With a sigh of relief mixed with equal parts of pride and exhaustion, you climb down from the tractor seat. The fertilizer is spread, the crop is growing and the weeds are under control. It’s time to recuperate at last and to enjoy some time with your family.

But hold on a moment. It isn’t only the crops that grow during the spring and summer. Great ideas, keen observations and the kinds of insights that can shape your farm’s future are ripe for the picking too.

And here’s the best part. Now, when you’re still in full gear in the summer, can be the perfect time to start planning and prioritizing so that you’ll get every last ounce of benefit out of the winter business season that’s just around the proverbial corner.

Still not sure? Then read on…

“In many ways it is like being an athlete, and summer is game day,” says Jerry Bouma of Toma + Bouma Management Consultants in Edmonton. When you’re in the thick of operations, Bouma means, you’ve got the year’s best opportunity to see what works and what doesn’t, which in turn is critical for planning.

Whether they know it or not, top farmers are constantly reviewing their farm’s vision. They’re assessing how well their current plan is working out. They’re evaluating and gathering data and identifying opportunities. And just when a lot is happening on the farm, they’re subconsciously thinking about it, rating it, and imagining new opportunities even more.

Several years ago Bouma was involved in a survey of leading farmers in Western Canada. The research concluded that each of these farmers had a vision for their business, each was confident, motivated, and showed strong leadership, and each excelled at managing risk, finances, marketing and people. They were proactive at forming alliances, improving production, seeking out innovation and managing environmental issues. They were on top of management and planning.

“Leading managers and farmers are planning all the time,” says Bouma.

At the core of planning is a three-step process, says Bouma. First you define a clear vision toward which you’re working or aspiring. Second, you gather information, data, and insights that you need to evaluate your current position, while at the same time identifying the key initiatives that are critical toward achieving your vision. Finally, you develop the actual plan itself.

Summer planning tends to be very informal, setting the stage for winter action. It involves picking a few key business priorities and mulling them over before you start digging into the nuts and bolts. It is also a time for observation, listening and noticing impacts.

This summer, spend a little time on the following six business initiatives. They can help fuel your winter business planning, smoothe your pathway to change, and expand your opportunities for growth.

Identify improvements

There’s no better time to get a grip on what is working well, what needs to be improved and what needs to be discontinued than when you’ve just lived through the repercussions. During a break in the action, jot down the ideas you’ve had. When you spend so many hours in a tractor or a pickup, you can think of lots of ideas that evaporate and disappear before the day is over.

Some of them may seem like small ideas. But because everything on the farm is so interconnected, sometimes it’s the small ideas that create a trail that leads to the great big ones.

So keep track in May and June. Then, start choosing some as your business priorities for next winter. For example, maybe after paying income tax in the spring, you want to focus on incorporating your business, and you can use the summer to figure out who you will turn to for more information and for professional advice. Or if you struggled hiring someone, you might want to work on recruitment.

Successful farmers take charge. They introduce new ways of doing things better and more efficiently. This includes adopting new technologies and genetics or even seeking out important new findings from business researchers and thinkers. Then, get a rope around your desire to make change. Lasso it when it’s bucking.

Be ready for unexpected opportunities

The reality is that some opportunities for investment aren’t budgeted for, and successful farmers are often the ones who can jump on these chances. Although summer isn’t the time for a full financial planning session, it might be ideal for reviewing your costs and how they compare to forecast.

“Make a budget at the beginning of the year and track it month by month with your bank statement,” says Art Lange, financial consultant at Sherwood Park, Alta.

Reviewing actual costs and plugging them into your budget will help keep you on top of the farm’s cash flow position and marketing requirements. Then decisions on purchases, marketing and production are made based on profitability projections, both short- and long-term.

Although not much land is traded with standing crops, being financially prepared allows for deals to be done whatever the time of the year. Access to credit can be pre-planned, says Lange, either by using vendor credit and grain advances or by keeping in touch with your loan manager.

Above all, don’t forget to take care of your emotional health. “Financial performance is important, but farmers need a family life too,” says Lange.

Be the first to enrol

Summer is an excellent time to determine exactly what you need to learn, and then to prioritize education needs for family and employees. Setting a midsummer deadline for people to select skills enhancement and educational opportunities will improve the chances of being accepted into certain programs and give people a dose of focus and motivation during harvest.

Some courses have summer deadlines and incentives for signing up early. Agri-Food Management Excellence (formerly the education part of the George Morris Centre) offers early-bird C-TEAM applicants a five per cent discount if they apply by July 15, although applications are accepted until three weeks before the course starts in December.

Professional development should be a part of a farm’s business plan, says Heather Broughton, who is a principal at AME Inc. and part-owner of SWG Farms in Alberta. “The agricultural industry is changing quickly and in order to stay competitive and ahead of the game, learning needs to be a continuous process.”

Broughton has personally seen how powerful it can be to purposely plan to take time to step out of the day-to-day operations of a farm and learn how to incorporate ideas and skills to strengthen the business. She has completed the C-TEAM program and the TEPAP program through Texas A+M.

At www.agritalent.ca is a list of potential courses that helps you select topics and locations. Also, if geography is an issue, several companies and agencies have built a fairly large collection of learning videos. FCC has some at www.fcc.ca/multimedia, the Agricultural Management Institute’s series is at www.takeanewapproach.ca and there are good webinars at Farm Management Canada at www.farmcentre.com.

Also keep in mind that learning opportunities have become more mobile. For example, several agricultural companies have been producing podcasts which are particularly popular in the busy spring and summer months. That includes the FCC Edge audio podcast, designed for farmers to listen to while on the go using their smartphones or mp3 players.

“Today’s best and brightest farmers are very intentional in their personal growth strategy,” says Mike Tisdall, who manages the FCC learning team. “Learning is an important component in your farm’s business growth strategy.”

FCC offers over 160 learning events all across Canada from November to March. This past year, 13,000 individuals attended these events, an increase in over 1,500 from last year.
“If you want to grow your farm,” says Tisdall, “you need to start by growing yourself.”

Touch base with employees

Before you fire up the fishing boat, take a moment to open up communication with your employees. Although full performance reviews in the summer might not work so well, taking time to talk to your employees while they are actively engaged in their in-season work is a perfect opportunity to connect with them and keep them charged up by ensuring they know how important their work is.

Bouma’s best management practices survey indicated that only about half of top producers conducted formal performance appraisals. However, open communication with employees is really important and it can be quite informal.

Human resource experts say there’s only one answer to the question of when to communicate with employees, including family. It’s, “Often.” Listening to and speaking with employees about how they’re doing and how that relates to your farm’s visions can be motivating. Staying connected also allows managers and employees to address little problems as they occur. Remember, too, that telling employees the good job they’re doing this summer may make it easier for them to accept constructive criticism later.

A complete formal human resource management system takes time and effort; it’s not something you can throw together between loads of hay. If you don’t have one, summer is a good time to make it a priority for next winter’s to-do list. It’s also a great time to identify the challenges the farm faces and then determine if employee incentives or training will help.

For future reference, the Canadian Agricultural Human Resources Council has created online step-by-step instructions on how to create an HR plan for your farm, including how to set compensation and safety standards and, templates for things like job advertising and termination letters. Available as of April 1 for $99, you can now source it online.

Think transition

This summer might be the right time to start exploring whether you want to sell the farm to an external party or transfer the farm within the family, says Grant Robinson, accountant and coach for Successcare in Guelph, Ont. Start with that single choice, Robinson recommends, and keep an open mind.

Next you need to define what you and your spouse want in the future for your business, your family and your ownership. It’s a conversation you can have on your front porch on a quiet evening or while you’re on a summer drive together. What’s important to you and your spouse? How do you want to retire? Is keeping the land in the family important to both of you?

Robinson has created a pathway of choices for the Agriculture Management Institute at TakeANewApproach.ca. Window by window, you select one of two choices, leading to options, examples, and worksheets. It’s a slick, anonymous way to steer through a very complex, confusing and emotional decision.
Only once you get through these preliminary choices, work out the framework of a plan for making your choice happen.

