Is Canola Lulling Us Into A False Sense of Security?

The colours of a blooming canola field are stunning. There’s no doubt, we live in canola country here in Saskatchewan.  Soon after harvest is complete, farmers will be able to calculate their profits for the year.  The importance of this practice is stated in the article “Is canola lulling us into a false sense of security” which appeared in the magazine, Farming for Tomorrow (Spring 2017 Edition).   

Paul Kuntz is the owner of Wheatland Financial and offers financial consulting and debt broker services.  Paul graciously agreed to share his article with me.  I believe his views are justifiable and provide a deeper understanding of our dependence on this profitable crop.  Here’s the question in need of an answer: “Is your farm built for long term sustainability? 

Paul is also a Certified Agricultural Farm Advisor through the Canadian Association of Farm Advisors (CAFA).   You can read Paul’s credentials here.  

Many things can lull us into a false sense of security. Let’s be sure our canola crop isn’t one of them.  Take a few minutes to determine whether the information applies to your farm operation.  

Is canola lulling us into a false sense of security?

As we get ready to plant our 2017 crop, I can guarantee that a good portion of seeded acres across Western Canada will be canola.   If you take a drive in July, there will be many yellow blooming fields. And why not, the crop has great technology put into it, there are great weed reduction systems, we have advanced fungicides to apply, our weather pattern provides the plant what it needs and the market wants our product. In the area where I am, we have three crushing plants close by that offer aggressive pricing, low basis levels and great delivery options. What is not to love?

The economics of this crop are hard to beat. Yields have been increasing at a rapid pace while pricing still remains strong. It is tough to find a crop that makes as much money as canola does. But how much can we grow on our farms? How often are we growing it? Are we making business decisions on poor agronomic practices?

I will put a caveat on this article: I am not an agrologist or plant scientist. My training and what I practice every day is the financial business of farms. So I am approaching this from a financial concern.

One of my clients had a discussion with me a few years ago right after harvest. Some new land had come available and he rented a complete section. You could actually farm it as a 640 acre block. It is a beautiful piece of land. He grew a canola crop that averaged 70 bushels/acre. In our area, that is huge. A 50 bushel crop is a great canola crop so 70 is unheard of. His discussion with me was not of optimism and great joy over the bumper crop he harvested, it was about rental rates.

You see there was a few quarters of land available in this area and the owners had done 1 year leases with some farmers. My client was a local producer but there were other parcels of land that were rented out to farms from quite a far distance away. These other farms would be considered very aggressive. My client had rented this land for $60/acre and was hoping to secure a long term lease at that rate. The other farmer had already made it know that they would be offering $100/acre.

At 70 bushels and prices over $10/bushel, there is no issue with paying $100/acre rent. All the numbers would be just fine. The problem is that we should not grow canola every year. We shouldn't grow it every second year. We should only grow it every third year. The growing conditions for the 70 bushel crop were also perfectly ideal. We should not expect that every year.

The problem is that whether my client wants to follow what is considered a proper rotation or not, the actions of the other farmer are forcing his hand. Rent in that area will rise because of profitable crops. If we took the economics of wheat and put that into the equation, no one would be rushing to rent land. But what happens if you have to grow some wheat for rotational purposes? The economics are already set out and you will lose money.

If you can grow a good crop of canola on most of your acres, you will be profitable. I do not have to conduct an analysis of your farm.  Based on my clients I know that an average canola crop will always pay the bills. So why don't we just grow it on every acre?

If you look to the real experts on growing canola, you will see that the recommendations given are not followed by producers. The Canola Council of Canada recommends to have at least one year, preferably two or three years of other crops in between canola crops. The reasons cited are to avoid diseases of Blackleg, Sclerotinia, and club root. But the article goes on to say that clubroot spores stay in your field for 7 years, so rotation does not help. Sclerotinina is windborne so with so much canola grown, rotation will not help prevent this either. So that leaves blackleg. But I thought all varieties are blackleg resistant? Well they are, but resistant to what strain of blackleg?

At a recent Pioneer Dupont grower meeting, they revealed that in almost every test plot there is blackleg. There is not enough to cause noticeable damage, but nonetheless, there was black leg there. So maybe we can't save our canola from blackleg just by planting the newest and best varieties.

Garth Hodges, vice president of marketing and business development with Bayer Crop Science told the Canola Council of Canada that short rotations are weakening the crop's ability to withstand pressure from clubroot, blackleg, weeds pests, and other challenges. He asked the question "How do we go back to some of the basics like saying we have to go into good crop rotation and be better at crop rotation?"

