Country Guide wanted to know, how does that kind of change in size and scope happen without swamping the operation’s management capacity and inundating the personal lives of family members?

Every expanding farm wrestles with this. Land and Sky, though, seems to succeed not despite it, but because of it, and we sat down with Lauren to look for the key insights that make this possible.

It takes passion and organization, she tells us. Plus an ability to let go.

That last might seem counterintuitive. Since so much more is at stake, wouldn’t it be natural to hang on tighter so as not to lose control? Maurer would say while that might be your first inclination, it’s not your best.

“Ten years ago we were going flat out,” she says. “We were young and hungry. Sometimes you don’t stop because you love it and don’t want to stop. Over time we had our (four) kids working and playing alongside us, but eventually finding a balance became a problem.”

Make a plan

In order to avoid overwhelm, it’s important to know what your farm is about and to understand why you exist, says Maurer. This means developing foundational statements about your business and using these to guide decision-making.

The vision at Land and Sky Grains is “Empowering Sustainable Agriculture,” and their mission “to seek fitting and viable growth opportunities.” These are backed by a strategic plan that includes four pillars: efficient production, enhanced marketing, growth in finances, and intensified management.

The term “viable” is an important one. Expansion over the years included direct marketing initiatives such as the value-added (and paperwork-heavy) world of identity preserved grains. At one time 75 per cent of cereals and malt barley production at Land and Sky Grains went into IP markets in Canada and around the world, but, ironically, as IP has gained traction the Maurer’s participation in it slowed due to inconsistent and elaborate identification systems.

Maurer says the process became too time-consuming, taking up valuable management capacity without the necessary payoff. Looking at their vision and mission statements and considering how they want to spend their time and energy, the couple has explored and grown other niche crops like caraway seed and coriander and they are putting acres into alfalfa and clover to maintain soil health.

A good lesson

Something that is working today may not work tomorrow. If you can hold it up to the light of your vision and mission, it is easier to be objective about what is happening and pivot to something new. Is it, as their mission statement says, “fitting”?

When looking at a new venture, it’s relatively easy to calculate the limits on finances and staffing, Maurer says. “It’s kind of like science; a replicable expansion is easier.”

The unknown is management capacity. It was the return of daughter Cassandra with certificates in both agricultural machinery and business that made it possible for Land and Sky to take on a truck and trailer servicing business. They had shop space and an interested third party wanting to partner.

But expansion is not without limits and those limits are not always financial. The truck servicing venture was good until it wasn’t. Personality and management styles clashed and the Maurers had to look hard at the culture they were trying to create and their vision for their farm.

“Who you are as a family and a business have to come ahead of what an outside person and business brings to the table,” Maurer now says.

The relationship was terminated, but the idea is very much alive and will be considered again in the future, Maurer says, who looks back at this experiment and doesn’t see failure so much as an opportunity to learn.

It also chimes with cutting-edge business thinking. At Agrifood Management Excellence — the organization that delivers the Canadian Total Excellence in Agricultural Management (CTEAM) program — president Heather Broughton says the trick to bringing a vision to reality is “to understand what growth means and manage it.”

Internal and external analysis is required to understand an operation’s current financial and management capacity as well as markets available for diversified products, she says. “You need to see far enough ahead so decisions are being made when you’re prepared for the opportunity and can make decisions without panic.”

The value of structure

One of the key indicators for a new venture is the time and money available, and how much its success will require a reorganization of both, adds Eric Micheels, associate professor of agriculture and resource economics at the University of Saskatchewan.

“It has to be analyzed with potential risks in mind and meet the stress test of interest rate hikes or a disaster like COVID. Do you have the financial slack to cushion the risk or is any blow going to be fatal to the whole company?… This comes down to how you structure the new enterprise as well in order to cushion the larger, older business from any failure.”

Micheels says with low interest rates today there are ideas being funded that would not have been when rates were higher. “There’s an abundance of cheap capital. This frees up managers to take up some experiments and try things on a small scale so they have more data before making the final decision.”

