high grain prices.

As a result, Boland doesn’t see any downward pressure on fertilizer pricing.

At FarmLink Marketing Solutions, market analyst Jonathon Driedger is telling his clients that they should consider locking in prices for at least a portion of their nitrogen fertilizer needs right now. He too believes there will be strong demand for corn next year and farmers will be very willing to invest in fertilizer for that crop, given the high prices.

“It’s all about corn,” says Driedger.

Matt Erickson, economist with the American Farm Bureau Federation is predicting higher nitrogen fertilizer prices throughout the winter and into the spring. In an early-summer webinar on energy and fertilizer, Erickson said: “Locking in fall fertilizer needs this summer could be a good opportunity, although it will likely be a narrow opportunity.”

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september 17, 2012

country-guide.ca 37

March 2012

management

Growing the brand AGCO’s two senior North American executives share their plans for building their company

By Scott Garvey, CG Machinery Editor

For AGCO’s Crain (l) and Richenhagen, North America is the world’s key battleground.

arlier this summer, most of AGCO’s senior North American executives made the trek from their corporate head office outside of Atlanta, Georgia, to the small, rural city of Jackson, Minnesota.

They went there to cut the ribbon and make a few speeches at the grand opening of the “Intivity Center” attached to the company’s tractor and sprayer assembly plant in that community.

Along the way, they told us about their strategy to grow their market share in both the U.S. and Canada. It’s a strategy that integrates marketing with every facet of the business.

The Intivity Center is a 17,000-square-foot visitors’ interpretive facility created to enhance the experience of anyone visiting the plant, which itself has just undergone a 75,000-square-foot expansion to accomodate production of wheeled Massey Ferguson and Challenger-brand row-crop tractors.

One AGCO executive described the Intivity Center as a “destination attraction.” Dealers can bring customers or prospects to the plant to see first hand what goes into building an MF or Challenger tractor, and anyone else can make the trip to Jackson to see the facility too.

All that helps enhance the company’s image, with the objective of building a positive image in the mind of potential customers as a strong driver for sales.

38 country-guide.ca

Higher sales numbers in North America are exactly what the company is striving to achieve.

According to senior management, investing in its North American manufacturing facilities is a major part of the company’s overall strategy to continue building the profile of its brands.

“We want to grow more in America than any other area of the world,” said Martin Richenhagen, AGCO chairman and CEO, during his address to the hundreds of dealers and invited guests at the Intivity Center grand opening ceremony. “When I came to the U.S. I always had a dream. And the dream was to build a factory for wheeled tractors in America.”

The Jackson assembly plant is the realization of that dream, and the company is planning other capital projects in the U.S. to increase its presence in North America. “AGCO is on a growth path,” Richenhagen continued. The company is spending $350 million on research and development this year, he said, and it is also pumping another $350 million globally into capital projects.

After the formal ceremony concluded, Richenhagen and Bob Crain, senior vice-president and general manager for North America, sat down with selected media to talk about the newly expanded tractor plant and how it fits into their vision for the company’s future.

“We would like to have everything we sell in America to be produced in America,” said Richenhagen.

“And we’re getting there. This (Jackson plant expansion) is an important first step in that direction.”

Getting production ramped up in Jackson to include row-crop tractors was the result of an extensive planning effort. As construction progressed on expanding the building and installing new equipment, staff from the plant spent a lot of man-hours in the Beauvais, France factory where the large rowcrop tractors were previously built. They were there to learn the unique assembly processes for the tractors, so they could seamlessly integrate those processes into the U.S. operation when they got home.

That kind of planning and lead-up effort is an example of why translating investment into tangible results doesn’t happen overnight. “If you know anything about product development, you don’t see the products for three or four years after you start spending the money,” explained Crain. “What dealers are seeing right now is truly the tip of the iceberg. The best is yet to come in terms of products.”

September 17, 2012

MANAGEMENT Along with increasing North American production, they also want their machines to have a reputation for quality. “We want to be No. 1 in perceived quality by 2014,” said Richenhagen. “Which isn’t an easy target because our competitors don’t stand still.”

The Equipment Authority

EUROPE TOO And don’t think the move toward increasing production in North America is an effort to flee the uncertain economic conditions in Europe, cautioned Richenhagen. “We are also growing in Europe.

We had a record first quarter in Europe, so that means our industry is different from some of the other industries.”

Richenhagen doesn’t believe the economic uncertainty there is holding back AGCO or any other company in the farm equipment industry. “I wouldn’t give up on Europe,” he said.

Even so, Richenhagen does think changes to the structure of the EU could eliminate the cause of some of that region’s current problems. “I always thought from the beginning it’s very difficult having one shared currency but different tax laws. I think we need to get into a kind of structure similar to maybe the U.S. or Canada, kind of the United States of Europe, which means we don’t want to overregulate every single country. But in the area of tax legislation and business laws we need one European state bank instead of many state banks.”

Richenhagen sees having production facilities in a variety of countries, including those in Europe, as a key element in running a global business. “You don’t want to put all of your manufacturing into one country only,” he said. “Therefore, we have it in France, Germany, Italy, Holland, and Finland, and then, of course, in eastern Europe.

That’s a nice footprint.”

AGCO has production facilities elsewhere as well, including South America. It’s building a new factory in China and expects to open a production facility in Africa at some point in the future.

Although there is widely publicized speculation that CNH Global, parent company of New Holland and Case IH, will pull up its corporate stakes in Italy for greener pastures elsewhere, Richenhagen doesn’t see any need to do the same with AGCO’s Italian holdings. “I think this is kind of a political fight,” he said of the CNH affair. “We don’t have an issue (in Italy). We like to be in Italy, because it’s not bad to have a factory in the important markets.”

As the company looks at future growth, Richenhagen offered a criticism of the prevailing attitude among many outside investors, saying he believes they don’t fully understand the new reality in the farm machinery industry.

“There is a kind of paradigm in our industry which needs to change,” Richenhagen said. “Which is the very famous question, ‘where are we in terms of the cycle?’ There are no cycles in our business anymore. When you look back in history, the last 15 years were extremely stable for our business. Even during the financial crisis we were hit very, very late. The problem is that those people at Wall Street are not coming from the countryside. They don’t understand farming. They’re big-city guys.”

And as he looks to the future of the North American market, is there a need for AGCO to continue to make capital investments by adding or expanding manufacturing facilities in order to fully reclaim Massey Ferguson’s once large market share? In answer to that he is unequivocal. “Yes. I think so,” he said quickly.

Will AGCO continue making those North American investments?

Richenhagen seemed to sum up the answer to that question during his speech at the grand opening ceremony when he said, “I would put it under the headline: AGCO, always growing.” CG SEPTEMBER 17, 2012

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country-guide.ca 39

management

Motivate with meaning For Bob Milligan, success comes when you switch from managing the task to managing the employee

By Maggie Van Camp, CG Associate Editor

hen I was 19 years old, I milked for a large herd in a rotary parlour. It was so repetitive I started dreaming about rear udders. Improvement of productivity was the last thing that I was thinking about, and that was before texting.