Don’t expect everyone to jump on the idea or make quick decisions without much information. Robinson has met farmers who in the middle of a busy day wandered up to their sons and asked if they’re in or out. They didn’t give them any information about the business, yet they expected an immediate, confident answer.

For similar reasons, Robinson says it isn’t wise to call a family meeting when everyone’s busy or right before someone goes on holidays. “It’s like throwing a bomb in the room,” he says.

This summer might be a good time to select a date in the winter to meet with the stakeholders to share relevant facts and get input from the next generation. Just don’t keep it to yourself.

Set a meeting to formalize plans

“Perhaps the most important decisions to be made in the summer might be answering: When do we plan to sit down and do more formal planning?” says Bouma.

For best results, Bouma suggests setting a time and place with a minimum of distractions for sometime during the next winter. Some farmers prefer to conduct their planning on site with their management team, which can include employees, spouses, siblings or children. Others prefer to go to an offsite retreat location where they can fully engage in planning without the noise of everyday business.

When you set the date and place, also select who needs to be involved in the plan. There’s gathering input from people in advance and then there’s selecting who needs to be part of the plan. It’s important to consider who should have ownership in the plan.

“You can have the best plan in the world,” says Bouma, “but if it requires a team to execute and the team is not part of the planning process, you have a problem.”

– Maggie Van Camp is an associate editor with Country Guide at Blackstock, Ont. This article originally appeared in the April 2013 issue.

Across Canada, farmers are wondering if AgriStability still has a fit on their farms. As I wrote in the last issue of Country Guide, government funding of AgriStability has been significantly cut under Growing Forward 2.

However, instead of lamenting these cuts, it is more important farmers evaluate the revised 2013 AgriStability program to decide if this risk management program is needed for their farm business.

Here is the conversation farmers should be having about 2013 AgriStability:

Q1: What exactly is AgriStability under Growing Forward 2?

First and foremost AgriStability is a margin-based program. A producer who is enrolled in AgriStability receives a government payment when their actual margin declines by more than 30 per cent from their reference (historical) margin. AgriStability does not guarantee a level of revenue and does not guarantee a farmer will make a profit.

Q2: What is margin?

Margin is the difference between revenue and expenses. If revenue exceeds expenses, you have a positive margin. When expenses exceed revenues, your margin is negative.

Q3: What is reference margin?

Your reference margin is the olympic average of your margins over the last five years. (Best and worst margins are excluded and the remaining three are averaged.)

Q4: If you receive a payment when your margin declines more than 30 per cent, does this not guarantee a profit?

No, for three reasons. Most importantly, not all expenses are included in the calculation of the margin. Most variable costs directly related to production (i.e. seed, pesticides, fertilizers, fuel and arm’s-length labour) are included in the calculation. Fixed costs like land rent, equipment (repairs, purchases, and even leases), hired custom work, building costs, taxes, capital cost allowance, and a host of other expenses are not included. So, having a profitable reference margin does not necessarily mean you have a profitable farm business.

Second, if you have experienced a number of years of declining or poor margins due to uninsured production losses, poor prices, or high costs, your reference margin may be so low that it does not provide the necessary coverage to meet the rising input costs farmers are facing.

Third, under Growing Forward 2, limits have now been placed on the reference margin. If the total of the allowable expenses are less than the olympic-average reference margin, then the reference margin is limited to the allowable expenses.

Q5: If a farm has had high margins, does AgriStability provide better protection?

No question about it. The reference margin is different for every farm. Every producer must look at their own historical margins and also weigh the risk of their 2013 margin dropping by more than 30 per cent from your personal margin history.

Q6: If AgriStability provides more protection for some farmers than others, do these farmers have to pay more?

Like the protection, the costs to participate in AgriStability are individualized. Everyone has to pay an administration fee of $55 annually. As well, there is a premium of $315 per $100,000 of reference margin. These fees are due April 30 each year.

This seems like a very low cost for insuring that your variable costs are covered. The actual premium is low but producers who participate in AgriStability may pay substantial accounting fees to complete their AgriStability applications and supplementary forms and to track inventory. Furthermore, part of any indemnity payment made to a producer is withheld in lieu of having farmers pay higher premiums for coverage.

Q7: By enrolling in AgriStability, am I guaranteed to receive 70 per cent of my calculated margin?

Not exactly. Unlike most insurance programs, the premium AgriStability charges does not offset the producer’s share of the indemnity risk. Instead, the government withholds 30 per cent of any indemnity payment made. In effect, the farmer is self-insuring the first 30 per cent of any margin decline and then an additional 30 per cent of any further declines.

So the maximum AgriStability payment you can receive from the government is actually 70 per cent of 70 per cent (i.e. 49 per cent) of your reference margin.

Q8: Do I need AgriStability?

You are the only one who can answer this question. Without doubt, AgriStability will protect you from severe margin declines resulting from poor production, falling prices, market interruptions and rising input costs. But you can protect yourself from three of these problems through other insurance.

Production insurance will cover production problems. You can use the futures and options markets to protect against falling prices. If you live in Alberta or Ontario you can purchase revenue insurance which mitigates falling prices. You can use contracts to protect against market interruptions.

However, there is a real dollar cost for these risk management tools, whereas the risk management cost is deferred through AgriStability until you are in a claim position.

The rising cost of inputs is the one factor for which there are few risk management options and which AgriStability provides protection for. Is this a risk you want insurance to cover?

Finally, as I pointed out in the last issue, there is at least one private-industry insurer who now offers a margin-based insurance product.

Q9: Are there other factors I should consider in deciding whether to participate in AgriStability in 2013?

At a recent Alberta Financial Services Corp, meeting addressing the 2013 AgriStability changes, the presenters brought up one more point farmers need to weigh in the balance.

This same point is made on the AFSC AgriStability website.

Here is the direct quote: “Participation in AgriStability may be a requirement for participating in the Advance Payment Program, or in accessing other credit.”

As I asked in the last issue of Country Guide, how much insurance do you really need, and what type of insurance best meets those needs? Does the 2013 AgriStability provide the risk management you need?

– Gerald Pilger is a farmer and writer at Ohaton, Alta. and a regular contributor to Country Guide.

Not long ago, it was considered vital to know your costs and to keep striving for lower cost of production. Then came the surge in commodity markets, and somewhere in the last few years of agricultural trade pacts, large-scale expansions, monster machinery and unbelievable volatility in prices, we seem to have lost sight of cost management.


Some of our costs have doubled in 10 years, but we tell ourselves that at today’s grain and oilseed prices, it make sense to invest in our crops.


Does the opportunity to make money by throwing everything at a crop in order to get the biggest possible yield mean we shouldn’t track and compare production costs?


If you want an answer, you’re basically on your own. Of all the money that gets spent on ag research in Canada, virtually none goes to studying our competitiveness. In fact, when I contacted Agriculture and Agri-Food Canada (AAFC) in my hunt for analysis on Canada’s farm competitiveness, I was essentially told that we must be competitive. Otherwise, we wouldn’t be producing wheat or soybeans, beef or pork. Case closed.


Still, AAFC can be a useful place to start.


A 2007 AAFC survey on farm business management practices found only 42 per cent of farmers create an enterprise budget, calculating their revenues and expenses for each product. While the format of such cost-of-production (COP) budgets varies, typically they include gross revenue, direct variable expenses, indirect variable costs (i.e. fuel, labour and utilities), fixed costs and net profit.


As most farmers know, many provincial ag websites offer fill-in COP spreadsheets, making it easier to establish break-even points that can be used in marketing and buying decisions.


To assess our individual competitiveness, then, the next strategic step could be to compare our numbers against our competitors, whether they’re regional, in-province or even national. Such comparisons could then help us refine our marketing plans or uncover ways to improve production costs. 


Rarely do we take a hard look at how our cost of production compares with farmers in other parts of the world, yet this is the bottom line for competitiveness. A case can even be made that trade deals should be preferentially sought for products that Canadian farmers can grow at a competitive cost of production. 


