It’s been 12 years of you, the readers of Grainews, taking the time to read my articles and respond to me with comments, criticisms and questions, all of which have helped me become a better person and writer.

It was very gratifying for me to receive notice that my article was one of the most-read Grainews features overnight or that week. I hoped that meant I was contributing something relevant you found of use or, at the very least, you found my writings humorous, which they say is good medicine.

As a small business owner, I work by myself, so my interactions with others are limited to farm visits, industry meetings and trade shows, which COVID-19 has replaced with phone calls, Skype or Zoom video meetings and the occasional gaze at my reflection in my computer monitor.

My writings for Grainews were a way for me to reach out to you, my pen pals, on a regular basis to offer you some insights and information that may be useful on your walk on this planet.

When I reflect on some of those articles, the ones that stick with me the most are those that inspired you to respond to them.

Particularly, articles about discussions with farmers or clients and how they struggled to make decisions about their farms and their interactions with other family members when it came to running a farm business.

Your responses were priceless and inspiring.

Many illustrated your similar experiences or suggestions about how to work through those types of problems and how to make it work to keep the farm alive.

For example, I had one reader email me with the question, “Is the farmer the boss and/or should he be?” Of course, it was his wife who asked this.

In this instance, the farm was being run by a couple in their mid-fifties, and their two kids, who were in their twenties, wanted to farm.

I am sure you can picture the dynamics of this situation already.

Dad had been the farmer for many years and was doing a very good job, and the farm was, by all standards, successful. The kids brought with them new energy, enthusiasm and knowledge, and they wanted to try new things, do better and be more innovative, which is great, except Dad didn’t want the extra work or headaches of trying to understand the new technologies, etc.

This frustrated the kids and Mom, as she could see the relationships between them all getting tenser, which was only going to lead to a blow up and the kids leaving the farm.

Long story short, we had a good discussion about how to set up a plan to help relieve some of the tension and build confidence for everyone that the kids were ready to take on a larger role in the operation and management of the farm going forward. That would allow the farmer to remain the farmer without all of the worries. I suggested they seek the advice of others to help them build their plan.

The kids drafted a plan of where they wanted to take the farm over the next three to five years and how they planned to do it — including the use of technology and the cost-benefit analysis of that technology to show if it would truly pay for itself or “Just be a nice toy to play with,” as Dad would say.

They enlisted the help of an agronomist, farm equipment technology expert, accountant and banker to put their plan together. They then presented their plan at a family meeting with their banker and agronomist present.

Mom and Dad were impressed by the plan’s detail and Dad admitted he had never created a plan like it for the farm.

The end result was an agreement for future decisions to be made collectively for the farm for the following three years, after which time, Mom and Dad would hand over the management of the farm to the kids. That way, the kids would have time to get financing in place to invest in the farm and Dad could continue to do what he loves — to be the farmer and put the crop in and take it off and not have to worry about making decisions on farm management and to feel confident his kids had it all well in hand.

It was such a good feeling to play even a small part in helping a family successfully transition. I have been very thankful to be able to give back to the industry that has provided me with such an amazing career over the past 40 years, and which is still going strong.

To Grainews, thank you for letting me write this column for the past 12 years. And to you, the readers, I would like to sincerely say thank you for taking the time to read my articles and to respond to me. I hope I have been able to make a difference for some of you as you have made for me over the years.

Be safe, stay healthy and thank you for what you do every day!

Editor’s note: We would like to extend to Brian our congratulations and most sincere best wishes as he joins Paterson Grain as general manager of its Foothills Grain Terminal at Bowden, Alta. We’d also like to thank him for providing 12 years of invaluable advice, recommendations, insights and marketing wisdom as well as his long-term commitment to Grainews and to the success of its readers.

The post What can I say, but thank you appeared first on Grainews.

• If I had known then what I know now, what would I have done differently?
• What are you learning from this pandemic and how do you turn those lessons into actionable items for the future benefit of your family and your farm business?
• When looking at your farm’s business, where were you the most vulnerable when the effects of COVID-19 took hold of the world?
• Was your revenue stream impacted?
• Did you have unsold grain in your bins?
• How do you plan to manage your cash flow needs for spring? Were you going to sell grain, secure a cash advance or bank or supplier line of credit?