Face it, many of the tasks we ask farm employees to do are boring and dirty, and they’re crammed into some pretty tight windows of opportunity. Yet we need them done, and we need employees to do them.

Historically, if farmers and their families provided their own incredible self-motivation, they were successful. However, today most farms need employees, especially if they plan to expand, and that requires a different approach to improving productivity, including a little understanding of psychology. It’s one thing to say you want to motivate your employees, but quite a different thing to make it happen.

Bob Milligan, professor emeritus of applied economics and management at Cornell University and consultant based out of Wisconsin, says that instead of focusing on managing the task, managers need to focus on motivating the person to do the task. This switch in manager mentality can make all the difference.

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Milligan says individuals need to make decisions in order to feel they’re in control of their work, no matter what the job. This autonomy is one of the most important ways employees derive meaning from their work.

Milligan sees this motivation roadblock often in his human resources consultancy work with farms, and he knows how difficult it is for these farms to succeed if they can’t change their attitudes.

He sums it up with his favourite saying from leadership trainer Lee Colan, “Meaning precedes motivation.”

“More than ever leaders need to engage employees in success,” Milligan says “Employees can perform best when they control their own actions.”

Whether employees are picking broccoli, milking cows or driving a swather, Milligan’s four-step plan has helped improve productivity and create happier employees by shifting manager attitudes.

Does it sound easy? It can be, Milligan says, but managers need to be willing to change and not blame the situation on individual employees.

1. Have vision Creating meaningful work requires farmer-leaders to communicate their vision to their employees. Often this falls by the wayside when we’re just simply focused on trying to keep ahead of the unrelenting demands of the job. As farmers, our focus becomes just getting the job done, not talking about vision.

Milligan suggests his clients start by writing down their answer to this question: “Why do you do what you do?” Then, take a look at your answer to see if it offers up a picture of the future that could motivate employees. It might need to be amended but can be used to help direct how employees are managed.

This can be very useful when the pressure of farming starts to mount.

It used to be on a farm that the only rats you had to race were in the granary. Today’s volatile commodity markets, rapid consolidation, demanding niche buyers and all the unknowns of global trade have brought the rat race to the farmyard. On-the-fly decisions are bigger and more critical than ever, and they’re blinking at us 24 hours a day from our mobile devices.

“Farmers today must make decisions faster, take advantage of opportunities faster and deal with threats faster,” says Milligan.

September 17, 2012

management

Under this pressure, it can be challenging to respond well. That creates stress, and this stress can then be passed along to employees, family, managers, suppliers and even customers. Milligan often deals with the fallout from farmers reacting negatively to this urgency. Anxiety infects your employees and eventually it sucks the productivity out of the farm.

Milligan coaches these farm leaders to view change as an opportunity and to always remain focused on what’s important to them — their vision.

Such an attitude can turn a stressful problem into an invigorating challenge that can be motivating to solve, with employees as part of the solution.

“It has to be perceived as positive urgency,” Milligan says.

2. Set Expectations For employees to feel motivated, they have to clearly understand what’s expected of them, which means explaining in detail why their job is important to the farm, says Milligan. Employees also need the chance to add their own input, and to ask questions and raise the possibility of getting additional resources, such as training sessions.

September 17, 2012

“Ninety-nine per cent of employees aren’t clear what’s expected of them,” says Milligan. Nor are they given feedback, unless something goes wrong.

Milligan starts by getting his clients to clearly explain daily responsibilities, including why each job is important to the farm. Then they give employees a chance to ask questions or, where appropriate, provide input.

“A major source of conflict, reduced motivation and poor performance is lack of clarity relative to one’s roles and responsibilities,” says Milligan.

Further to this day-to-day clarity, Milligan helps his clients create job descriptions. His includes the name of the supervisor, a summary of the position, a bulleted list of specific current and new responsibilities and capabilities, and attitudes required to do the job.

Milligan believes a job description should contain at least three key measures of performance for the individual in the position to succeed. Then the employee knows up front what the job is also about, which opens the door to personal improvement.

Continued on page 42

country-guide.ca 41

management

Cellphone police or policy?

A few years ago, a farm friend lamented that texting was a huge waste of employee productivity. At the time, he wasn’t texting himself. Instead, he still relied on two-way radios as the farm’s main communication tool, and texting just looked to him like an electronic way of goofing off.

A couple of years later, this same friend got his first smartphone. Now, he’s an avid texter and cellphone user, and although he makes it clear that employees are not to use their cellphones while operating anything, he understands how useful texting can be in keeping people connected.

Instead of policing, he now has a policy based on employee safety.

Bob Milligan agrees that the rules of the game for cellphone use need to be set in a policy. However, this policy needs to be very clear, explaining who, when and where everyone can use cellphones. It’s important to explain why the expectation is important or needed. Distraction because of text messaging or talking on the telephone can cause injury or even death. As well, in a growing number of places, it’s illegal to text or talk and drive without a hands-free device.

Make it clear too that cellphone decisions are made in the best interest of the farm, not based on the personal desires of the employee.

Don’t forget to ask questions and let employees provide input. As in the case of my friend, he simply didn’t understand how useful cellphones can be. Maybe it’s a good time for you to embrace the technology and it’s definitely a great excuse to provide employees with a number for emergency phone calls.

Then write the policy down (including the whys) for future reference, post it, and include it in employee manuals, job descriptions and policy binders.

Also remember, you have to live by your own rules.

If there’s a problem, first look for the reason behind the misuse of the cellphone. Is it lack of understanding, lack of commitment, or employee error? Once the policy is established to guide employee use of their cellphones, then the farm leadership and supervisor need to work continuously to maintain employee commitment.

42 country-guide.ca

Continued from page 41

3. Give and receive feedback Sometimes, farmers and supervisors fail to get the most from their employees because they forget their very valuable human attributes. Unlike a tractor, humans aren’t merely tools. They think, decide, ask questions, provide input and respond emotionally.

Instead of trying to identify and control employee problems, managers should be focused on the solution involving all the possible attributes of employees.

One trend Milligan is seeing is more middle management on farms. It began a few years ago with larger dairy operations picking up on the idea of crew supervisors used by fruit and vegetable farms. More recently, middle managers are getting used on corn, soybean farms as they reach 6,000 or 7,000 acres.

Generally, these supervisors get promoted for their production skills. Yet they are expected to be the front-line managers of employees with emotional responses, questions and insight.

To empower others, Milligan says we need to let individuals feel in control and make decisions. They need confidence that they can excel, and they need to believe they are growing and learning and that they can relate to those around them. “Today we know that people respond well to positive feedback, encouragement and support,” says Milligan.

Milligan suggests using three types of feedback, including positive, redirected (such as using training or explanation), and negative. Reprimands, punishment and demotions should be used when standards aren’t met due to personal characteristics or attitude.