Usually diversification comes from the younger generation, Micheels also finds. “The older is more risk averse and want to preserve wealth while the younger have more time to recover from a potential failure. The flip side is there is not as much financial slack so failure can be catastrophic to the young. Again structure becomes important if the expansion is part of a large multi-generational farm.”

As owners of Land and Sky Grains, Lauren and Ryan Maurer each have defined roles on the farm; Ryan is in charge of operations, land and business development, and crop sales; Lauren focuses on administration, human resources and finances. As a junior partner Cassandra contributes to each area, keenly aware that someday many of these responsibilities will be her own.

“We try to stay out of each other’s boxes,” Maurer says. “If Ryan looks at the spreadsheet I’ve created, he typically just nods. I look at his production plans and do the same thing.”

There’s an unusual degree of trust in this relationship, but it’s necessary because no one can be all things in an operation this size.

“Ryan laughs that we fired him,” Maurer says. “He hasn’t run a tractor or combine for any significant number of hours in six years. He was always on the phone or radio and so it is better for him to be headquartered to deal with changes, issues or opportunities that arise. Otherwise we would make mistakes and lose efficiency because he’d have to shut down to go deal with something.”

Her husband gave up hands-on operations in order to lead, freeing up management capacity to give attention to the critical details like precision seed placement, grain management and uninterrupted flow of harvest logistics, as well as to the big picture.

Says Maurer: “Instead of working in the business, you work on the business… strategy, tactics, the big questions about why we exist.”

Leadership

The Maurers long ago gave up on “bedroom meetings” (if you’re a farm couple you know what that means, and there’s nothing sexy about it) and set aside specific time for discussion as owners and with their staff.

“Agriculture is about people,” Maurer says. “We feed them, we employ them, we partner with them. So relationships are paramount.” Whether it’s with their children, buyers or their numerous employees, the couple keeps everyone involved.

“Ultimately the person with their name on the top of the form has to make the decision,” Maurer says. “But we go round the table… we have debate and share ideas. It has to be put on the table now so it doesn’t bite you later or when it’s too late and you’ve already started a new project.”

She laughs imagining all her kids coming back to the farm. “What happens when there are six owners around the table?” she asks. “We will have to be even more structured and have more open communication.”

Eric Micheels says the analysis of a new venture should include exactly this type of consultation with partners, employees and lenders.

“You want to make sure you’re not caught up in the excitement and unaware of your own blind spots, pushing ahead regardless. Good leadership is recognizing you have blind spots and listening and being open to others telling you what they are. It reduces the probability of missing something or ignoring things you don’t want to see.”

“A willingness to take on some risk aligns with the definition of leadership in my mind,” Micheels says. “It’s being okay with trying something new.” So, too, is the ability to make the decision; at the end of the consultation, the person at the top of the form should be decisive. “Decisiveness is a required leadership skill, knowing when to stop analyzing and make the call.”

So, too, leadership requires the ability to see the expanded capacity of others not as a threat but as a gift. Lauren Maurer sees their returning children as an exciting opportunity to take on the new ideas and the energy the younger generation brings to the table.

Many of the leadership and management skills at Land and Sky Grains have been acquired through education.

Education

Education has been a focus from the start, both Lauren and Ryan are graduates of the CTEAM program, and Lauren is currently studying for her MBA with a focus on mentorship, learning and coaching.

The goal is to ensure effective leadership on the farm.

They’ve extended the learning focus to their children, investing in their education, knowing that the tech and marketing abilities the kids bring back to the farm will open up new management capacity and exciting new diversification opportunities.

From there “you have to empower employees to do a good job,” Maurer says. “We try to pull long-time employees into lead roles.”

Training is provided around equipment operations and maintenance, with management expectations well communicated, building trust and respect across the operation and giving employees the confidence to ask good questions and provide the right information, Maurer says.

A good understanding of leadership and life-long learning have seen Land and Sky Grains successfully expand and diversify over the past 27 years, leaving a promising farming future for the next generation. It’s the value of vision.

The post Managing more, working less appeared first on Country Guide.