Maybe the plan was to sell the rest of the old crop grain this spring for cash flow for inputs. However, COVID-19 steps in and messes with that plan by dropping all markets, including grains, lower. So, what do you do? Do you sell and accept the hit in price or do you hold in hopes of a rebound after COVID-19 is resolved?

The answer to that question will depend on your farm’s current cash flow situation and whether or not you will need more cash to purchase inputs for seeding.

If you are convinced grain markets will rebound and want to hold on to your grain for now, then the next best step is to look at taking out a cash advance to get you through the short term until you get more grain sold, not knowing how long that may be.

With the advance being interest-free for the first $100,000, it gives you some time and flexibility about deciding when to sell your grain in the future and not having to worry about paying an interest charge on the borrowed funds. Using the cash to pay for inputs should get you a better deal and eliminate interest charges from the supplier if you were purchasing on account, unless they are offering a payment deferral program that makes sense.

These are all things you will need to sit down and pencil out to determine the best option to meet your farm’s cash flow needs.

The pandemic has also affected the crop input value chains. Some questions to consider include the following:

• Has COVID-19 interfered with your ability to secure inputs for the coming spring season and/or impacted prices?
• Did you pre-purchase some of your inputs?
• Can you take delivery of fertilizer, seed and chemical earlier to get better prices and/or to ensure you have what you need on hand when you need it, so you don’t have to run to town now to get it and risk contact with others?
• Do you currently buy your inputs from one supplier?
• What is your Plan B if that supplier goes out of business or can’t source some products due to unforeseen events elsewhere?
• Should you change your buying habits and do more pre-purchasing of products, taking them home to ensure you have them for the coming season?

This will impact your cash flow needs and possibly require extra storage needs for products. Some planning would have to go into implementing a strategy like this.

Look for opportunities

Out of uncertainty can come opportunity. We haven’t seen fuel prices this low in many years, so consider if this is the time to pre-purchase extra for the spring and fall seasons.

Pulse prices are rallying due to buyer concerns elsewhere, which is providing the opportunity to pre-sell new crop at some very good values. What can you do going forward to reduce or mitigate the effects of unforeseen events from impacting your farm business?

Take the time needed to do a risk review for your farm business. Put together a risk management plan that will help you to mitigate or eliminate the risks you know about.

Develop a plan that will help you to better react to future unknown risks and minimize the impact they will have on your business.

Look at how you are currently doing business on your farm and determine if there are things you can change to help you be better prepared for when the next unforeseen event happens that could affect your farm.

Grain marketing

In the new reality, your grain marketing plan should address risks. Consider the following questions:

• Do you factor in the costs of storage and spoilage into your marketing strategy?
• For easy figuring, let’s assume storage and some risk cost is about five cents per bushel per month. Do you factor that in when selling grain?
• Are you paying interest on a line of credit that could be reduced or paid off if you sold grain sooner?
• Would having cash available from grain sales to pre-buy inputs save you money?
• Should you be more aggressive pre-pricing grain at profitable values when they are available as opposed to holding on to stocks and gambling the markets will improve over time?
• How do you protect yourself if you want to be more aggressive pre-pricing grain going forward?

You need to take time to build a marketing plan that works within your risk management plan. It needs to help you address risks you want to mitigate and not add any extra risk that cannot be managed properly.

This can be done through using various grain contracting strategies, futures or options contracts and production and/or revenue insurance to reduce or eliminate the delivery risk you will face if you become a more aggressive grain marketer. More elements to consider include:

• Would doing these kinds of things help to better protect your farm from the next unforeseen event?
• Would they help to protect your revenue and cash flow if you had a stronger marketing plan in place?
• Would you be less affected if you had all of your inputs secured on-farm for the coming year?
• Would you be able to sleep better at night knowing you were more prepared for the next unforeseen event that come along?

Good luck this spring!

Stay safe and keep healthy.

The post What we thought would never happen has come to pass, now what? appeared first on Grainews.

When the First World War broke out in 1914, the demand for wheat was unprecedented, and all energies were devoted to growing the crop. The Canadian Wheat Board was formed as a temporary war measure to market the country’s entire crop, and this stabilized wheat prices for the first time. With the end of the war and dissolution of the Wheat Board, prices began to plummet and farmers were in crisis. The power players within the Winnipeg Grain Exchange prepared to recapture the wheat market.