Still, the AAFC attitude does have some justification. The competitiveness of the agriculture and agri-food sector is linked to its ability to remain viable and profitable over the long term, especially in relation to its competitors in relevant markets. 


“Long-run sales growth in domestic and international markets shows that Canada has remained relatively competitive in markets for agriculture and agri-food products,” says Julie Smith, AAFC data analyst.


Even so, Canada’s impressive export record doesn’t necessarily mean that Canadian farmers are producing commodities at a lower cost than our global competitors. It only means that someone out there is buying what we produce.


The difficulties in coming up with meaningful data on competitiveness are also compounded by the complex nature of our industry and the volume of farmers and products, including widespread variations in production systems and farm size, not to mention the endless and heavily politicized implications of food trade policy. 


Think about the spread in cost of production between different canola production systems, or between no-till Roundup Ready soybeans and conventional non-GMO soybeans. Then factor in the spread in yields and regional land costs, and it quickly becomes mind-numbingly complicated.


And that’s in a country with a developed agricultural economy and reasonable statistics. No wonder global COP comparisons have been relegated to internal comparisons and doctorate theses.


One interesting approach comes from the Institute of Farm Economics in Germany. This think-tank links up with other teams of economists spread throughout the world to gather real numbers from what they perceive to be typical farms. Under a project called Agri Benchmark, these researchers collect, compile and compare economic farm-level data for the world’s major crops and livestock. 


Yelto Zimmer, head of Agri Benchmark’s crop team, is immersed in the cold reality of global COP numbers. “The ongoing liberalization of agricultural trade policy will lead to reallocation of agricultural production worldwide,” Zimmer says.


Since 2005, Agri Benchmark has been quantifying production costs for the major production areas of globally significant crops, as well as documenting how farming is done in various regions. It has also looked at the drivers of international agricultural competitiveness, and it looks at who may be the industry leaders in the future.


For each location, Agri Benchmark creates a typical, hypothetical farm based on standardized questionnaires that explore whole-farm and enterprise data. Local experts then cross-check the results and discuss the changing technical, economic and political situation in each country.


Allowances are also made for what Zimmer coins “entrepreneurial profit” or opportunity costs, and the study also looks at valuing family labour at alternative income levels, as well as comparing family-owned land versus farms that need to make mortgage payments. 


Zimmer’s team also runs projection models of the effect of policy changes, although the group is not supposed to judge. “We provide numbers from which to navigate policy, trade deals and make management changes,” says Zimmer.


The result is a snapshot of a country based on fairly small sampling. Admittedly then, there are some pretty big holes. Not all crops in a rotation are considered, and only some regions are represented in some countries. For example, in Canada, the only place data is collected is Saskatchewan, through Richard Schoney, economist at the University of Saskatchewan.


However, this isn’t supposed to be a comprehensive COP. It’s strictly for comparisons particularly around the effects of government policy and production methods.


Based on these numbers, Canada looks pretty good. “The latest figures from Saskatchewan indicate that crop production in Canada is very, very attractive,” says Zimmer.


Still, it can be frustrating for farmers who are trying to assess whether it makes sense to pay $10,000 an acre for Ontario corn and soybean ground.


Agri Benchmark’s thick annual cash crop report looks at a wide variety of issues affecting cost of production. One of the key lessons is how much direct cost of production varies compared to revenues throughout the world.


For example, in a number of European countries on smaller farms, growers hardly cover their cash costs growing oilseeds. Farmers in these countries are most likely to continue growing rapeseed due to government payments encouraging the production of biodiesel.


For wheat, lacklustre margins have permeated the globe. Yet the differences between countries are stark, especially when you consider how government tops up revenues. (See chart Total Cost and Gross Revenue Wheat.)


The other lesson is that uncompetitive costs of production are primarily driven by operating costs, not inputs. In canola, for instance, the report puts the average operating cost at about 40 per cent of total costs, but it ranges from 60 to 20 per cent.


That’s enough to give Canada and Ukraine an advantage of close to $200 per tonne compared to the least efficient countries, where farmers’ cost of production was inflated by operating costs, production systems and size of farms, as well as by opportunity costs for labour, land and capital.


Weather still controls the bottom line in farming, especially in snapshot annual comparisons. Several areas of drought show up pretty quickly in the Agri Benchmark study because of lower yields. For example, drought-stricken western Australia and Denmark’s Funen Island were the highest per-tonne cost of production among rapeseed areas in the world in 2011. 


Size


Agri Benchmark’s original crop analysis in 2005 confirms the link between farm size and lower cost of production for oilseeds, as an “L” shaped cost curve.


Land costs


Agri Benchmark’s 2010 analysis found that Saskatchewan, Ukraine and Romania had the lowest total production costs for canola — including land — at less than $300 per tonne. 


The biggest advantage eastern European areas have is their almost non-existent cost of land. In Europe the leases are much more stable with most being seven, 12 or 18 years, and they are rarely adjusted over that time. “Rental is almost nothing there,” says Zimmer. “That gives them a competitive edge over North America.”


At the opposite extreme, says Zimmer, “Argentina has extremely transparent land markets. Basically if land goes up in value, that is transformed overnight into higher land rent.”


In the last few years Russia and Ukraine have improved their cost of production slowly. However, they also face unseen costs, like theft. “Russia and Ukraine have enormous potential to reduce cost of production,” says Zimmer. “But the current system of having large tracts of land managed under one operation has led to some inefficiencies.”


There are also some red flags for Canada. “Two regions have extraordinary higher costs of labour, Australia and Canada (the study area in Canada is only in Saskatchewan),” says Zimmer. “Both those countries have the mining industry drawing away farm labour.”


Yields


As intensive farming methods are adopted in more and more countries, global yield patterns are shifting. Technology is also impacting cost of production. For example, herbicide-resistant GM canola is grown on about 80 per cent of the acres in Western Canada where GM canola was first introduced in 1995. Coupled with no-till seeding, Canada has enjoyed this cost of production advantage over Europe for 15 years.


In other crops, however, the trend can be reversed. According to the Agri Benchmark study, for instance, Canada is near the bottom for global wheat yields. However, Canada is among the most efficient in terms of our direct per-tonne cost of production.


So, the question remains. Are we competitive? At this point, the only answer appears to be: if you’re profitable, you must be. CG

But the crop isn’t exactly what Doug is talking about.


Harvest means more than yields at Over the Hill and Under the Hill Farms, the 10,000-acre farm near Glenboro, Man. where Doug is company president. Harvest also means their biggest labour management challenge of the year.


With close to 1,500 acres of processing potatoes to dig at the same time that their grain harvest is ramping up, “interesting” might be the wrong word. Even “challenging” might qualify as the understatement of the year.


Maybe the word should be “opportunity.”


Over the Hill’s full-time staff of seven grows exponentially until up to 40 in total are digging, sorting, culling, piling and storing the year’s harvest. Many are longtime members of the harvest crew — some have been working for the Berrys for 15 seasons. Others are entirely green and might never have stepped on a farm before. Others are retired farmers who are looking for something useful to do and a chance to run a tractor again as much as any paycheque.


So how do you take a group of school kids, unemployed city office workers, retired farmers and who knows who else, and merge them in a time shorter than the Stanley Cup playoffs into a cohesive, high-functioning team?


Oh yes, and let’s add the critical point… a team that you’re betting your entire year on?


“It’s actually kind of fun,” Berry says, which makes me admit I’m surprised. “It’s really something to watch a crew pull together,” he says, “and really get going good.”


Start at the top


One of the most important questions is a predictable one for a large operation with a number of members on its management team: “Who’s in charge of what?”


Berry says it means having clearcut chains of responsibility — and one person who’s clearly in charge of each chain. Knowing who to talk to about what takes a lot of stress and guesswork out of the day for employees, and it ensures that resources and workers are deployed efficiently and appropriately.