“The key is to get people talking,” says Milligan.

“No matter what the mess is.”

4. Proactively people organize Milligan helps farmers develop a systematic approach to human resource management based around performance reviews. Job descriptions are linked to these performance reviews. Training and possibilities for promotion or growth are spawned from the reviews.

Importantly, employee feedback drives this review system.

Responsibilities and communication corridors are organized and explained clearly. The bottom-line benefit for this more formal structure is that it allows for continual communication at the right time and to the right person. It doesn’t have to be a complicated corporate maze, but it does have to be known by everyone, including family and all employees.

Making it work takes commitment from the farm’s leadership, together with an understanding of why such processes can drive the farm’s success.

In other words, sometimes the most difficult challenge in managing your human resources can be changing our own behaviour. “Leaders and supervisors must change their behaviour,” says Milligan, but then he reminds them, “It is possible, and the reward for individuals and businesses is immense.” CG September 17, 2012

hr

The wrong beliefs Our beliefs about farming and about life can prevent us from achieving the success that is waiting for us

By Pierrette Desrosiers, psychologist and coach

n large part, our beliefs determine what we get out of life. They can also help us be successful as farmers, or they can get in our way.

By this, I don’t mean the beliefs we associate with church. Instead, for our purposes a belief is something that isn’t a fact or an absolute truth, but that we consider to be true.

We all have beliefs about other people, life and ourselves, and these beliefs affect our attitudes, feelings and behaviour. This is why they deserve scrutiny.

Our beliefs are the result of our education, culture, personality and experiences. Some of them are good for us and for society: it is wrong to steal. However, some of our beliefs are limiting and even destructive.

They prevent us from evolving, from improving ourselves, or from changing situations or even adapting.

Therefore, if we want to change something in our lives, the first step is to examine and perhaps modify our beliefs. For example, Roger, a large farmer in his 50s, is heavily in debt and he believes that he can’t do anything about that. He argues that he has no control over his finances. “I am in debt because of the government, the price of inputs, my wife.”

When I spoke with Roger, we discovered that the real source of his financial problems is his belief that in order to be successful, he must be recognized as a success, and in order to be recognized as a success, he has to possess the newest machinery and the biggest farm in the area.

Roger also believes that a “real man” doesn’t ask for advice or help.

It became apparent how Roger’s beliefs affect his financial situation. By addressing those beliefs, Roger put in the necessary time and effort so that, two years later, he has developed healthier habits about managing money.

When should you suspect that your beliefs might be holding you back? Consider the possibility if: • You are obtaining clearly unsatisfactory results.

• You feel limited in your development.

• Your self-esteem is fragile.

• You have many conflicts.

• You have financial problems.

• You feel you don’t have control, or that you’re like a prisoner of your own life.

In short, if your life is a series of dissatisfactions and disappointments, you surely hold several limiting beliefs. In fact, you are probably sabotaging your own existence unconsciously.

Limiting beliefs that can have a major impact on your financial situation include: september 17, 2012

• I ’m not smart enough, good-looking enough, educated enough to…

• Above all, I must not make any mistakes.

• It’s not my fault, it’s their fault.

• I’m not disciplined enough.

• I absolutely need to be recognized in order to be happy.

• If I make a mistake, everyone will laugh at me.

• No one can be rich, healthy and happy.

• You have to suffer in life to deserve what you have.

• You were born to be poor.

• Only liars and thieves get ahead.

• Success isn’t for me. That’s how I am, and I can’t change that.

• It would all be different if I was born with a silver spoon in my mouth.

To change life’s results, we have to change our beliefs.

1. Identify your beliefs It takes effort to become aware of your beliefs.

You have to listen to your internal dialogue. We constantly talk to ourselves, even if we are not always aware of it: “I can be such an idiot! How can I do that? I need that in order to be happy.

What will they will think about me? Other people are going to think I am not successful if…”

2. Confront your beliefs Are they true? Look for proof of what you are saying. Is it real? Does everyone think that? Is it really undeniable?

Are they beneficial? Do you feel good (joyful, happy, confident, peaceful) because of your beliefs?

Do they give you more happiness? Do you feel better in the long term? Do they make your family happier?

Are they useful? Do your beliefs help you accomplish your main objectives in life and business?

3. Change your beliefs Are your beliefs true, beneficial and useful? If so, keep them. If not, make an effort to change your thinking, exchanging one belief with another that is more useful and more realistic. Remember, you can control your beliefs. After all, a belief is only a belief, not a truth. 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. country-guide.ca 43

Business

When the Jenkins family was ready to wrestle with its succession dilemma, help came from an unexpected place

By MaggieVan Camp, CG Associate Editor

44 country-guide.ca

hen fifth-generation southern Alberta rancher Jen Jenkins decided she wanted to farm 12 years ago, she knew there would be some tough decisions. Starting to farm is hardly ever easy. Nor is succession. But add in a big family, all owning small parcels of the highly prized foothills ranch — plus two possible successors — and you’ve got the makings of a succession labyrinth.

The Jenkins ranch is nestled in one of the most spectacular vistas in Canada, which also happens to be a wildlife migration corridor.

It’s like a scene from the 1990s movie, “A River Runs Through It.” To the south lies Waterton National Park with the soaring Rocky Mountains, while along one of the ranch’s borders is a sparkling fly-fishing river.

It can seem like paradise. Soon, though, the family’s how-to-succeed options seemed as rare as some of the wild species on their property.

Today across the Waterton River, Cardston County is flooded with urban

development, tastelessly big houses jostling for the mountain view, and in 2000, when the Jenkins were talking succession, it was already clear that developers wanted even more.

At the time, the two Jenkins brothers, Tom and Bob, worked side by side to manage their 300-cow purebred Hereford herd. The ranch’s 3,200 acres of native grass however were owned by no less than 15 family members, including themselves. Grandpa had willed his grandchildren 40-acre pieces, and each of the uncles and aunts still held portions that they leased to the ranch.

Tom and Bob each had a child, Pete and Jen, who wanted to ranch, but 300 cows wasn’t big enough to sustain another two families. Being bordered by a national park and a river made expansion impossible and then there was the rising cost of land. “Land values in our area are very high so it wasn’t feasible to create that kind of capital to purchase the land by ranching alone,” says Jen. On the positive side, all the family members agreed that they didn’t want september 17, 2012

Photo credit: Aaron Whitfield

Thinking outside the fence

Business

to sell out to development. “No one wanted to see it subdivided,” says Jen. “We were ingrained with values about the land, how to treat and respect it.”

Realistically, however, the family members did need to be compensated for their assets.

The succession puzzle’s solution came unexpectedly, from an unexpected source — an environmental conservation group, the Nature Conservancy of Canada (NCC) which was buying land for its Waterton Park Front project at the time.

