Items such as fertilizer bins traditionally depreciate relatively slowly and if they are funded at 75 per cent of the cost, the impact on the balance sheet will be positive for quite a while.
EFP PROVINCIAL CONTACTS ALBERTA SASKATCHEWAN MANITOBA
The Alberta Environmental Farm Plan Company Toll-free information line 1-866-844-2337 Web site www.AlbertaEFP.com
Provincial Council of ADD Boards Toll free: 1-866-298-7222 Website: www.saskpcab.com
Call your nearest MAFRI GO Centre
In the past couple of weeks we have had a rash of phone calls regarding the evolution of the next round of Environmental Farm Plan and associated best management practices (BMP) programming. Everyone in the Right Choice community — Al Worknoplay, Boss Hog, Johnny Cash, Hans Pullteats and Ray Roundemup — have all been wondering how to best utilize the available funding under the newly announced program in Manitoba.
As similar Environmental BMP programs evolve in other provinces, the question of the best way to utilize the funding will become top of mind for many in the agriculture community. Every farm operation has different goals, which should influence which programs should be utilized to maximize benefits. Here are a few examples.
Al Worknoplay is tired. He has been harvesting for the past two months working on six hours of sleep a night. The rewarding feeling of finishing combining is quickly trumped by the daunting task of fall anhydrous season. Al would like to reduce his work load as he feels he aged 10 years this past season and his goal is to free up some time. Al doesn’t want to drop in acres, so we looked over the BMPs for options that would allow him to cover the same acres in less time and that had the highest cost share percentage. BMP categories that moved Al to one pass variable rate spring fertilizer application were very attractive to Al.
Al also mentioned he is sick of pounding kochia piles through
the combine and has also elected to establish forage on some of his marginal land. This will also be cost shared and he will be able to rent the forage land to Ray Roundemup. This will eventually save Al time in repairs and increase returns on these unproductive acres.
Johnny Cash has one goal: Continue to build equity. Johnny wanted to know how to improve his balance sheet using the BMPs. We looked at purchasing assets that would depreciate the least and were the highest cost shared. Items such as fertilizer bins traditionally depreciate relatively slowly and if they are funded at 75 per cent of the cost, the impact on the balance sheet will be positive for quite a while. Johnny will be adding an asset worth $40,000 and using $10,000 cash. Johnny will add $30,000 of equity in one day!
Further consideration for Johnny is upgrading his harrows. Heavy harrows are proposed to be cost-shared 50 per cent, however they will depreciate more quickly. Johnny could purchase a $40,000 set of heavy harrows and would have to pay $20,000. The return on this investment would be lower than on the bin example.
Hans Pullteats has been delaying his decision to upgrade aging manure storage. He realizes that this will have to be done at some point to remain in industry and keep pace with existing regulations. This is an expense he has difficulty including in his budget, but with a cost share of 65 per cent, he feels this is the time to move on this project to ensure the farm will be able to continue to operate.
Ray Roundemup has decided to pack ‘em up and move ‘em out. Ray caught his five-year-old son drinking out of the slough beside the yard, which runs into the creek. After two days of dealing with his son’s monkey butt, environmental stewardship and water quality is top of mind. Ray has decided to move his livestock confinement to a more suitable location on his home quarter and the funding share of 75 per cent will facilitate this decision.
In summary the best decision regarding these programs will be a synergy between financial and environmental reward. Each manager will have to have a clear understanding of future goals and carefully weigh options. Take time to understand the programs and the implications they will have on your goals and ambitions. Participation in these programs may place limitation on future land use and have implication on ownership of carbon credits just to name a few.
Andrew DeRuyck and Mark Sloane manage two farming operations in Southern Manitoba and are partners in Right Choice Management Consulting. With over 25 years of cumulative experience, they offer support in farm management, financial management, strategic planning, and mediation services. They can be reached at [email protected]and [email protected]or 204-825-7392 or 204-825-8443.