“When we’re digging potatoes, for example, I’m in charge of the storage, and that’s about all I do,” says Berry. “My nephew Kevin runs the grain operation and my son Chad is in charge of the potato end of things.”


Employees working in these various areas know who to talk to, where to get their daily instructions and where to report problems. Those area leaders can then make a decision, right at that point. Then it’s also up to them to co-ordinate any issues that cross the lines of responsibility — such as needing to shuffle employees or equipment between areas.


Then, at the top of the operation is one single individual who makes the final call. But in the Over the Hill operation, who that person is can vary depending on the day-to-day reality of the operation and what various members of the management team are up to.


Profitable foundation


A few miles east, near Portage la Prairie, grain farmer Jim Pallister agrees that leadership of the labour force at the farm level is important in many ways. On Pallister’s operation — one of the largest in the province — he relies on a handful of year-round employees as well as seasonal additions to the labour force. Pallister says running a profitable and well-managed farm is foundational to his success. It’s something nobody can afford to lose sight of.


“That’s the bottom line — if we’re not profitable, we can’t afford to do some of the things that will make our employees happy,” Pallister says.


That doesn’t mean squeezing his labour force, however. Instead, it means establishing a mutually respectful understanding of the nature of the business and the reality of the operation.


Indeed, based on hard-won experience, Pallister encourages farmers to gain a clearer understanding of these facts of life themselves by utilizing available IT tools to track how payroll hours vary throughout the season.


“It’s quite straightforward and you can get a really clear picture of what your labour needs are through the season using a graph,” Pallister says. “It really does show a clear picture of your labour requirements.”


For his operation, things are steady at a low level through the winter months. Then into the growing season there are modest peaks during spring seeding and in-crop pest control. Next the real crunch hits, at harvest time.


“It looks like a mountain,” Pallister says of the labour graph for his operation.


That might seem like common sense, but Pallister insists that having a crystal clear understanding throughout the operation of the immovable nature of the business is important. 


“You can do things to meet your employees’ needs, but you can’t change the business you’re in, or the fact that it’s seasonal,” he explains.


Sometimes that means denying an employee’s request. For example, let’s say they want every long weekend off. Maybe that works in the summer. During harvest, not so much.


Work has to fit into the needs of the farm rather than the calendar, even when that means the farm is operating on a different schedule than other employers. It works, says Pallister, as long as the rules apply to everyone on the farm, including family members.


To illustrate he tells a story of himself from his younger years.


“I was sitting at a friend’s place one day — I was just a kid — and my dad called, and he asked me ‘Do you want to farm?’” he says. “We weren’t even done seeding yet, and there I was hanging out with my girlfriend and my buddy.”


Pallister says that the one phone call was all it took to smarten him up. “I told him, ‘Of course I do, I’m on my way.’”


Now he says the key to managing employees on a farm is finding good people and motivating them to answer that they want to farm too, even though they’re not the owners of the operation.


Comfort zone


Another reality for Berry is the diverse nature of their workforce. Some are extremely knowledgeable about the operation, others are newbies who might not know much about anything. Treating them as interchangeable cogs simply won’t work.


For example, a retired farmer might be chomping at the bit to get back behind the wheel of a tractor and pull that digger down the field. Someone who’s never run a tractor on the other hand might — if they have any sense — balk at taking the controls of a complicated and occasionally finicky piece of equipment that’s the very heart of the harvest operation.


Knowing what the individual wants to do and is suited to do is very important, says Berry.


“I really like to let people do the jobs they want to do, that they like to do,” he says. “There are people who want to work in the shop, for example. There are other people who want to be equipment operators. I myself like it out in the field, not being stuck in the shop. It’s better if they can go where it works for them.”


Part of that process is building a comfort zone for new employees — something that has to happen just about every year, says Berry. “It seems like every year we take on three or four new people,” he says. “It changes every year, though we do have quite a few repeats.”


While new blood can be a good thing, it also means there are a handful of new people who need to be integrated into the crew so that everything can hum right along. A big part of that is making sure they’ve got a good overview of the operation and how the pieces fit together.


“We try to take the new people and move them around a bit in the first week or so and give them a bit of everything,” Berry says.


Berry also councils a bit of patience with new employees, especially in the early days.


“You’ve got to remember that they might not be used to working — physically working, that is — and it can be a hell of a change,” he says.


The farm has also found success, Berry says, by working with employees who have other obligations elsewhere, but still want to work on the crew when they can clear room for it.


“We might have someone, for example, who has a full-time job — but during the potato harvest he makes arrangements so we can have him from, say, 3 p.m. until we quit at night,” he explains.


Because potato growers seek to avoid harvesting during the hottest part of the day — putting hot potatoes into storage is a recipe for disaster — this sort of arrangement can work well for them.


On Jim Pallister’s farm, meanwhile, gaining an understanding of his labour needs again takes a systematic approach, this time using a simple spreadsheet program. On it he lists the farm’s various skill requirements — for example, Class 1 drivers’ licences, mechanical ability, welding, and other basic building blocks of a good farm employee. He then fills in the individual employees and essentially then checks the boxes. At the end he has a clear labour matrix of needs and skills.


“You can look at it and you can see, for example, that you’ve got plenty of people with Class 1 licences, but you may not have enough people who can weld,” Pallister says. “When you’re running a business, you need to have bench strength — you can’t afford not to.”


That means both cultivating the people you have and having a backup plan if things don’t work out, he says. “You’ve got to have numbers to call.”


Motivation?


What an employer wants from the relationship between the business and the employee is fairly straightforward — someone who’s productive, reliable and honest likely tops the list for most.


But plumbing the depths of what motivates employees is an entirely different matter.


Berry says he’s learned that there are likely as many different answers to, “Why do you want to work here?” as there are employees on the payroll.


For some it can be a straightforward financial transaction — they want a few extra dollars for some of the finer things in life, so they take some vacation time from their day job and make it a working vacation.


“I think for some of them it’s their Christmas money, or the money to pay for the kids’ sports — it’s a few dollars for those extras,” he says.


Others might find a few more dollars to be just fine, but that’s not really what keeps them coming back season after season.


“For some, I think it’s a chance to change their life a bit,” Berry says. “They get to work outside, drive equipment and work with a group of people for a common goal.”


That might seem a stretch to some, but to someone whose life usually consists of hunching over a computer in some anonymous cubicle eight hours a day, pushing electrons around on a screen or paper around in files, getting out into a farm field can seem like a vacation they’re being paid to take, especially on something like a harvest crew.


Pallister agrees there can be many different motivations for employees, but in the end, he says, “Incentives count.”


For him that means showing employees that they’ll be rewarded if they show up when they’re needed and work both hard and smart. In some cases it also means rewarding employees with acreage-based bonuses for critical field operations.


“We do that during seeding — the guys get an acreage bonus for every field that comes up and I’m satisfied with — even emergence, no misses, proper seeding depth,” he says. “They also know if they get chemical on someone else’s crop or shrubs or something like that, it’s going to come out of that bonus.”


What he’s attempting to do, Pallister explains, is to delegate both reward and responsibility throughout the organization, pushing it down as far as possible.


Pallister concedes it makes for extra cost. It’s not uncommon for employees to double or even triple their hourly wages during these critical periods, he says. But profitability demands that critical operations must be done right, which works out in everyone’s favour. “If we’re profitable,” Pallister says, “we can share that success.” CG

“The biggest factor was when we sat and couldn’t pick any corn because we were still sitting on beans, and nobody would take them for over a week,” recalls Gillespie, who farms about 1,000 acres on Highway 21 between Ridgetown and Thamesville, Ont.


It’s a move that points to both the opportunity that comes with an on-farm drying and storage system, and also to the way that it impacts all parts of the operation.


It’s also a move that puts Gillespie in the middle of a major eastern Canadian trend.


More growers are pulling the trigger, either building new storage and drying units on their farm, or replacing existing systems or expanding them. In Gillespie’s case, it was a major upgrade. He decided to replace his father’s aging system, and he reasoned that the family farm was also outgrowing the existing system’s capacity.