The NCC has big money behind it, plus large corporate sponsors such as Shell and TD. With a balance sheet weighing in at about $5 billion in net assets, this non-profit group has used private donations and its partnerships with governments to purchase outright or put conservation easements on nearly two million acres across Canada. The NCC not only buys but also actively manages conservation on many of these properties.

In 2001, the NCC bought 3,200 acres of the Jenkins’ property for about $1,250 an acre. (The family also ranched an additional 300 acres via Crown lease or in partnership with neighbours.)

Although the sale price was much lower than the land’s development value, it allowed for the nonfarming family members to be paid out, and those who wanted to continue ranching to do so. Tom and his son Pete took their portion and bought another ranch in Saskatchewan while Jen and Bob stayed on the Alberta ranch, with a 50-year no-charge lease where they cover the municipal taxes. september 17, 2012

“It allowed everyone to begin fresh,” says Jen. “Amazingly we (all the family members) still talk to each other.”

By the time debt was covered, equipment was duplicated and all the family members were paid off, there wasn’t a huge nest egg left. However, in the end everyone was able to meet their goals. “It may not have always been the best business decision but it was a good family decision,” says Jen. Conservation easements first became popular in the 1980s. By the end of 2010, the National Alliance census estimated the total acres conserved by state, local and national land trusts in the U.S. to be 47 million. That’s an increase of about 10 million acres since 2005 and 23 million since 2000.

Basically, they’re legal agreements between conservation bodies and landowners that limit the uses on a property and are tied to the title of the land, no matter who owns it. The conservation body can be a federal, provincial or municipal government body, an independent, non-profit conservation organization or a land trust, such as the NCC. According to the Ontario Farmland Trust, a unique trust that focuses on preserving agricultural land, the terms of conservation easements vary, but all limit subdivision and environmentally damaging forms of development and are usually into perpetuity.

“As long as the easements are spelled out clearly from the beginning and the intent is known, these (restricContinued on page 46 country-guide.ca 45

Business Continued from page 45 tive convenants) should stand,” says Matt Setzkorn, OFT’s policy co-ordinator.

The conservation body doesn’t necessarily have to buy the land, as it did in the Jenkins case. More often landowners decide to have a conservation easement placed on their land because they want to ensure the ecologically sensitive or agricultural features of their property will remain protected after the property is sold or transferred.

The landowners may also be motivated by tax credits. The difference in value of the property before and after a conservation easement is the value of the donation receipt to which the landowner is entitled. This may also reduce the municipal property tax assessment, although this must be pursued individually with property tax officials.

Not all easements qualify as ecological gifts. For a donation of a conservation easement, common-law covenant or full title to be an eco-gift, Environment Canada must certify that the land is ecologically sensitive and it must also certify a fair market value for the donation. For more information on the Ecological Gifts Program, contact Environment Canada at www.ec.gc.ca.

As of June 2006, landowners in Alberta had donated or sold conservation easements covering about 74,000 acres and donated or sold fee simple title covering about 100,000 acres to conservation organizations. Of these lands 47,000 acres qualified as ecological gifts valued at about $42 million.

“The property value usually is lowered with these easements and for that change in value you can get a tax credit, if your property is deemed to have special qualities,” says Jennifer Stevenson, business adviser with the Ontario Agriculture Ministry. “Anything above the capital gains tax exemption, you get extra tax credits.”

The tax benefits of a conservation easement can sometimes be used to help with farm succession. The process also forces families to talk about a vision for the property and try to match that with personal wants and needs.

“An agricultural conservation easement is also a tool for succession planning as it provides a formal agreement outlining provisions to ensure that one’s land may provide a specific use for future generations,” says Stevenson.

46 country-guide.ca

When the Jenkins began negotiating with the NCC they hired a good lawyer who had previously worked with conservation easements. “Get a lawyer experienced with conservation easement to set it up properly,” Jen recommends.

Covenants usually are negative, not allowing for particular activities or land uses. For example, a covenant might prevent subdivision of the property or require that the property be used for farming only, or not allow the removal of certain vegetative species within designated natural zones.

Since they were already using good land stewardship practices, the Jenkins didn’t have to change how they operated their ranch.

Jen and Bob maintain control of how the land is grazed and subsequently many other area ranchers now have agreements with the NCC. Some of them are based on purchases, as with the Jenkins, while others are based on conservation easements. Today the Waterton Park Front project is one of the largest private land conservation initiatives in Canada, conserving over 30,000 acres of ranchland.

Covenants can also allow activities such as responsible forestry, usually according to a named set of practices or a management plan attached to the easement. The easement portion of the agreement grants to the holder, among other things, access for the purpose of inspecting the property and the right to take action to remedy any deficiencies.

It also usually outlines terms such as giving notice of inspection to the landowner.

Jen works well with the two or three NCC staff in the area and over the years has partnered with the NCC to do a few conservation projects, such as fencing riparian areas.

Bob and Jen own everything on the land, such as the houses. There are three family homes on the ranch. One concession they made to the family was that the descendants could come back, use their family homes any time and enjoy the property, ride horses or go for a walk.

That agreement has worked out fine but Jen’s ability to build a home for herself to replace her mobile home is curtailed.

There’s another hitch too. Ownership of capital assets wasn’t something Jen thought would be important when she was younger.

However, loaning agents want land as collateral. “I didn’t see that it would leave me with little borrowing power,” says Jen. Normally they would have managed through this limitation but May 2003 changed everything. During the winter, Jen and Bob had bought 100 cow-calf pairs intending to resell them after grassing them over the summer. When the border shut down because a Canadian animal tested positive for bovine spongiform encephalopathy (BSE), suddenly those cows were worth nothing.

And all their cash flow was tied up in cattle. “All our cash had gone back into building the herd,” says Jen. Once the shock had settled, Jen gathered her financial information and invited her banker out to the ranch to talk about a bridging loan. She poured out her story. “Then he said I should evaluate what I wanted to do and suggested I get a job at Walmart.”

Now spurred on with a little anger, she called a senior economist from Alberta Ag and got some good advice.

She went back to the books and did five years of full budgeting and presented it to two other banks with no luck. “It forced me to step up my game,” she says.

Finally Jenkins went into Lethbridge to meet with FCC. “I’ll always remember that moment,” she says. “He met me with optimism, and said it was going to get better.”

Now she figures it’s time to give that positivity back to other new farmers.

She’s recently started acting as a facilitator for FarmOn (www.farmon.ca).

Her role there is to listen, let farmers know they are not alone and help them set up a team of people and information to get them through their challenges.

Her services are free and she has a large resource board behind her who help connect to the resources.

“Often we’re trying to do it all, financial management, marketing, production, ownership, human resources,” Jen says. “Sometimes it’s a matter of letting someone else help you and it doesn’t necessarily cost a bundle.”