Farmer groups like the Farmers’ Union and the Saskatchewan Grain Growers’ Association believed the solution was for farmers to combine their crop and market it themselves. This was the start of the co-op grain elevator movement across the three Prairie provinces.

Grain co-op history

The first grain co-operative to be formed was in Saskatchewan in 1906. It was the Grain Growers’ Grain Company.

The Alberta Farmers’ Co-operative Elevator Company was established in 1913 by the United Farmers of Alberta, and in 1917 they amalgamated with the Manitoba-based Grain Growers’ Grain Company to form the United Grain Growers Company.

Alberta Co-operative Wheat Producers Limited (Alberta Wheat Pool) was formed in 1923. Manitoba Pool started in January 1924 as the Manitoba Co-operative Wheat Producers Limited and the Saskatchewan Wheat Pool was formed in 1923–24.

In 1996, the Saskatchewan Wheat Pool became a publicly traded company, putting an end to 73 years of co-operative ownership.

In 1998, Manitoba Pool merged with its counterpart the Alberta Wheat Pool to form Agricore Co-operative Limited. In November of 2001, Agricore and United Grain Growers ultimately formed a new corporate entity known as Agricore United, issuing public shares.

In 2007, Agricore United was taken over by the Saskatchewan Wheat Pool and the company took on the name Viterra. The merger marks the end of co-operative grain marketing in Canada. This publicly traded corporation operated until 2013 when it was purchased by Glencore International.

So what happened?

Back at the peak of the country grain elevator system in 1933, there were 5,758 elevators in operation across the Prairie provinces. In the 1930s, falling farm incomes led to rural depopulation.

In the 1950s, rising expectations, improved roads and mechanized farm equipment accelerated this trend. Fewer people working larger farms meant many small branch lines became unprofitable. Rail companies sought permission to abandon them. Deregulation of the railways and the demise of the Crow Rate in 1996 led to major rail line abandonments. This greatly affected the grain companies as they had to abandon many elevator locations that for them may have been profitable.

All of these events forced the grain elevator companies to revamp their business strategies going forward. For some — those that did not have the vision to see what was coming — it was too late, and they were either forced out of business or consolidated with other companies.

When I look at today’s reality where we now have only 354 grain elevators operating across the Prairies, that is a massive rationalization of an industry within a 90-year time frame — a 94 per cent reduction in numbers.

However, when I look at what companies are still in the grain game today, there are some that were there at the beginning before this all happened, and they are strong and viable today — which makes me ask the question, “How did they survive while the co-ops did not?”

I was working in the grain elevator business in Alberta from 1982 until 2006, so I was there for the transitions from Alberta Pool to Agricore, Agricore to Agricore United, and then to Viterra.

Here is my take on what happened or did not happen that could have allowed the grain co-ops to survive those years of change and to still be viable, member-owned co-ops today for the long-term benefit of its members.

In the early ’90s as all of the changes were happening, there were discussions amongst the three sisters as they were called (Alberta Pool, Sask Pool and Manitoba Pool) about merging together to become one large co-operative.

Rumour has it there were too many big egos at the negotiating table to ever allow the discussion to get to a meaningful point of possibility. There were more arguments about who was going to take over, what the company would be called, who would run the company and who would be on the board, that the discussion never got past the point to where it would ever become more than just an idea. They had lost focus on the fundamental philosophy of why a co-operative existed: for its members’ benefit and betterment.

Then, in 1996, the board of Sask Wheat Pool brought in a CEO from the United States who was incentivized to turn the company around. His idea was to take the company public and turn away from the member-owned co-operative model, which did not match up with the U.S. business philosophy of corporate enterprise.

This, in my opinion, were the first nails in the lid of the coffin of grain co-ops in Western Canada.

In 1998, the two remaining co-ops (Alberta Pool and Manitoba Pool) merged to form Agricore Co-operative.

So why couldn’t the three pools have come to an agreement earlier and kept a Prairie grain co-op alive?

Back to big egos and bad decisions made at the board tables of all of these co-ops. Sask Pool was the bigger co-op and it wanted to run the show, which no doubt upset the other two, and the beginning of the end of grain co-ops was the end result.

The rest is chronicled above.

The post What happened to those co-op grain elevator companies? Part 3 appeared first on Grainews.

Grain handling is a volume and numbers business. If grain companies don’t handle the volume, they need to “change the numbers” so they net out profitable in the end. But how do they do that if someone else is controlling the sales and handling fees?