Bin and dryer manufacturers have been working flat out for the last four years, with more and more farmers wanting the flexibility and profitability that they associate with on-farm grain handling.


In many cases, they see it as a version of the own-your-own-equipment versus hiring custom operators continuum. Owning your own ensures you get the work done when you want it done, and that you get it done the way you want it done too. Going custom, however, means your capital isn’t all tied up in steel.


“That’s basically what it is,” says Gillespie, agreeing with the comparison. “If you’re going to the elevator, it’s the same as hiring a custom sprayer or a customer harvester. It’s all about what your goal is, and what you want to do.”


Of course, management of time is a huge consideration too. Do you hire an expert, or do you take the time to become an expert yourself?


But then, the time discussion has two sides. If you aren’t drying and storing your grain on farm, you can be spending a lot of your harvest lining up trucking and delivery, negotiating drying rates, and waiting in someone else’s line.


For Gillespie, the decision to build his own storage and drying unit came down to logistics and marketing. There was the challenge of getting the grain harvested and stored in his previous system measured against the freedom of marketing and holding on to the grain himself.


“I wanted more capacity, because I couldn’t handle having to ship a third of our crop in the fall — and,” says Gillespie, “there were the logistics of getting it out, and I wanted to be able to sell it throughout the year, and I wanted to be able to capture the drying costs on the corn.”


“If there’s a substantial amount of grain and you’re spending a lot of time that you should be harvesting just trying to get rid of it, or if you’re paying commercial drying rates,” Gillespie says, “that’s when you should (install a new system).”


For Gillespie, there is no reason why farmers shouldn’t have some storage on their farms. In fact, he goes so far as to suggest that there should be storage capacity for at least half to three-quarters of the crop on any farm. Unless a farmer lives next door to an elevator and can unload easily without significant wait times, he believes, then the move towards larger farming units that are often spread farther apart necessitates on-farm storage and drying systems. 


Helmut Spieser, engineer with the Ontario Agriculture Ministry also sees more farmers building new on-farm systems, and for the most part, he believes it’s a sign of some shrewd thinking.


With larger farms, as well as with today’s bigger yields, most farms are dealing with steadily increasing grain and oilseed volumes. Besides, timelines are getting tighter too, and there’s less margin for inefficiency.


Plus, more growers are building their new units in the hopes of becoming inland satellite locations for some of the larger commercial elevators, so there may be even more income opportunities.


But it’s not as simple as it all may seem.


“If they have the assumption that ‘just because I put a system, I’m going to make a whack of money,’ they’re going to be disappointed,” says Spieser. 


In effect, with larger farms, higher yields and rising land prices, there is simply too much at stake to leave anything to chance, and Spieser points to wheat to explain why.


Quality is paramount, and with wheat’s current pricing structure and with its sprouting potential and its specific quality uses within the food industry, the stakes get very high very fast. It’s a trend that helps explain Spieser’s belief that if you have a large on-farm system, you should have one person dedicated to managing that system. It shouldn’t be a part-time responsibility, or something that you think you can squeeze into a few in-between moments scattered through the day. 


“Somebody has to look at it, aerate it, turn grain, move grain, ship it out, or whatever needs doing,” says Spieser. “That needs a full-time person who’s responsible for that. You have to have some continuity and capability there.”


Turning and aerating is important, but again, with wheat even more than with corn or soybeans, in part because it’s stored through so much warm, muggy weather.


As well, insect pests are another learning curve and can be a bigger threat in wheat. Since wheat is harvested at the height of summer, it’s also the height of insect activity, and as Spieser notes, it’s the first “fresh food” in the bin. 


“Again, you have to manage it, because the tolerance in the industry is zero,” says Spieser. “That’s zero for live insects at the receiving plant and in some cases, they also want zero dead insects, because if they find dead ones, they say, ‘There’s an off chance there might be a live one in the batch.’ If they find them, they’ll send you home.”


Corn can provide a similar challenge with bugs but typically only in those cases where it’s stored for more than a year.


The good news is that there are many different resources available to growers looking for information on storage bins and drying units, Spieser says. In particular, Ontario’s Ag Ministry hosts workshops on storage and drying, and also offers written articles and does presentations at Ontario Soil and Crop Improvement Association meetings. Some dealers will help a grower with the initial operating instructions and perhaps some rudimentary training. However, some of the technical detail beyond how the auger works or how the dryer works can be left out, sometimes with very unfortunate results.


“I say that I dry a lot of grain on the phone,” Spieser says with a chuckle. “I can usually sense the guys who have the system for the first year because I talk to them about three times through the growing season. ‘This is how it went in, it looks like this, it smells like this.’ ‘Trust me,’ I say, ‘it’s fine. Run the fan.’ But they need to know what they need to know, and unfortunately, some don’t.”


It’s one thing to say, “This farmer says he pays 19 cents shipping whereas the mill is charging 51 cents.” But Spieser contends that these comparisons aren’t apples to apples. The price the farmer may be quoting could be for fuel alone. The price the mill quotes usually includes everything, including overhead, insurance, profit, amortization, repairs, demurrage and equipment breakdown. The two prices are not considering the same parameters. 


Dave Gillespie agrees that such risks and concerns are valid, and must be addressed. But he also maintains storing his own grain is an advantage. He performs all of the necessary checks and monitoring that is needed, although he acknowledges that those processes are often more complicated than they might appear.


“You don’t just think you’re going to put grain in it, and that it’s just going to be there when you need it,” Gillespie says, echoing Spieser’s warnings. “You have to check it and manage it, and really, the only way to be checking it is to be pulling loads out through the year and moving it around.”


Like tile drainage?


As farms keep growing, and as risk management becomes more crucial, on-farm storing and drying of grains is also taking on a new value. And in many ways, hiring a professional for storage and drying is mirroring what is happening within the tile drainage sector — where some farmers have to wait up to two years to get a crew on the farm. 


These are what Spieser calls “the typical expansions,” where farmers add a bin, which is usually larger and taller than any existing unit on the farm. Most are also considering adding new dryers, but timing is important, with manufacturers producing only so many units per year. It’s one more example, Spieser says, that shows the value of planning. CG

However you have always thought about wheat’s role in your own operation, it may be about to change. Many in the industry are taking a fresh look at the market and the potential for the crop, and they’re seeing new opportunities.


On farm after farm for the past decade, wheat has been losing the battle for acres against corn and soybeans, and those crops can still seem to have all the momentum.


It didn’t help that wheat became a political football in the 1980s, complete with government support programs such as Europe’s restitution payments (also known as export refunds) and the U.S. Enhanced Export Program (EEP). Those supports helped their farmers push exports overseas with the help of government-paid rebates.


On the surface, the Ontario Wheat Producers’ Marketing Board appeared to net the same $2.50 per bushel as Michigan growers, yet Washington’s subsidies topped up farm returns for American growers with an additional $1.40 per bushel that farmers north of the border never saw.


But the climate has changed, both figuratively and literally. New U.S. farm bills have leaned more towards corn and soybeans, while at the same time, genetically modified traits have been boosting yields of those crops, and simplifying their weed control. 


“That meant a grower in South Dakota could successfully grow 40-bushel soybeans and 145-bushel corn versus just 50-bushel spring wheat, and that doesn’t do it anymore,” says Ken Nixon, a farmer from near Ilderton, Ont. 


Nixon was on the executive with the Ontario wheat board in the 1990s, helping chart the sector’s transition out of mandatory pooling, so he has had an insider’s seat for watching the impact of government policy. 


“A lot of those programs are also designed or encouraged by the processing sector, because they want to have large amounts of raw product to deal with and choose from,” says Nixon. 


Nixon believes corn and soybean acres were also stimulated by the input sector, with the prospect of selling fertilizer and potash and keeping rail cars running. Then there is the rise of the ethanol industry, or as some see it, “the ethanol-corn industry.”