Jen started her online connection with a woman’s group. These online chats and conferences led her to the FarmOn site. “I want to facilitate people building the future of agriculture,” Jen says. “I know what it feels like to be alone trying to make a go of it. I’m there to listen, online.” CG september 17, 2012

w e at h e r

F Sn ros ow t

DRIER THAN USUAL

Dry ls l spe

NEAR NORMAL TEMPERATURES AND PRECIPITATION

Scattered rain

BRITISH COLUMBIA

d Mil ered t t Scarain RIER ND DAL A R RM ME WAR HAN NO T

ca s rai ion n al

MILDER THAN NORMAL

Oc

NEAR NORMAL

m ar ew s W f er A ow sh

September 23 to October 20, 2012

Sept. 23-29: Generally fair apart from spotty rain or showers on a couple of days.

Temperatures vary but trend toward normal values. Frost pockets inland. Blustery at times.

Sept. 30-Oct. 6: Frost in several inland areas, otherwise seasonable temperatures.

Fair aside from a few showers south and mixed rain or snow northern areas and higher elevations.

Oct. 7-13: Cooler air moves into many areas with windy conditions that bring scattered rain to southern localities on a couple of days, changing to snow and frost at higher levels and north.

Oct. 14-20: Expect changeable weather and temperatures this week as disturbances move by. Fair with intermittent rain on the coast tapering to showers inland. Snow at higher levels.

ALBERTA

Sept. 23-29: Dry on most days but showers occur here and there, more numerous central and north. Temperatures fluctuate under brisk winds but average close to normal. Frost pockets.

Sept. 30-Oct. 6: Lows often near zero, otherwise seasonal temperatures. Fair skies dominate the week aside from scattered showers on two or three occasions.

Chance snow north. Blustery at times.

Oct. 7-13: Windy at times with cooler temperatures and frosty nights. Fair overall aside from rain in the south on one or two occasions. Some snow central and north, chance heavy in places.

Oct. 14-20: Weather conditions fluctuate this week ranging from fair to unsettled with rain becoming mixed with snow cenSeptember 17, 2012

tral and north. Windy at times. Expect frost on most nights.

SASKATCHEWAN

Sept. 23-29: Frost on a few nights as temperatures oscillate from mild to cool.

Sunshine dominates but look for a couple of unsettled days with rain, especially central and north.

Sept. 30-Oct. 6: Mild, fair days are interrupted by cooler, wet days in the south.

Frost in many areas on a couple of nights.

Windy at times. Cool north with frosty nights and a chance of snow.

Oct. 7-13: Cooler, windy outbreaks bring rain on a couple of occasions this week.

Frosty nights. On fair weather days temperatures average close to normal values.

Scattered snow north.

Oct. 14-20: The weather varies this week from fair and dry to wet and blustery as disturbances move through. Temperatures will also fluctuate from cool to mild. Some snow central and north.

MANITOBA

Sept. 23-29: Expect a couple of frosty nights as temperatures vary from mild to cool. Sunny but rain or showers on a couple of occasions this week. Some rain, chance snow in the north.

Sept. 30-Oct. 6: Mild and fair on most days apart from scattered rain on a couple of days. Fluctuating temperatures from mild to cool with occasional frost. Scattered snow and rain north.

Oct. 7-13: A couple of cooler, windy outbreaks bring rain to the south with changeable temperatures trending to the

cool side. Cool north with some snow, chance heavy in places.

Oct. 14-20: Fair skies on many days this week will be followed by scattered rain and blustery winds. Temperatures vary from cool to mild but average near normal.

Occasional snow north.

September 23 to October 20, 2012 NATIONAL HIGHLIGHTS A broad upper ridge is expected to prolong summer-like weather across eastern Canada this fall. Apart from a few showers or occasional rain, relatively dry weather is likely to accompany the mildness from Ontario eastward to Quebec and the Atlantic provinces. In the West, a lack of moisture is also anticipated in southern British Columbia with temperatures averaging near or slightly below normal.

Across the Prairies, cooler outbreaks will bring frost to all areas and snow will make its first appearance in northern regions, with overall temperatures and precipitation ending up close to normal values.

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

ACRES

By Leeann Minogue

Taking on the lawyer’s kid hen she married Jeff and moved from the city to a farm, Elaine had been prepared for a lot of things. She was ready and eager to learn how to operate farm equipment. She had given a lot of thought to the reality of living a long drive from the nearest movie theatre (which only offered one show per week).

She had even considered how she would live in a yard with her in-laws, and talked to friends to find out what it would be like to send her little boy to a small-town school on a yellow bus.

After a year on the farm, Elaine was doing fairly well by anyone’s measure. She could drive the grain truck, the swather and the combine. While they wouldn’t admit it out loud, the Hanson men were relying on Elaine to be a big part of the harvest operation. And not only was she getting along well with her mother-in-law, Jeff’s mother Donna had taught Elaine to look after the farm books, and Elaine had taken over all the Hanson farm bookkeeping.

She’d been prepared.

But still, she wasn’t ready to have a surly 16-yearold living in her guest room.

When Donna’s great-nephew needed a place to spend three weeks in the summer, the Hansons had, 48 country-guide.ca

of course, agreed that he could come to them. Of course there was room on the farm. There were two houses, and four adults to supervise the boy. (In fact, five, since Jeff’s grandfather Ed drove out from town to help out almost every day.)

Taking in a stray teenager was not only polite, it was part of an age-old tradition of bringing city kids to the country to “run wild” in the summer.

So Brandon had been shipped by plane from Ottawa to Regina, and since Donna had plans with some women in town and the men were in the shop, welding together some replacement parts for the Hansons’ seed-cleaning plant, Elaine had been dispatched to pick him up at the airport.

It wasn’t a stellar start.

Brandon only said about 17 words during the two-hour drive to the farm. Elaine asked question after question; Brandon gave one-word answers or just nodded. Luckily, the toddler chattering in the back seat kept Elaine company after Brandon popped an iPod earbud into his right ear when he thought she wasn’t looking.

She hoped things would go more smoothly when she had the rest of the Hansons to help out.

But the evening didn’t go much better. The whole family had dinner at Jeff’s parents’ house, SEPTEMBER 17, 2012

acres

and Donna and Dale took it in turns to ask Brandon questions. They also got one-word answers. It seemed that Brandon wasn’t crazy about being exiled to the wilds of rural Saskatchewan, and intended to spend as much time as possible on his laptop, keeping up with his friends back in civilization.

The next morning, Brandon was still asleep when Jeff was going to work.

“Send him out when he gets up,” he told Elaine. “We’ll show him how to weld.”

“Weld?” Elaine said. “Are you out of your mind?”

“What?”

“He’s 16! His father’s a lawyer. He’ll sue us if we let the boy kill himself welding.”

“Calm down,” Jeff said. “I started welding when I was 13. He’ll be fine.”

Elaine could not be convinced.

“All right.” Jeff gave in. “He can cultivate the trees.”

“Seriously?” Elaine asked. “Have you been listening to me?”

“With the small John Deere tractor.

I’ve been running it since I was 11.”

“Your parents let you drive a tractor when you were 11?”