Keith Downey, one of the researchers who created canola, is suggesting municipalities to use existing legislation to stop farmers from growing canola too often. He is concerned about only having three clubroot resistant genes and not being able to find new ones quick enough.

Hodges went on to say he is worried that growers assume that the industrial giants like Bayer Crop Science will simply develop new varieties and products that minimize the problem.  "It's hard to invent new chemistry" was Hodges comment.

So how bad are we doing? Are farmers really pushing the envelope? In Saskatchewan's canola growing capital, the north east, in 2015 46% of the acres were seeded to canola.  Almost half of the acres in that region are in canola. The quick math on those numbers show only one crop is being grown in between canola crops. Every second year is canola.

There isn't a farmer out there that wants to be unsustainable. Every producer wants to be able to make money today and grow great crops for years to come.  The current economics make it very difficult to make good rotation decisions.

Part of the problem is that the bad behavior is being rewarded. If you grew a great canola crop on a field that had canola on it two years ago, you will continue the practice. Producers are not seeing dramatic drops in yield when they push their rotation. If they did, they would change the practice immediately.

My fear is that I believe proper crop rotations can be compared to our health and nutrition. If you have one cigarette, you do not get lung cancer. If you eat a bacon cheeseburger with french fries, you don't have a heart attack. If you have a soft drink, you do not get diabetes. But the research shows that there is a direct link to all of those activities and the negative outcome. The same can be said about rotations. We all know there is a risk, but it is off in the future somewhere and the bills are due now.

Your seeding plans for 2017 will be set in stone by the time you read this. I want to challenge your financial crop numbers: Calculate your cost of production for your farm and run a crop scenario that has you growing canola every fourth year rather than every second or third year. Could you generate enough income to cover all of your costs? If you can, then your farm is built for long term sustainability. If you cannot, then maybe canola has lulled you into a false sense of security.

Preserve the Knowledge of Others

The CAFA (Canadian Association of Farm Advisors) Parkland Chapter ended their membership year in late June on a high note. The meeting’s theme was “Why Advisors are Valuable to Farm Families.” Our presenters, ranchers and farmers, shared their first-hand experiences working with advisors on their businesses. 

Robert and Karen Ivey, partners in Evergreen Cattle Company, and Terry Aberhart, CEO of Aberhart Farms and Sure Growth Technologies and Managing Partner with Aberhart Ag Solutions, graciously shared their knowledge, experience, and wisdom.  Their insights are worth capturing and preserving in writing so that others may learn from their journeys. Here are a few take-aways from their presentations.

1. Have a keen interest and passion – important ingredients to drive success.  This sound advice may have been reiterated previously by different people as they pursed their careers.  Today, our presenters confirmed this again.  If your heart is not in the work you do – whatever it may be – then no matter how hard you try, you will not drive yourself to do better than average.  Your passion causes you to lie awake at night, dream about your work, and devise strategies. Living and breathing what you know and love becomes part of your DNA.  The fuel -- your interest, passion, and dedication to your work -- are the driving forces of your mission and vision statements. This takes us to the next point.  

Robert and Karen Ivey
Evergreen Cattle Company

2. Create and review your mission and vision statements for your business.   A person does not realize the value of words. A well-designed and crafted mission and vision statement motivates people to succeed especially through setbacks.  Failures, obstacles, and challenges will happen.  Our determination to see the light at the end of the dark tunnel helps us to persevere through the tough times.  Robert and Karen designed their mission statement four decades ago when they first began farming.  This important step should not be overlooked.  The vision statement tells you where you want to be (and what you represent) and the mission statement tells you how you’ll get there.  

Terry Aberhart
Aberhart Farms / Sure Growth Technologies
Aberhart Ag Solutions

3. Embrace change.  Change occurs with or without your permission.  New ways of doing things -- technology, processes in a business operation,legislation (legal and tax rules) – affect a business.  You cannot control everything so you need to focus on the things you can control.  “Have the right mindset and work with future-minded people,” was Terry’s advice.

4. Anticipate the storms, the financial setbacks. You may need to rely on a different strategy.  In the farming industry, severe weather conditions and disease infestations can hamper the bottom line.  Regroup. Strategize. Persevere. Rely on your mission and vision statements.

5. Know your financial situation. If you are not a number person then linking up with an advisor who can help establish your yearly budgets and analyze the financial data is vital. The Management Trinity has been previously discussed. Generally, people are good at two of the three essentials necessary to carry on a business. These three are finances, marketing, and the hands-on work. Business plans with realistic financial projections are road maps.  Robert and Karen had created their business plan with financial projections and asked their banker, “Do you want to come into business with us?”  They proved to their business advisors their capability for achieving their business goals with a concrete plan.    