“It also has a lot to do with genetics, where we have soybeans that will run 40 bushel that can grow in Manitoba and North Dakota, whereas 15 years ago, that was wheat country, no ifs, ands or buts,” says Nixon, also citing 75- and 80-day hybrids for that part of the continent. 


Corn has taken over the agricultural landscape, regaining its prominence in southwestern Ontario and gaining acres as you go east. Now, however, there are signs the boom may be nearing an end.


For several years, Cal Whewell of FC Stone in Perrysburg, Ohio, has been pointing to the rise of ethanol to explain corn’s resurgence, at least from a U.S. perspective. However, last February, he talked about corn’s imminent slide back into the upper-$3 to low-$4 range, pointing to a saturation level within the ethanol sector and a resulting lowering of demand. Thanks to the drought of 2012, prices went up, not down, but he still sees long-term fundamentals calling for a huge cut in corn and soybean prices. The drought has postponed those cuts, he says, not cancelled them. 


Besides, wheat may offer more premium opportunities, says Archie Wilson, general manager with C&M Seeds in Palmerston, Ont.


Wilson sees potential where others see barriers. “In Ontario, we don’t have the cheapest land, we don’t have the laxest regulatory system, the cheapest tax system or the cheapest labour, and we don’t even have the best environment,” says Wilson. “What we do have is relative proximity to a lot of relatively affluent people who can afford to spend money on food.”


To some, it seems pie in the sky. But Wilson points to Manitoba growers who contract wheat to Warburton’s bakeries in the United Kingdom as proof there is plenty of room for Eastern Canada to establish its own quality-conscious value chains.


“How much would be a true premium?” Wilson asks, but then reframes the discussion. “It’s not a premium, it’s just a different market.


“I don’t think we’re going to save ourselves to prosperity in Ontario,” says Wilson, who believes Eastern Canada needs to get on top of more genetic research in wheat and get innovative with more production and marketing systems for producing and delivering those high-value traits. “I think the way we’re going to be successful is to manage to a higher level and produce better-quality end products for people, as opposed to producing the cheapest crop we can.”


It won’t necessarily be easy to get to Wilson’s view of the future. From a research perspective, there have been big strides in disease tolerance and the development of fungicide tools, and for Henry Olechowski, these kinds of advancements argue for continued research and breeding, not a “sit on your accomplishments” approach.


“I don’t think you want to stop and catch your breath,” says Olechowski, a researcher with Dow AgroSciences based in Nairn, Ont. “You’re always re-evaluating what you have and you’re always planning for the future. For us? We’re planning 10 years ahead.”


But what should be in that plan? With wheat, it’s more complex, meaning Olechowski can’t look at wheat as a single crop. He sees many classes, from soft reds and soft whites to hard reds, hard whites and durum, each with a specific end use. 


“Corn is corn, but when you get into quality assessment and what the end-user wants, what quality parameters they want, that gets a little more difficult and the breeding of wheat is more difficult because it’s a hexaploid,” says Olechowski. “There’s a lot more challenge in breeding wheat and forecasting what their needs are 10 to 15 years out.”


But is wheat ready for genetic modification?


That’s a huge question, and a discussion that seems ready to jump to centre stage. The fact is, genetic modification in corn and soybeans has been part of the farming vocabulary for more than 15 years, with more positives than negatives. But wheat is a direct food ingredient, and toying with that plant is seen as a motherhood issue, like tampering with hockey or Tim Hortons coffee. 


“As quickly as the technology or science is advancing for the breeders, the same could be said about the technology advancing for the manufacturers,” says Olechowski. “Some can use many different types of wheat to produce the same product. Others have a very tight spec sheet, and if you go outside of that, it won’t work in their current process.”


For Al Mussell, all potential markets are feasible. Exports, value added, even the end of the Canadian Wheat Board can create opportunity for those willing to explore the possibilities. Still, competition in the wheat sector is more intense than in corn, and much of this competition is on a global level. 


“Certainly with the change in the Canadian Wheat Board, we’re going to see a much more transparent marketing of wheat,” says Mussell, a research associate with the George Morris Centre in Guelph, Ont. 


Further into the future, Mussell sees a looming game changer — air seeder that will plant corn.


“Part of the reason wheat works into a rotation with corn and soybeans, quite frankly, is that we have a big bottleneck in the spring,” says Mussell. “That creates an opening for a fall-seeded crop. As the technology improves around the air seeder that will plant corn, there’ll be less of that bottleneck in the spring, and some people will say, ‘What’s the most profitable crop, what do I sell the most bushels per acre, relative to my cost base?’ — and wheat may be challenged in that environment.” CG

Think for example of the entrepreneur who is too independent to take good advice, or who seems so fast to find the weakness in any concept that his family and employees stop telling him their ideas.


The irony of course is that we also know that when entrepreneurs listen to everyone, they become indecisive and their leadership suffers.


Taken too far, any strength — such as decisiveness — can become a problem, a flaw, a weakness.


Consider this example. Andy’s farm looks successful from the outside. It has everything going for it, including excellent yields, a very low level of debt, shiny tractors and machinery, well-managed fields and a spotless barn.


However, even Andy will tell you that nothing seems to be going right anymore. He’s exhausted, and he’s frustrated with other people’s attitudes, including his partner, his employees, his wife and his children. “They’re irresponsible,” Andy says. “They don’t have high enough standards. You could say that I’m the only one who wants to succeed and make any effort.


“If I weren’t so demanding,” Andy says, “our farm wouldn’t be so productive and we wouldn’t achieve such a high level of financial success.”


In fact, when I visited the farm, it was obvious that Andy does indeed have much higher standards than everyone else, and it is true that, without his standards, the farm probably would never have attained the level that it has. Andy sees himself as careful, ambitious, attentive to detail, and hard working, and he believes he possesses high professional standards and a great sense of responsibility.


These are crucial traits for success, and he is strong in all of them. 


However, what Andy perceives as valuable qualities are perceived by those around him in a different way. They see Andy as rigid, stubborn, strict, intolerant, tense, never satisfied, hung up on details, always serious, incapable of delegating and unable to express joy or any other positive sentiment.


“No one can ever do enough,” his wife says. “It’s never good enough or fast enough, or it’s not the right thing.”


“If you get to the barn at 5:10 instead of 5:00, it’s a big drama,” his brother adds. “But if you do arrive at 5:00, he will expect you to be there by 4:45 in the future.


“In Andy’s eyes, we don’t have enough ambition,” the brother says. “He thinks we’re all losers. He wants to control everything. There’s a lot of employee turnover because no one gets positive feedback, only criticism. They get discouraged and go work on another farm.” 


The message isn’t that Andy’s strengths aren’t good for the farm. It’s that when they become rigid and exaggerated, without any nuance or flexibility, they become an obstacle to success. 


Think about your farm as a crop. The harvest represents your objectives. The fertilizer is your management. To have an abundant harvest, you have to add fertilizer (perseverance, attention to detail, high objectives, thoroughness, etc.) because, with no fertilizer, you’ll have a very mediocre yield. However, if you fertilize too much, you’ll waste your money and energy, and even cause damage to the soil. And if you keep overfertilizing, you won’t harvest anything (other people will get discouraged, rebel, become apathetic, exhausted, or they will quit).


Here are some questions to ask yourself:


• Are your standards realistic given existing resources, materials, skills and time?

• Are the people around you stimulated and committed by your objectives, or are they exhausted and discouraged?

• Is the climate positive, or is everyone walking on eggshells?

• Do you acknowledge and celebrate success, or are you never happy?

• Do you start all your conversations with, “You have to,” “you should,” or “you must?” 

• Are you still able to enjoy life and the presence of others?


Most of us feel we are good at identifying our strengths, so a good exercise is to think about each of those strengths and imagine the problems that could come from taking them too far. Then look for signs that this is what you have done — or ask your partner or your children what they think.


And always remember…“Too much is the same as not enough!” CG


It’s all in the delicate balance between modern-day technology and traditional farm wisdom, says McRae, a popular speaker during the winter months who is never shy about sharing what he knows and what he’s experienced. It’s an openness that has helped him win a number of accolades too, including the BASF Innovative Farmer of the Year award presented at the 2012 Innovative Farmers Association of Ontario annual meeting in February.