“Sure,” Jeff said. “Heck, I’d been driving the half-ton for four or five years by then. Not on the road, of course.”

Elaine had no idea what to say. She remembered how horrified her own mother had been when she found out that Elaine’s father had let her drive their mini-van in the Saskatoon Safeway parking lot when she was 15, before she had a learner’s permit.

“You won’t let our son drive when he’s 11?” she asked Jeff.

“We shouldn’t need to wait that long.

He’s a smart kid.”

“He’s two!” Elaine said. “He’s hardly big enough to ride on farm equipment.”

“Grandpa says kids are old enough to drive if they can open the door of the cab,” Jeff said.

“Look, I’ve got to get to the shop.

Dad’s waiting. Send Brandon out when he gets up, will you?”

But by the time Jeff came back to the house at 10 o’clock, Elaine still wasn’t convinced that this wasn’t a big deal, and Brandon still wasn’t out of bed.

“I’ll get him up,” Jeff said. He did, while Elaine packed the toddler into the car and went to town for a play date.

September 17, 2012

“ Send him out when he gets up,” Jeff told Elaine. “We’ll show him how to weld.” “ Weld?” said Elaine. “Are you out of your mind?”

When Elaine came home, she learned that the day hadn’t gone well.

“You were right,” Jeff said. “This kid isn’t ready to weld. He’s not even ready for a cultivator. So Dad and I thought maybe he could start with mowing the grass. The kid couldn’t even start the lawn mower! He’s never heard of ‘choke.’

What do they teach them in those eastern schools?

“I told him to start with the grass next to the canola field. Brandon said, ‘What’s canola?’

“Then I said he could fill up the gas tank when he was done, and he could barely do that without an instruction manual! Geez.”

Elaine sighed. “You have to be patient,” she said. “How would he know about canola? This is only his third visit to a farm. He’s not stupid. He knows about different things. His dad says he’s a genius with a computer.”

“Huh,” Jeff grunted. “I guess a hotshot eastern lawyer doesn’t have to know how to put gas in his own lawn mower.

The kid’s probably never seen anybody do anything without a computer.”

It was not exactly an easy summer for the Hansons. Or for Brandon.

By late August, when Brandon’s parents arrived early in the morning to pick up their son, they were surprised to find he was not only out of bed, but out of the house.

“He’s in the swather,” Elaine said.

“Riding with Jeff? That’s nice,” Brandon’s father said.

Elaine laughed. “No, it’s Brandon’s shift. We seeded so much canola, we’re running the swather 24 hours a day.”

They looked shocked.

“It took Brandon awhile to get the hang of it,” Elaine admitted. “But he’s good. Very conscientious.”

Brandon’s parents’ jaws dropped.

“How did you get him off the computer?” his father asked.

“His computer skills have been

handy,” Elaine said. “When the GPS system went down, Brandon fixed it.”

Elaine directed them to the field so they could see Brandon in action for themselves. “Can you take him this?” she said, holding out his iPod. “He left it on the kitchen counter.”

Brandon’s parents just stared. Later, Elaine found out it had been months since they’d seen Brandon without at least one earbud plugged into an ear.

Jeff was heading out to the field to replace Brandon on the swather.

“Can you take the baby?” Elaine said.

“He should be spending more time out there.” CG

Trait Stewardship Responsibilities

Notice to Farmers

Monsanto Company is a member of Excellence Through Stewardship® (ETS).

Monsanto products are commercialized in accordance with ETS Product Launch Stewardship Guidance, and in compliance with Monsanto’s Policy for Commercialization of Biotechnology-Derived Plant Products in Commodity Crops. This product has been approved for import into key export markets with functioning regulatory systems. Any crop or material produced from this product can only be exported to, or used, processed or sold in countries where all necessary regulatory approvals have been granted. It is a violation of national and international law to move material containing biotech traits across boundaries into nations where import is not permitted. Growers should talk to their grain handler or product purchaser to confirm their buying position for this product. Excellence Through Stewardship® is a registered trademark of Excellence Through Stewardship.

ALWAYS READ AND FOLLOW PESTICIDE LABEL DIRECTIONS. Roundup Ready® crops contain genes that confer tolerance to glyphosate, the active ingredient in Roundup® brand agricultural herbicides. Roundup® brand agricultural herbicides will kill crops that are not tolerant to glyphosate. Genuity and Design®, Genuity Icons, Genuity®, Roundup Ready®, and Roundup® are trademarks of Monsanto Technology LLC. Used under license. country-guide.ca 49

10623A_MON_GEN_stewardship_legal_countryguideresize.indd 8/9/12 10:29 1 AM

life

Peace in the family As we head into the holiday season, more and more farm parents are wondering. Can our family survive the tension?

By Helen Lammers-Helps t can seem like they come one right after the other.

First there’s Thanksgiving, then Christmas, and then Easter, without a single break in the burden of fretting and worrying that you have to carry.

Sure it sounds great to have the kids all home. But will there actually be peace at the family table?

Sometimes it can seem that farming is a minefield for the family, and it only gets worse as the kids get older, leading up to the day when you decide who gets the farm.

In fact, farming can be even harder on families than other family businesses, because the farm isn’t only your business. It’s the family home too. Indeed, it may have been the family home for generations, which means the farm is a big part of how your children define themselves, and how they define you too.

Elaine Froese, a farm family coach in Boissevain, Man. gets a lot of calls in the holiday season. “That’s when problems with family dynamics come to the surface,” Froese says.

Often those problems had their real origin far earlier, but they’ve been allowed to simmer and stew because farmers often don’t know how to start difficult conversations. They want to avoid conflict, so the tough stuff doesn’t get talked about.

Dennis Dwyer, a former family business mediator and author of This Business of Family (Shoreline Press, 2009), agrees but says it helps if people understand that conflict isn’t bad, it just is!

Says Dwyer: “Like breathing, conflict is a fact of life.”

Reg Shandro, a qualified mediator and succession planner in Lacombe, Alta. offers one more reason.

Farmers often get top marks for focusing on the technical aspects of succession planning, paying close attention to things like taxes and legal documents.

But they aren’t nearly so disciplined at considering the human side of the process.

The good news is that it is possible for everyone to still be on speaking terms after a farm has been transferred from one generation to the next, as Froese, Dwyer and Shandro can prove from their own training and experience.

Shandro recommends involving everyone in the process — including spouses — as early as possible.

Explore what’s fair and have the facts to back it up, he says. “Open disclosure prevents conflict down the road,” he emphasizes.

Dwyer agrees. Lay out the proposed scenario and invite feedback, he says. “There should be no 50 country-guide.ca

secrecy, no side deals.” Make sure everyone gets a chance to speak, even the quiet ones, he adds.

Shandro advises the founders to make sure their will is up to date and that it adequately represents the current situation. Then they should disclose the contents to their children. “This way you can explain the logic if there’s been a pro rata distribution,” he says. “It’s better to avoid surprises.”