It started back in 2012 with legislation that gave the grain companies control of their own destinies in the world of grain handling on the Prairies with the abolition of the Canadian Wheat Board (CWB) Act.

Before 2012, the CWB would sell the grain and determine what to pay the grain companies to handle your grain, and the balance after costs went back through the pools to producers.

Now the grain companies sell the grain and can set and flex their own handling fees up to government/industry set maximums. This means the grain companies take any profit or losses made on the sale plus they get their self-determined handling fees and keep it all and offer you a fair market value for your grain.

Now this is where basis comes into play. Having been in the grain-buying industry for 20 years and then work for the CWB for five years and now as an independent marketing consultant for the past 14 years, I can tell you that basis levels have changed somewhat since 2012 to today — and not in favour of you, the producer.

Back in 2006 when I started my consulting business, I can remember doing marketing strategies with producers and setting canola basis targets and hitting them constantly at levels under -$10 per tonne. In today’s world, what I would call a good basis would be a number under -$20 per tonne, and that is not near as easy to hit now as was a -$10 back then.

It is similar with wheat basis. Back then a good basis was in the +$50 to +$60 per tonne range and now a good wheat basis ranges in the +$30 to +$45 per tonne range.

Changing the numbers

Production on the Prairies is not going to increase dramatically enough to enable all of these facilities to be able to turn their facilities eight or 10 times a year. In order for them to make money, they need to make a little bit more on every tonne they handle so at the end of the year they make the same or more profit.

If total deliverable volumes on the Prairies don’t increase over time, you can expect the cost of doing business will, as shareholder and corporate profit expectations will demand it. If we have years of lower production, you may see some better basis levels as grain companies compete harder to get their hands on the fewer tonnes that are available, otherwise expect basis levels to remain static.

Before committing to a contract, ask about handling and cleaning charges as they can vary widely between companies. If you know what different companies charge, you can use that as leverage to try to negotiate a better price.

If only these grain companies were producer-owned co-ops that would pay dividends back to producers on the profits they are going to make. Wait a minute … some of them used to be, what happened?

Find out in my next column.

The post How grain companies are changing the numbers: Part 2 appeared first on Grainews.

I found the results interesting.

The overall capacity continued to grow even during the initial number decline, which tells me that new, larger facilities were being built while smaller ones were being shut down.

I look at the overall 2019 capacity of 7.8 million metric tonnes and think there are still at least five new facilities being built across the Prairies that are not yet included in these numbers. If we assume these new facilities are all going to average around 40,000 metric tonnes of capacity that would add an additional 200,000 tonnes of capacity, bringing the total elevator capacity on the Prairies up to eight million metric tonnes.

Now from my days in the elevators back in 2005, when we would plan our budget for expected handlings at a 40,000-tonne concrete elevator, we planned to turn the elevator six to eight times in a year. That would calculate out to between 240,000 to 320,000 tonnes of handling per year.

My quick math would tell me with eight million metric tonnes of capacity on the Prairies, if we were to expect each facility was going to turn eight times in the year, the total grain handled would be in the 64-million metric tonne range.

I went back to the CGC website and looked up total yearly deliveries to Prairie elevators and found that in 2017/18 it was 46.279 million metric tonnes and 2018/19 it was 48.763 million metric tonnes. If I take that and divide it by the current capacity of 7.8 million metric tonnes, we get an average turn ratio of six for the past two years. That is at the bottom end of turn expectations for a facility, unless… (I will get to this later)

I returned to the CGC website and looked up historical export numbers for all grains and found in 2014 total exports were just over 40 million metric tonnes and in the past two years total exports have been between 41 and 42 million metric tonnes, so about a five per cent increase over the past five years. Not a great increase in year-over-year numbers that would inspire me to build a $20-million-plus facility, unless… (later)

Total production has not increased dramatically and total exports have not increased dramatically over the last five years, so what has inspired the grain companies to build all of these new facilities over the past five years?… (later)

Grain handling is a volume and numbers business. If they don’t handle the volume, then they need to “change the numbers” so they net out profitable in the end. But how do they do that if someone else is controlling the sales and handling fees?

For my take on what has happened and why we are seeing all of these new facilities on the Prairies, see Part II in my next article.

The post New grain elevator builds over the past five years, why? Part I appeared first on Grainews.

How can you keep your farm from becoming a casualty of these unpredictable events?