6. Engage with other advisors.  Advisors help you think and plan realistically.  Terry said it best, “You may be blinded by what sounds like a good idea until someone shoots holes in your boat for good reason.” Advisors fill in the gaps with their knowledge and expertise then advise accordingly.

7.  Find a way which works for you.  “Canned programs” with a step-by-step process do not work for every business family.  Two examples are whether to implement an estate freeze or purchase land inside a corporation.   The strategy has to be right for you.

8.  Keep your business and family affairs separate.  Treat your business as “business first” which results in doing what is in the best interest for the business. The Three-Circle Model illustrates that the family business has three unique groups within its structure: the owners (or shareholders), the family, and the business.  

To operate a farm or ranch successfully, like any business, you must have a great understanding of all the elements.  Our presenters shared the core foundation for any successful business remains unchanged in order to strive, thrive, and survive. 

Reflecting on the years when our ancestors first came to Canada, you can see how agriculture has evolved over the years. Breaking new land was first done with horses and plows. Roots were handpicked.  Labour was intense and backbreaking. Today caterpillars and heavy discs relieve the strenuous labour.  Yet others stressors, which are uncontrollable, remain constant. Weather is one factor.

The benefit of learning from others is hearing about their strengths, weaknesses, opportunities and threats.  Naturally, a person thinks others have it so good until we hear how bad they had it. But their ability to turn their situation into good is reassuring and encouraging.  Advisors and mentors help us find the way.

What We Know

How often have we heard, “It’s not what you know but who you know”?  In all honesty, the proper proclamation should be “It’s what you know and who you know”.  Our expertise and experience are just as valuable as those of “who you know”. 

The Parkland CAFA (Canadian Association of Farm Advisors) Chapter gathers monthly for their regular learning event.  It is a meeting of the minds to learn something we might know very little about.  The presenter on a given topic is the expert. We tap into their resources and access their authoritative wisdom and knowledge. At any given meeting, the two professionals or agri-business experts know something the rest don’t. Their willingness to share is an opportunity for us to learn.  When applicable, we even refer clients to the appropriate professional who can better help them.

I believe everyone understands you can’t know everything.  Having an expert in your network circle is a valuable “fill-in” for the information and experience you lack.  A fitting expression, “Mind the Gap”, heard when you travel the rail system in London, can also be applied to our knowledge gap.   A person can only know so much, has only so much brain capacity, and has only interest in a specific area of expertise.  There may be some logic to the statement “a jack-of-all-trades and a master of none!”  When we try to be everything, we have to ask ourselves, “Is this fitting for what I am trying to accomplish for my clients?” As a CERTIFIED FINANCIAL PLANNER®  professional, I know my limitations and rely extensively on other professionals.  I appreciate having them in my network; they’re my links to information and experience.    

This past month’s learning event highlighted two hot topics:  Trusts and the Need for Them, both from a tax and legal perspective; and TOSI (Tax-on-Split-Income), the new rules and the exceptions-to-the-rules.  Our professionals, Jason Heinmiller, a tax expert, with Collins Barrow and Shawn Patenaude, a lawyer, from his legal firm, Shawn Patenaude Legal Prof. Corp, are privy to the latest updated information.  Procedures and processes are constantly changing. This is especially true when there’s a change in government.  In 2017 the federal government implemented new rules regarding the way income is distributed to shareholders of private corporations. The experts, Jason Heinmiller and Shawn Patenaude, addressed the impact this new legislation has on tax vehicles such as trusts and corporations.

Our professionals discuss new legislation with their peers. They dissect and analyze the logistics of the information to fully understand the new proposals: how they apply, when they apply; what exceptions exist; and who they affect. They exchange thoughts, ideas, and ask each other, “If we can’t do this, can we do that?”

The best professionals work together in tandem with other professionals to decide on the ideal strategies for their mutual clients.  The collaboration is important especially with multiple generational and blended families. Family business situations are both complex and complicated. Because peoples’ intentions are different, a strategy which might work well for one family operation doesn’t mean it fits another.         

When we try to work in isolation and try to do it all, we do our clients a disservice.  When professionals work together as a smart team, their clients benefit from the best quality advice and service.  When the clients receive a wealth of information from all the angles, they are able to make the right decisions. I’ve said before, “Good information leads to good decisions.”  Good decisions avoid financial and costly errors.  Some strategies cannot be undone and are permanent arrangements with dire consequences.  