Also be aware of the technical possibilities. Passing on the farm doesn’t have to be on an all-or-none approach, says Shandro. Non-farm siblings can still play a role, such as with a collaborative arrangement for some form of minority ownership in return for a contribution of labour or cash.

That said, it’s still important to make sure there’s a formal agreement in place for how to unwind things if it doesn’t work out, Shandro says. “A handshake isn’t enough.”

Acknowledging that the farm is also the repository of family memories can help make the transition to the next generation go more smoothly. The new owners can ensure that non-farm family members feel welcome at the farm to use the toboggan hill or walk the back lane. Shandro has one client who started an annual Thanksgiving gathering after he moved into his parents’ farmhouse so the family could continue to enjoy themselves at “their home.”

“This went over very well, especially when in addition to this he gave each of his siblings a ‘meat package’ annually,” adds Shandro.

This fits perfectly with Froese’s advice to farm families. She tells them to practise the three Cs: communicate, connect and celebrate!

Good communication is essential, agrees Dwyer, and fortunately it’s learned behaviour, he says. Dwyer insists his clients take basic communications training. “This really works,” he says. “It saves time and money down the road.” Courses are readily available through your local community college, he adds.

Shandro urges family members to talk about what the change means to them. What does it mean to the founders, the successors, or other family members? “If you don’t talk about it, there may be false assumptions,” he explains.

All three experts offer tips for practising good family communication.

• Use “I” messages. For example, start a conversation with “I’m angry because… ” instead of placing the blame on the other person.

September 17, 2012

life

• Use active listening skills. Don’t be formulating your rebuttal while the other person is speaking.

Make sure everyone gets a chance to speak. Using a “talking stick” can help.

• K eep an open mind — you may not have the whole story. Go in with the mindset of a “learner” not a “judger.”

• Watch your words! Avoid swearing, threatening, name calling, being a know-it-all, changing the subject, gossiping, making assumptions or using other unhelpful tactics.

• Create a safe place to talk. Pick a place away from the farm, with the cellphones turned off and with stomachs full.

• Don’t use the silent treatment or use access to grandchildren as emotional blackmail.

• If issues arise, deal with them early. Issues tend to percolate and incubate and come up in a worse form down the road.

• Examine your own role. Did you do or say something that could have contributed to the misunderstanding?

• If you made a mistake, take responsibility, express remorse and make a gesture of kindness. If you have unintentionally hurt someone, acknowledge the hurt and express regret. Don’t tell people, “You shouldn’t feel that way” or, “I don’t know why you’re so upset.”

• If you’ve attempted to mend fences but your overtures have been rebuffed, remember that you canSeptember 17, 2012

not force someone to forgive you or speak to you.

At some point you need to accept that you’ve done all you can and learn to let go and move on.

• If you’re the one who’s been wronged, remember that holding on to anger has been shown to cause depression and decrease life expectancy. Maybe it’s time to let go for your own sake.

If communication breaks down, Dwyer recommends trying mediation before going to the courts.

“The courts are designed to apply the law but do not concern themselves with fairness. “And they don’t resolve conflict,” he says.

Besides, while mediation isn’t exactly cheap, it’s usually much, much cheaper than litigation, he adds.

“Mediation can also help people see things in new ways so they can move forward.”

If you decide to go the mediator route it’s important to select a trained professional, says Shandro. “Using someone who’s not trained can do more harm than good,” he warns. The Canadian Association of Farm Advisers (CAFA) at www.cafanet.com is one place to look for mediators who have an understanding of farming.

Every parent wants a happy family and it’s a sad situation when the family is in turmoil. Shandro has taken a page from one of his own clients who told him, “We need to protect the family. If we protect the farm and the family’s needs aren’t met, then we may lose the farm anyway.” These are wise words indeed. CG country-guide.ca 51

h e a lt h

The skinny on fish oils

By Marie Berry ish oils are promoted for everything from blood pressure control to cancer protection, and you can see shelves of various fish oil products in pharmacies and even grocery stores. The health benefits of fish oils were first noticed among Inuit people who have diets rich in fat and cholesterol, yet have a low risk for heart disease. The effect was traced back to the type of fats they consumed, mainly cold-water oily fish.

However, today’s fish oils aren’t necessarily the cod liver oil that some of us took when we were children. Cod is indeed a source of fish oils, but so are salmon, mackerel, sardines, herring, anchovies, and bluefish. As well, rather than eating fish, many people take fish oil supplements.

Fish oils do improve cardiovascular health, but your best option may be to walk past all those pills and supplements, and buy cold-water fish to cook for supper twice a week The active ingredients are omega fatty acids which are essential to normal growth, but only a small amount is needed and an average diet contains more than enough.

Fatty acids are classified according to their chemistry. Omega-6 fatty acids seem to be involved in healthy skin and kidneys. Omega-3 fatty acids seem to benefit the development of the brain, eyes, and nervous system, as well as contribute to healthy circulation.

When omega-3 fatty acids combine in your body with substances like alpha linolenic acid or ALA,

So much of our lives is sensed through our eyes, but as we age our eyesight can change and we experience more eye problems. Next month, we’ll look at keeping your “baby blues” from getting “blue.”

52 country-guide.ca

they form eicosapentaenoic acid or EPA and docosahexaenoic acid or DHA. It is these larger molecules that have the health benefits. On average, only five per cent of omega-3 fatty acids are converted, and women seem to be more efficient at it than men.

You probably have noticed that fish oil supplements may offer a combination of several of these substances. Indeed, when you read a product’s label, you may actually need to do some math to obtain the total fish oil content. In its official monograph, Health Canada recommends the maximum daily intake for adults be no more than 3,000 milligrams of a combination of EPA and DHA. This includes fatty acids from plant sources. For example flaxseeds, canola oil and soybean oil may contain omega-3s. Corn oil and safflower oil may contain omega-6s.

Researchers have shown that fish oils do improve cardiovascular health. This may be due to reduced blood vessel inflammation, improved circulation, and/or reduced cholesterol levels. In the U.S., a prescription fish oil product is marketed for lowering triglycerides, which are a specific type of cholesterol.

Drawbacks to taking any fish oil product include potential allergies, stomach upset, and “burping fish oil.” There is also the concern that the source of fish oil products could be contaminated with environmental mercury, dioxins, and PCBs. As well, fish oils can increase your risk for bleeding. Thus if you take any blood thinners or are undergoing surgery, including dental procedures, they are best avoided.

While there are a wide variety of other claimed benefits for fish oils (for example joint pain, asthma, cancer prevention including colon cancer, depression, dementia, Crohn’s disease, eczema) none have scientifically been proven.

Because studies have shown a wide variety of content among various manufacturers, you need to read labels carefully. Keep in mind that too much fish oil can lead to vitamin imbalances.

An alternative to fish oil supplements is eating fish at least twice a week. Dietary sources are more compatible with your body, will provide other nutrients as well, and are much tastier than supplements.