In previous articles, I’ve discussed how improving management practices can ensure your farm is running as efficiently and profitably as possible. Within these management practices, there is the risk management component. At times like these, risk management becomes a key focus area for farm managers.

What level of crop insurance coverage should you take to cover your production risk? Should you take extra hail insurance? Should you consider a band of coverage from a revenue insurance product that also offers contract-buyback protection?

This can reduce delivery risk on pre-priced grains and allow you to market more aggressively throughout the year.

Managing marketing risk

When outside influences rather than supply and demand are driving world markets, we don’t know if markets will recover quickly or if we will see a continued downward price spiral due to the fear of the unknown.

After the harvest from hell, adding outside, uncontrollable factors that influence world prices and your focus going into this growing season has to be on taking every opportunity to lock in profitable prices. Why gamble, when you can take a profit?

There are a number of ways to go about pricing grain for next year.

You can pre-price grain for future delivery on a production contract, a fixed-price contract or a futures or basis contract. Or, you can buy or sell a futures or options contract for canola or wheat to position yourself for forward sales opportunities.

You can wait until you have the grain in the bin and then sell into the cash market or forward price for future delivery to take advantage of market premiums. Waiting until the grain is in the bin could mean missing out on profitable early-season pricing opportunities.

I would consider production contracts with an Act of God clause the least risky way to pre-price grain for future delivery. Use them whenever you can, as they provide good value with little or no delivery risk.

Other risk management tools

The next best, or cheapest, way to pre-price grain is a fixed price contract where you lock in a net price for fall delivery. There is no cost to this, but you do assume the delivery risk should you not be able to deliver the grain in the fall.

Reducing or eliminating that delivery risk is possible, but it comes at a cost.

Some grain companies offer options contracts that can be attached to your fixed price contract, at a cost. Or, you purchase a call option through your broker to offset your delivery risk. This can bring great peace of mind through the growing season.

With a revenue protection policy in place (like GARS), you can pre-price grain for the fall and not worry about delivery risk as it is covered in your policy to a certain value. Again, you need to determine the cost of these two different strategies to see which will work best for you.

Next, you could consider using futures first contracts to lock in a futures price on your grain and lock the basis in at a later date. Not all grain companies offer futures first contracts and some charge a fee. Ask before you commit to a contract.

In times of downward market cycles, profitable prices may not be as easy to realize as one may hope. When they appear, you need to be ready to react and lock them in. This could mean being a little more aggressive than you would normally be. Have a plan for how much risk you are willing to carry, and how much risk you will offset with insurance or options. Factor those insurance costs into your plan for profitability.

The post Risk management in a chaotic world appeared first on Grainews.

No. 5 on the list is knowing your cost of production. I break costs of production out into three components: direct, variable and fixed costs.

Direct costs are those expenses that have a direct impact on your production capabilities. These are your inputs: seed, fertilizer and chemicals.

Variable costs are those such as labour, machinery, utilities and cost of living.

Fixed costs are the costs of land, buildings, taxes, and overall farm financing costs.

If you have an aggressive production plan, your total projected input costs may be a little scary, but if you hit your yield and pricing targets, the profitability will be there.

Buying or renting more land could impact your debt servicing ability, but may improve your earning potential by maximizing your machinery usage.

You can’t guarantee yields, quality or price, which determine your total gross revenues, but you can control the costs of production that determine your net revenues.

Assessing risks

The risks of farming are many and varied. From loss or destruction of property to production risks, loss of livestock, loss of life, family discord, health issues or liability for others.

As the business owner or manager, be aware of where the risks are and what you can do to reduce or mitigate those risks.

Budget and financial plan

To manage your farm’s financials, you will need to be able to see how your information varies from year to year, and to benchmark your farm against industry peers.

You will need consistent numbers. The best way to get those is to use accrual accounting practices. This will give you consistent, comparable numbers which will help you make better management decisions.

Year-over-year comparisons of your farm’s financials give you a quick and clear picture of how your farm is doing, if it’s growing or falling behind.

Are your expenses outpacing your revenues? Where are expenses increasing? Could you take on more debt to buy land or machinery? Maybe you’re overpowered with machinery for the land you have. Can you improve your cashflow?

For benchmarking information, visit the Alberta Agriculture website and look for Agriprofit$ cropping benchmarks.