In fact, McRae knows that he’s in the spotlight enough to make some farmers wonder if he’s there mainly for the ego. It’s an idea though that takes him aback, running contrary to what he sees as the fundamental nature of farming.


“Farming is a great occupation to nurture self-doubt,” McRae tells me. And then he adds that he goes to great lengths to avoid comparing himself to other growers.


Instead, the thing that takes him to more and more meetings and into more and more educational programs, he says, is that the issues surrounding today’s agriculture are just so cool. Or, as he frequently repeats as we talk, “I eat, breathe and sleep this stuff!”


He knows he isn’t the only one. “If we’re careful to use disciplined, objective and scientific analyses of our systems and our goals,” McRae says, “we can gain reassurance in our decision-making process and avoid rash mistakes borne of insecurity.


“Definitely, the way I approach the business and the lifestyle and the science of farming is all rolled up into one big ball of wax,” McRae adds. “I don’t compartmentalize different aspects, it has to all blend together.”


High yields, low costs


McRae works the family farm along the St. Lawrence River near the Quebec border, where the 800-acre operation is nestled beside the hamlet of Bainsville. His great-grandfather grew up and farmed at a location farther north in the same county, and purchased the current plot at auction in 1904. McRae now works 450 acres, with a five-crop rotation that includes roughly 90 acres each of corn, dry beans, oats, soybeans and barley.


The other 350 acres include woodlots, wetlands, grass headlands and buffer strips, along with some land that is being transitioned into crop production. 


For the record, his corn yields are at a five-year average of 178 bushels per acre, with a 15-year trendline increase of 4.5 bushels per acre per year. At the same time, he applies only 100 lbs. of fertilizer N per acre, with no P and K or starter fertilizer.


In the production of adzuki beans, McRae has managed to push production to 22 cwt per acre without fertilizer versus the Ontario average of 17 to 18 cwt per acre, typically with fertilizer. And he has the lab analyses to show that his manure and compost applications are replenishing lost nutrients. Roughly one-eighth of the cropland has a manure or compost application, equivalent to 1.5 tonnes per acre, worth 13 lbs. of total nitrogen (N), 13.5 lbs. of phosphate and 9.25 lbs. of potash.


Keeping it simple


In an era when expansion and being among the first to buy the latest technology are seen as the twin pillars of success, McRae is a holdout. For him, change doesn’t come quickly. It is planned, analysed and examined from all angles. And when it’s found to work and provide an economic payback, it’s accepted as a new management norm. 


The McRae farm has been in conservation-till production since 1983, when Shawn’s father Ron permanently parked his furrow plow. Shawn was 12 when that happened, and by 1988, despite some early growing pains with their chisel plow, the operation was a combination of no-till and ridge-till farming. There is no fall tillage done, although McRae now performs what he terms strategic mulch tillage in the spring before corn. For that task, he uses a mix of old and new, with an old Ford disc that provides the tillage and a tractor equipped with RTK GPS auto-steer guidance to help manage compaction using controlled wheel traffic. 


(For next year, McRae is planning to eliminate his spring tillage and move it back to August after barley. Then he’ll rebuild the ridges and seed cover crops similar to what he does following oats, and he’ll go back to planting corn no till on a ridge. McRae believes this will reduce holdups with corn planting and reduce the risk of erosion from any heavy spring rains.) 


After graduating from the University of Guelph in agronomy in 1995, McRae became a partner in the family farm operation, and the learning has continued since then. He’s attended seminars and conferences and he has researched the economic and environmental impacts of no till to the point where he has managed to reduce his fertilizer use, boost his yields and help improve the overall health of the soil on the farm. 


“This change to no till that my dad undertook took place when I was a pretty impressionable teenager,” says McRae. He adds that it bothered him to see the frustration on his father’s face, trying to remediate the rill and gully erosion that was taking place on the farm. “So I did my high school science project on soil erosion and soil degradation, and then went on to university from there to study it further. For me, soil without a blanket of protection, whether it be a cover crop or at least the crop residue, is prone and threatened.”


In the shop too


Just as McRae justifies what he does on the soil, he uses the same reasoning when it comes to his machinery. To say something is old isn’t a reason to replace it. If it works — and in this case, if it works well — then keep it. That’s why McRae uses the same Hiniker ridge-till corn planter with Kinze units that his dad used back in the 1990s. For cereals, he uses a 22-run, 15-foot no-till Tye drill, complete with a coulter cart he purchased in 2003. The fluted coulters on the unit break up the surface after 30-inch ridge-tilled beans. 


McRae has also outfitted the Hiniker ridge-till cultivator to seed cover crops such as red clover, oilseed radish and annual ryegrass, using grass seed boxes from the Tye drill, a 40-year-old windshield wiper motor and some equally vintage bicycle parts. The modification provides an opportunity to rebuild the ridges following oats, while spreading a cover crop after harvest. 


The goal, he explains, is to take a common-sense approach while still adopting the latest technology in terms of glyphosate-tolerant corn, GPS auto-steer, and RTK. “You name it, if it’s new and it represents a competitive advantage or a competitive tweak, I’ll adopt it or work it in,” says McRae. “But I’m not going to throw the baby out with the bathwater and go back to making the same mistakes that have been made in the past with respect to too much tillage, too much dependence on bank credit and too much artificial fertilizer and artificial pest control. We still need the fundamentals of crop management and crop rotation, so I’m just trying to establish that balance and incorporate as much modern science as I can.”


There’s even a “back-to-basics” approach when it comes to heating the family farm operation. McRae manages the farm’s woodlot acreage, removing deadfalls, diseased or wind-damaged trees plus fenceline trimmings, grinds them down using a Hurricane wood chipper and burns it all in a furnace that’s capable of heating two homes (including hot water), an office, machine shop, woodshop and an insulated machine shed.


The system is driven by a homemade electric-hydraulic powerpack and an old truck transmission, and not only allows for fine tuning the fuel and air blending in the primary combustion chamber, it also comes with a timer-controlled feed of grain screenings from their seed cleaner unit. The system is completely self-sufficient.


It starts with the soil


On top of the economic aspects of soil management, there is also the science of soil which has to be factored into the management equation. Informing this complex decision-making process is McRae’s insatiable appetite for information. This past winter, he spent time educating himself on the complexities of Keynesian economic theory versus Austrian economic theory. He also has a business associate who scans the news services of the world every morning, and during the course of the day, sends him news items and economic updates, sometimes to inform and sometimes to stimulate new lines of thinking. 


“As a farmer, I just read and attempt to continually educate myself in all of those parameters, from global economics and how they impact the financial system, to our markets and credit supply,” McRae says. “It just comes in and goes through your grey matter, and what comes out the other end, in terms of management of the business or the soil, is just a culmination of that.”


To say that McRae does not jump to conclusions or make decisions about managing his farm based on convention or a whim is an understatement. He studies, he challenges, he revises and tweaks — and he worries about whether he’s made the right decision. 


Blending old and new


That curious blend of common sense and technology — of old and new — drives McRae’s world, particularly where soil sustainability is concerned. McRae has studied soil health, right down to its microbiological levels since the fall of 2002, when he attended the National No-Till Conference in Indianapolis.


It was at that conference that he heard from the likes of U.S. researchers Jill Clapperton and the late Dean Martens, and realized that there’s a little-understood, unappreciated world living in the soil, and that its sustainability has a direct cause-and-effect impact on the sustainability that farmers try to build into their operations. 


Today, he continues to learn of the role that fungi play in the soil profile, affecting plant-available nutrients, soil aggregate stability, cation-exchange capacity (CEC) and enhancing crop growth. With his schooling at Guelph, he realized that much of what is known about soil science is based on conventional plow-till systems, and from sessions with Clapperton, Martens and others, he came to learn that soil biology changes significantly under no till. It reached the point that after switching to no-till and ridge-till farming, McRae and his father stopped seeing any appreciable response to applied in-furrow liquid starter fertilizer.