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

September 17, 2012

The silence is interrupted by the clatter of horses’ hooves, the warbling of mountain birds and the bawling of cattle. We saddled our horses in the early morning and began a long climb upward. Now we are almost at the tree line. Melting snow creates creeks and rivers. We are riding in a “box canyon,” a confined area bounded on three sides by mountains. It is an ideal range for cattle. The grass is lush and the streams of water are clear.

I am riding with Hugh Simon, a retired RCMP officer who is contracted to ride the range and keep an eye on cattle belonging to several ranchers. Hugh watches out for sick cattle, cattle roaming outside their normal range, and the occasional rustler.

Usually he rides alone. Knowing my interest in horseback riding, he invited me to join him for a few days. I am awed by the majestic mountain peaks, the rich-green vegetation and the colourful alpine flowers.

Ranches in southwestern Alberta are few and far between. As we trailer the horses from one area to another, chance encounters with neighbours develop into lengthy chats. Pickups pull to the side of the road and the news is shared. One rancher has not seen his black bull for a few weeks. Could we spend some time searching for the wayward sire? We heard about a longtime rancher who is receiving chemotherapy treatment for cancer. A young man from Australia has purchased a ranch from a family who retired.

Hugh is a master storyteller, full of anecdotes, legends, and amusing tales. One night after a steak supper and saskatoon pie he tells me a story about Cyprian Pinkham, one of my predecessors as Anglican bishop in Saskatchewan and southern Alberta. In 1909 a new log church at Rosebud Creek, northeast of Calgary, was ready for the dedication service. Bishop Pinkham and a clergyman named Thomas Castle rode horseback 35 miles to lead the service. They discovered most of the local residents were bachelors who had come to Alberta to homestead.

As the bishop prepared his sermon, Castle attended to other arrangements. He asked one of the older men present to act as an usher, and he asked “the tallest cowboy… to take up the offertory.” The big fellow did not understand the word offertory so the parson explained it was the collection. Years later Castle related what happened next, to the consternation of the two clergymen.

“The service went along well until I was preparing to ask for the offering. But the cowhand beat me to it. He walked to the front of the church, drew out his enormous revolver and told the congregation, ‘We are taking up an offering and it’s going to be a good one. If anyone puts less than $10 on this plate, I’ll shoot him right there.’ He then walked through the standing congregation with the pistol in one hand and the collection plate in the other. It was the best collection I ever saw.” Local legend says the “cowhand” was big Jack Morton, often called Wildhorse Jack.

I wonder what Bible text Bishop Pinkham chose? Perhaps he preached on Exodus 35:21 “And they came, every one whose heart stirred him up, and every one whom his spirit made willing, and they brought the Lord’s offering.” Alternately he may have selected a text from 2 Corinthians: “Each of you must give as you have made up your mind, not reluctantly or under compulsion, for God loves a cheerful giver.”

Suggested Scripture: Exodus 35:20-19, 2 Corinthians 9

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country-guide.ca 53

Va l l e y

Seeking inner strength

ILLUSTRATION: RICK KURKOWSKI

Dan Needles is the author of “Wingfield Farm” stage plays.

His column is a regular feature in Country Guide stumbled into the Kingbird Cafe a couple of weeks ago, limping more than usual after an attempt to treat the ram for foot rot. If you’re a shepherd, foot rot is all part of the rich tapestry of agriculture.

The guidebook tells you to catch it early, and to separate and treat the animal before the problem spreads around the flock. You just roll the patient up on its bum, give it a shot of long-acting antibiotic in the neck and paint a lot of copper sulphate between the toes.

My ram, Cato, weighs 250 pounds.

I did manage to roll Cato over, but he rolls like a grand piano. I didn’t get my knee out of the way in time and I ended up underneath him. A Mexican standoff followed for about a minute, which was just long enough to separate the triceps surae from my Achilles tendon. Not serious, but I am limping for the moment.

“What does the other guy look like?” asked my neighbour, Vern Bunton, as I gingerly slid into the booth.

“The judges gave me the decision based on points,” I replied. “Cato has 10 ccs of penicillin in him and his toes are painted.”

“Good for you,” said Bob Pargeter, the cash cropper. “I’ve got a stitch, too, up here in my back. I think it’s from sitting in the combine all day and then trying to throw a tarp over the grain buggy in a cold wind.”

“Yeah,” said old Owly Drysdale.

“I’ve got a stitch right here above my ankle and it goes all the way up to my left ear. Probably from dosing cattle without a squeeze for the past 60 years.”

Vern Bunton’s son Matt listened to us complain about our late-season ailments and observed, “If you guys were in bet54 country-guide.ca

ter physical condition, you wouldn’t be so prone to injury.”

Matt is the youngest person to take up farming in Petunia Valley since 1985.

He works out every day, something he picked up while he was at college studying crop science and marketing.

“I get lots of exercise,” said Bob with a snort. “I’m moving all day.”

“Nothing a farmer does, short of throwing a few hay bales, really qualifies as exercise,” said Matt. “It’s just slugging.”

“Do you want me to jog or something… at my age?” asked Bob. “You should all come to my yoga class on Monday night,” said Matt.

Vern turned to us with a big grin and shrugged. “What can I say? Sometimes I don’t know if he’s my kid.”

“Yoga,” said Bob, waving a bear paw at Matt. “I tried that once but my dogma got out and it got run over by my karma.”

“You laugh,” said Matt, “but yoga is something you can do anywhere, even in the combine. It’s great for building inner core strength. And you would find meditation really interesting.”

“Meditation?” mused Bob. “I guess it beats sitting around doing nothing.”

“What it beats,” said Vern, “is staring at the yield monitor with your shoulders all tense and hunched up, chewing your fingernails. No wonder you have a stitch in your back.”

Bob hid his fingernails in his pockets.

“You mean you’re doing this, too?”

Vern smiled and nodded.

So the following Monday night, the Petunia Valley Leisure Time Club played host to one of the more macabre spectacles of the season, with six farmers off the Petunia Valley Sideroad doing the Downward Dog in spandex. Under the instruction of Marnie, proprietor of Urth Yoga, we learned to breathe in sympathy with the natural vibration of the traffic on William Street and open ourselves to the sublime indifference of the universe.

For an hour we wound ourselves into pretzel shapes and tried to touch our toes with our tongues. It was exhausting but quite refreshing.

Finally, Bob unwound his leg from his elbow. “If my foot gets any closer to my face, is there any chance I’ll start chewing my toenails next?”

“As you learn to free yourself from all attachments, such behaviour will become unnecessary,” said Marnie gently.

Bob turned pale. “She wants me to give up my attachments?”

“Relax. She’s not talking about your loader tractor,” said Vern. “She means you have to let go of your attachment to the physical world. That’s what it’s all about.”

Bob sighed with relief. “Please forgive me, Yogi Marnie,” he said. “Stupid me.

All this time I have thought the Hokey Pokey was what it was all about.”

September 17, 2012

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