You are likely already doing a lot of this, but maybe not writing it down in a formal plan, inputting it into a software program, or sharing it with others on the farm.

Start by creating a vision of what you want your farm to be in five, 10 or 20 years. Include those that will be there at that time. Analyze risks for that farm vision, so you’ll be prepared for the future.

Have conversations with those who can help make your vision a reality. This could include accountants, bankers, consultants, agronomists, and insurance advisors. Most importantly, talk to your family members. Often.

Seven key practices

I’ve previously mentioned Farm Management Canada’s research and its findings of seven key farm business practices that top farm managers use. These seven practices are:

1. Ongoing skills development, lifelong learning.
2. Make business using accurate financial data.
3. Seek the help of business advisers/consultants.
4. Have a written business plan, review it annually.
5. Know your cost of production and what it means for your profits.
6. Assess risks and have a plan to manage and mitigate risk.
7. Use a budget and financial plan to monitor your financial position and options.

The post Seven strategies of successful farms appeared first on Grainews.

Let’s say your family members have taken personality and risk tolerance evaluations and discussed the results. This helped you clarify why some people react the way they do when making decisions or in stressful situations. This work can be classified as “lifelong learning.”

This discussion will help your family decide who’s responsible for each aspect of the business.

Discussing individual personality types and risk tolerance levels can help everyone understand who is willing to take on more responsibility and who is better suited to take on a specific role such as managing production, livestock, finances, safety or human resources.

Accurate financial data

Now that there is someone specifically responsible for the financial management of the farm, someone with an interest in numbers and budgets, that person will want to track and benchmark the farm’s financials against accepted industry standards to see how the business is doing.

First, they will need to meet with the accountant and banker. Proper year-to-year comparison and benchmarking requires good financial data. That starts with accrual-based financial records.

Seeking help

You have already engaged your accountant and banker in your financial discussions. You may already be using the services of an agronomist and a marketing advisor.

Starting a plan or strategy is just that, a start. Implementing the plan or strategy is where real change comes from. This is arguably the most critical point in the process and most likely the time when you most need the support of an advisor.

A written business plan

Your business plan should be a multi-level plan. A yearly plan focuses on the upcoming production cycle. A future vision includes plans for expansion and or capital improvements. A human resources plan details if more family members will work on the farm, or if there will be employees. What if someone gets sick? You will also want to include your transition plan, so you know how long each generation is willing to be an active part of the business.

Now, as the farm management team, you need to decide what the business of farming looks like on your farm and write it down.

What markets will you focus on? Specialty markets, commercial markets, seed markets, breeding stock markets? What do you need to do to meet those market requirements?

Who is responsible for which parts of the plan? Who is managing production? Purchasing inputs? Signing contracts? Maintaining records?

This written business plan will help you make better decisions going forward.

To be continued.

Seven key practices

I’ve previously mentioned Farm Management Canada’s research and its findings of seven key farm business practices that top farm managers use. These seven practices are:

1. Ongoing skills development, lifelong learning.
2. Make business using accurate financial data.
3. Seek the help of business advisors/consultants.
4. Have a written business plan, review it annually.
5. Know your cost of production and what it means for your profits.
6. Assess risks and have a plan to manage and mitigate risk.
7. Use a budget and financial plan to monitor your financial position and options.

The post Taking farm management to the next level – Pt. 2 appeared first on Grainews.

Your success may be production-based, profit-based, financial, or managerial — as in improving the way you monitor your farm’s performance. Or, your success may be becoming a more sustainable and safe business.

Over the past few years, we’ve seen some unusually hard harvests that left grain out in the fields. I’ve have seen a marked difference in the struggles that farmers have faced.

You would think the struggle would be worse for those with the most grain left in the field until spring, but in fact, those that struggled the most were the ones who harvested their grain but then struggled to manage the quality and took heavy losses due to spoilage. Those with grain in the fields weren’t having the best of times, but if they were able to manage their quality, between sales revenues and insurance they had their costs covered.

In hard years, those who follow higher-level management practices set themselves apart from those who don’t. This becomes evident when you look at bottom line per-acre returns.

Higher-level management starts with basic tasks, such as taking the numbers you jotted down in your pocket field book and putting them into a management software program so that they can be used for decision-making. Or tracking expenses such as fuel as a total cost of operations, but also on a per-unit basis, so you can calculate operating costs for each piece of equipment.