This is an example of a costly consequence.

A father included his son as a joint owner on a piece of real estate.  Their relationship became estranged.  When the father requested that his son relinquish his ownership to the property, the son refused.  The courts decided if the father wanted the son’s name off the title, the father was obligated to buy his son’s half-share interest at the current fair market value.  We don’t know if the father sought legal advice when he was deciding to make the real estate joint with his son.  However, if he had, all the possible outcomes would have been discussed. 

Advisors help farmers make informed decisions around management, finance, marketing, tax, or legal issues.  If necessary, they network with other CAFA members. This networking creates links to a wealth of knowledge and expertise. When a basketball or football team executes play after play, they work together to accomplish a goal. That goal is to secure a win.  Win after win create champions.  We are all champions when we work together as a team.  John Wooden said, “A player who makes a team great is more valuable than a great player.”  

Let’s Talk About Depression

 

Been Down That Road

Because I have been there, I can speak sincerely about the effects of depression.  Feelings of helplessness, fear, and lack of confidence consume our abilities to think clearly.  A depressed state of mind is not a happy place to visit and certainly not a happy place to live.  Admitting our need for help takes great strength.  In our weakness, we can be made strong.

During my encounter with depression, I discovered an interesting fact. My depression wasn’t triggered by one major event but sneaked up on me in a series of events, big and small.  The responsibilities, the unfortunate incidents, and the conflicts were likened to bricks being laid on my shoulders. The weight from the combined lot was overbearing and overpowering.  Tears of helplessness overtook me without any warning.  Like Jell-O, which wiggles and jiggles on a plate, I too had no backbone, no strength, no form. 

I was reluctant to take prescribed anti-depressants until a dear friend and pharmacist shared with me a different perspective, “If you had a headache, wouldn’t you take an aspirin?”   Medication alone didn’t fix the depression.  Talking to a counsellor to sort through the debris, the problems in my life, helped pull me through to recovery, allowing me to be freed from dependency on any medications. 

Life challenges are just that … “Challenges”.  Challenges come in all shapes and sizes and mean different things to different people.  Regardless who you are, what your occupation is, or where you live, depression can sneak up on you. Our ability to face and deal with life challenges will depend on our own resourcefulness and support networks.

 

Recognize the Symptoms

The Canadian Association of Farm Advisors (CAFA), Parkland Chapter, invited David Dyste, a Master Practitioner of Clinical Counselling, to share his presentation about the Warning Signs of Depression and Suicidality in Farmers and Farming Families.   Next to family members, we as farm advisors are often the farmer’s first point of contact.  Knowing the warning signs is valuable knowledge for an advisor because often a farming client doesn’t recognize or is unwilling to confront their reality. They are consumed by their circumstances, assigning blame to a list of other factors, rather than willingly addressing their need for professional help. 

In his presentation, David adequately described the symptoms of depression for our benefit.

 

The 2016 harvest was a devastating one, filled with high expectations and predicted record yields. For many farmers, the challenge was getting the grain from the field to the bin.  The task was impossible when cloudy and rainy skies consumed the month of October.  In November, when the combines made their way into the fields, their efforts were limited to only a number of adequate harvest days. Convincing oneself that weather conditions are out of our control is difficult.  Last year was challenging beyond words when farm income and sweat equity laid in the fields over winter.   Circumstances like this can leave many feeling helpless, hopeless, and trapped.

Depression is sneaky, robbing you of your ability to think clearly. Logical reasoning is compromised and clouded.  I have witnessed inappropriate business decisions made which resulted in irreparable financial consequences.  It’s reasonable to assume that the triggering causes of depression may be financial conditions or disastrous events like death or divorce. Yet the true cause could be a series of episodes in our lives.   Dealing effectively with them may require professional help.  Depression cannot be left unattended, believing that you will “get over it”.  More and more people are stepping forth to ask for help because they realize dealing with life’s circumstances on their own is too difficult.

 

Seek And You Will Find

 

When we recognize our disheartening circumstances, we can effectively put action steps into place to turn them into favorable ones. There is hope because there is help. Dealing with our circumstances restores our ability to control them. Rather than feeling helpless, we can see options leading to our recovery.  I know because I have been there.     

Knowing that help is only a phone call away can bring “relief” to a person’s stressful circumstances.  The Farm Stress Line is available if you want to speak to a counsellor. Call 1.800.667.4442 or visit Mobile Crisis Services.