Now he wonders if the main tenets in the belief in expansion leading to profitability are wrong. The 2010 Large Commercial Producer Study, commissioned as a joint project between Agri-Studies Inc. and Ipsos Forward Research, established the low end of the large commercial producer class to be $250,000 in annual revenues. It’s arguable that most people involved in the agri-food/agribusiness sector would think a farm of 450 acres is too small to yield enough to reach that level. Yet McRae’s revenues are well above that mark, and his costs, including fertilizer, are lower than those of many of his counterparts. 


“I wonder sometimes if the cause and effect is backwards. Perhaps it’s the individuals driving the business who are successful, and expansion is the consequence,” poses McRae. “Another component is that expansion takes timing; a whole bunch of things have to come together for that to be good. That’s why I study history and I study financial markets, I want to step back and be objective, and ask, ‘Is now the time to expand or will there be buy opportunities around the corner?’ I’ve seen some people expand and fail rapidly.”


For now, McRae is happy with what he has and how he’s producing. He’s comfortable with his equipment and the fact that his bins fit his acreage, and he has a debt-to-equity ratio that’s manageable. The sustainability that he’s worked to build on the farm is something that helps him manage with efficiency, and will help if any of his children decide that they want to farm as well. Or he can help them as they head off into another career choice.


“We can liquidate, we can rent and I can help set them up in some other business, whatever interests them,” says McRae. “Or they can go off on their own, make their own way in life. Whatever makes them happy, that’s what I want in the future.


“And that’s another reason I don’t want expansion for the sake of expansion… things can backfire on you.” CG

You can also plug in your own numbers as a guide to see how your farm compares to averages in different regions south of the border. However, be careful with your comparisons. In particular, be aware that some provincial crop budgets do not include costs for land, overhead and unpaid labour that are included in the U.S. information.


“Line-by-line comparisons could be done on the direct costs,” says John Molenhuis, business analyst for the Ontario Agriculture Ministry. “But it would be more difficult for the other costs without knowing what was included…”


As an example, the ERS soybean operating costs average in 2011 was $138.84 per acre, with total costs at $401.61. Based on 47 bushels per acre, soybeans in the U.S. netted $123.75 per acre, which meant it was a good year for the average American grower.


The picture in wheat wasn’t as bright. Wheat operating costs range in at $121.56 per acre, climbing to $285.76 per acre when overhead costs are added, including hired labour, opportunity costs for unpaid labour, capital recover for machinery, opportunity costs of land (rent), taxes and insurance, general farm overhead.


This netted only $2.89 per acre in margins for the average producer, based on prices at $7.35 per bushel, a yield of 38 bushels per acre and an average crop size of 443 acres. (Almost 70 per cent of the crop was winter wheat.)


The USDA forecast for 2012 and 2013 is more of the same for corn, soybeans and wheat. Obviously, however, the drought is a new and unknown complication.

How do you 
stack up?


It was just one sentence, but it is worth coming over 1,500 miles to hear. In a very real sense, New Holland had been sitting in the wings for years watching other brands go head to head. 


Now, New Holland was saying they were going to climb back in the ring. The question is, can they do it?


“We haven’t really been in the media,” said Hughes, admitting that even the company’s most loyal customers are uncertain about its strength. “We haven’t really been doing any of this.”


All through the organization, the NH team knows they’ve got a job ahead of them. “When I worked for a competing manufacturer, we kept an eye on New Holland, but we weren’t too worried about them,” said one of the members of the New Holland management team. “We thought they were asleep… and they were.”


One of the purposes of the April media event was to demonstrate the sleeping giant has awakened.


The strategy unveiled at the media briefing, intended to breathe new life into the company, is the product of an intense planning effort. “We spent month after month with senior management,” said Hughes. “We spent four or five hours (a day) for nine months from 2009 all the way to 2010 figuring out how we come up with the very best plan to reposition, restructure and rejuvenate this brand.


“One of the things that plagued this brand, if you followed it closely over the last 10 years, was there were a lot of leadership changes here, symptomatic of a company that had lost its footing,” Hughes said. “Since we acquired the Case organization we’ve been a bit out of the game. When they did the acquisition a lot of attention was focused on the other brand, and none of the attention was focused here. So it’s really over the last 10 years that we’ve struggled a bit.” 


Since taking charge of NH’s North American operations, Hughes has put together a new management team and set some clear goals to build on the company’s proud history in hay tool technology, expand its equipment line and move the brand to a stronger market position. 


To do that, the team took a look at where the brand was positioned in the industry, who its customers were and where it needed to go in the future to build on its strengths. “We needed to really define who are our customers,” Hughes said. “We have to have the right products for that customer base.”


For decades, the company’s core customer base has been farmers who need hay-making equipment. “We’re a mixed-farmer-focused company,” Hughes said. “This has been our traditional base of business. But along the way, this farmer has started to get more and more into cash crops. So this area has become stronger in our business. That’s where we’re pushing a lot of our growth and expansion.”


An example of the brand’s move into the grain-growing sector is the recent introduction of the two-model, self-propelled sprayer line. And it’s been a success. “We’re already above eight per cent of the market in Canada in our first year after launch,” said Hughes. The company has introduced several other new equipment models in the past two years as well. “Between 2010 and 2012, we’ve launched 15 new products,” Hughes said. “Our equipment line is really fantastic at this point.”


That’s probably true, compared to where the company has come from, but there are still some gaps to be addressed in the crop production segment; and Hughes said the company is actively working on filling them.


Figuring out which products to introduce and how to market them is where Hughes and his management team have gone their own way, compared to executive practices at some of the other major brands. Rather than designate marketing managers for specific implement lines, the NH management team has divided its overall business focus in order to concentrate on three distinct market segments: the cash crop grower, the dairy and livestock farmer, and the residential, lifestyle and contractor customer.


“It used to be that New Holland was just one big network, and we talked to our network all the same way,” said Hughes. “The more we segment our market, the more we connect with our customers.”


And just like executives at all the other major equipment brands, the NH management team recognizes any rejuvenation of the brand needs to filter all the way down to the dealer network. So the focus on targeting the needs of specific types of customers continues through to the retailers. 


“We’re re-energizing our entire (dealer) network,” Hughes said. “We’re segmenting these dealers and we’re investing heavily in the dealerships. We’re looking at all the different dealers making sure they’re up to the standards we want. We’re rewarding dealers that meet those standards.”


That attention is paying off. “Our dealers are perking up,” said Hughes. “And our sales are proving that. I’m happy to say we reported our first-quarter earnings today and we beat analysts’ expectations by far.” Those earnings were nearly 40 per cent above predictions.


But even though individual members of the management team now focus on the needs and market demands of their particular segment of the industry, all of them remain cognizant of the core objectives Hughes has set for the brand overall. That means, among other things, working toward sustainable growth. 


But any manager knows a company can only reach its objectives if everyone in the firm is on board with the plan. So it was necessary to also bring a renewed sense of pride and teamwork to the entire workforce at the corporate head office, not just the managers.


Walking through the offices at NH’s North American headquarters, it was impossible to miss the large wall murals reminding all the staff who their customers are and what work the company’s machines are put to. “We also began to do a cultural transition of the brand,” said Hughes. “We’ve rejuvenated the whole administration area, refreshing it, investing in employees, bringing out new benefits, offering simple things like free coffee, things that liven up the environment, really letting people know we care about them.”


At the hay tool assembly plant across the street, about 21 round balers make their way out the door each day, thanks to a $30-million upgrade. There’s a new management approach as well. “We’re tasked with achieving six to eight per cent savings year over year,” said Phoenix Rann, plant operations manager. And he said those goals are being met.


After the tour, media gathered in the foyer of the administration building to say goodbyes. It was Hughes’ last chance to get his message out, and unlike the NH of old, he didn’t miss it. “We’re back in the game,” Hughes said, confidently. CG