Field mapping with agronomic data and yield data will help you make better cropping decisions for the coming year. Financial indicators can help you analyze your farm’s financial health, which will help you make better capital investment decisions.

Making tough decisions

Everyone makes decisions differently. This is due to individual personality types and risk styles — characteristics that can be changed through learning and practice.

Personalities range from aggressive to passive. Risk tolerance levels can range from daredevils to avoiders. There are tests you take to help you understand your personality type and risk tolerance level. It is interesting to have family members complete these tests separately and then come together for discussion. This helps people see why they don’t always agree with others when decisions are made on the farm.

Look at the personalities of the people currently making decisions on the farm. Maybe some aren’t comfortable stepping outside of their risk tolerance level. Can you help them get beyond that roadblock? I have seen this with farm clients. There is often someone else within the business with the opposite personality. I suggest that those two people discuss decisions and make them together. Both parties can expand their risk tolerance levels and take their game to the next level.

If the two parties can’t get along, it’s best to bring in a third party with a more neutral personality and moderate risk tolerance. This person can act as an arbitrator and help the others learn how to better communicate and compromise, which is hard for some aggressive daredevils!

Seven key practices

I’ve previously mentioned Farm Management Canada’s research and its findings of seven key farm business practices that top farm managers use. These seven practices are:

1. Ongoing skills development, lifelong learning.
2. Make business using accurate financial data.
3. Seek the help of business advisors/consultants.
4. Have a written business plan, review it annually.
5. Know your cost of production and what it means for your profits.
6. Assess risks and have a plan to manage and mitigate risk.
7. Use a budget and financial plan to monitor your financial position and options.

The post Taking farm management to the next level – Part 1 appeared first on Grainews.

If you were fortunate enough to finish harvest, you have less to worry about, come spring, but depending on the weather and how early spring arrives you are going to be pushed hard to get fields worked, fertilizer and chemicals applied and seeding done in a timely manner so you don’t end up being pushed into a late harvest.

For those who still have crop out in the fields, it is going to be a very busy spring as you try to manage that crop to get the next crop seeded on time. An early spring is certainly preferred.

What are some things to consider before you put together your plan for the coming year?

First, determine the priority: to forge on and continue farming or to look at other alternatives. This will be driven by a brutally honest review of your financial situation, working with your accountant and banker to see if you can afford to continue farming the way you are or if you need to make changes. Changes could mean investing in better storage and handling systems so you can start harvest sooner and then aerate or dry your grain.

Second, review your risk management plan (crop, revenue, hail insurance). Is it giving you coverage to protect you from bad years like 2019? This review will involve you sitting down with your crop insurance rep and/or a risk management advisor to review what you have been doing, what is available to you and what you should be using to protect your business. This review will go a long way with your banker, when you show them what you are doing to manage your risk. This also helps reduce the bank’s risk, making them more willing to do business with you, even through tough years.

Study crop rotations carefully. Spend time with your input suppliers and/or agronomist to map out a plan for the spring that will give you maximum potential and crop choice flexibility. You will need a Plan A and a Plan B, in case spring comes late and forces you to plant shorter-season crops. Your plan should be optimistic and flexible, so if you run into delays during the spring, you can do so without greatly sacrificing yield potential.

The spring after a bad harvest is not the time to start cutting back on inputs. All that does is limit your potential for the upcoming year before you even get the crop in the ground.

2020 Marketing plan

Your marketing plan should focus on taking profitability when and where you can, to ensure that next year’s crop is going to pay for itself and you are not faced with another potentially profit-losing year.

This is where having a risk management strategy already in place becomes beneficial. As you map out your marketing plan as to how much of each crop you are willing to sell at certain times of the year and at what price, the decision as to when to pull the pricing trigger is easier to make when you know what kinds of pricing and production protection you have in place.

After a hard harvest like this past year cash flow is likely tight. Lines of credit may still be maxed out and cash advances taken. Your marketing focus will need to lean toward addressing those issues. Focus on pre-pricing grains for harvest delivery to improve cashflow, allowing you to meet your financial obligations and pay down debt as fast as possible, reducing your interest costs.

Focusing on getting your business back on track financially and making good decisions to get you past the effects of last year and back on track toward a better future.

From adversity comes learning. From learning comes knowledge. From knowledge comes wisdom. From wisdom comes opportunity. From opportunity comes success. Grow from the experience.

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