Darren and Carmen Sterling at Weyburn, Sask., hadn’t thought much about their retirement. In fact, they hadn’t once looked at the goals they had committed to paper 20 years ago, back when they were in the process of creating a joint venture with Darren’s brother’s company as a means of taking over from their parents. At that time Darren wrote down his hope to retire from farming at age 55 while Carmen set her separate goals, and then the pages were promptly boxed up and put on a shelf.

When Darren’s brother retired, the Sterlings rented his land for a number of years before rolling his company into their own in 2018. At harvest of 2019, Shady Lane Farms Inc. was taking off about 8,000 acres of canola, wheat, lentils, soybeans and corn, with 3,200 of that owned, the rest rented. The farm had two long-term full-time employees and the Sterling’s daughters, Brooke and Shastidy, helped out when at home in the summer but were otherwise pursuing careers in health care.

The decision

If hindsight were 20/20, the Sterlings might have done things a little differently. “We really had no idea that two years later we’d be selling,” Carmen says. But when they sat down to review their operations, they both started thinking beyond the theoretical to the reality of their potential retirement. Carmen admits it took a while for them to speak openly about it, each afraid of unduly influencing the other’s decision.

“Are you ready to do this another seven to 10 years?” Carmen asked Darren as a means of opening the discussion. Their equipment was largely paid for and still had good value, but needed upgrades if the Sterlings were to keep farming. “Because if we purchase now that’s how long it will take to get back to our current position.”

These are difficult conversations for anyone. “The number one most difficult thing to decide is when is the last harvest,” says Dean Klippenstine. “It’s finding the balance between doing a good job of farming, operating at peak production, and deciding the point at which it’s time to start the next chapter.” A long-time partner and business advisor with the MNP Ag Team in Regina, Klippenstine says this kind of self-assessment can be emotional because in some cases partners can differ in their readiness.

It’s also about the kids. At Shady Lane Farms, the Sterlings consulted with their daughters who love the farm but want their careers. Darren had been farming since his teens. Looking at the options, he made his call. “I’m ready,” he told Carmen. They made their decision in the fall of 2019 and sold in spring 2020.

“We called the accountant and it was a shock to him,” Carmen says. “But I think the only way Darren could follow through and retire was to make the decision and have it happen quickly.”

There’s a point to be made that despite what can feel like haranguing from advisors to plan, plan, plan — we have to acknowledge that personalities and circumstances are going to play a role. With her long career in agriculture and business lending with RBC, Carmen knew many if not all the implications of the decision they were making, and agreed with her husband because it mattered to both of them.

“It’s been a win for me that Darren never wavered,” she says. “From the time we made the decision he was good with it.”

This doesn’t mean Darren is unaware they might have benefited from more planning, especially with regard to rolling Darren’s brother’s corporation shares into their own only two years prior. “We might have used the tax tools more effectively,” Carmen says. “We could have started five years before, even if we weren’t anticipating retirement, moving toward something that is inevitable for everyone.”

Business timelines

After the emotional decision about the last harvest (or milking, or cow sale), Dean Klippenstine says, “the number one business debate, especially with increasing land prices as we’ve seen in the Prairie provinces, is whether to liquidate operating assets and land, or to rent the land out and hold it as an investment. There’s no right or wrong way — it’s a personal decision — but each does have tax and other consequences.”

At Shady Lane Farms, the Sterlings chose the second option. Wanting to keep a land base should one of their daughters return to farm, and with neighbours ready to rent the land, the Sterlings sold everything else out of the corporation so that what remains is basically a land-holding investment company.

But things get a little more complicated if you want to sell it all. Specific to corporate farm sales, there are a few things to consider.

Lise Deleurme is owner at Lise Deleurme Chartered Professional Accountants in Notre-Dame-de-Lourdes, southwest of Winnipeg. She recommends making a plan and beginning its execution as much as five years ahead of the final sale, particularly where a producer has everything in the corporation.

To begin, Deleurme suggests grouping assets held in the corporation and spinning them off into separate entities in order to expand the base of potential buyers and ensure maximum value. Trying to sell any farm in its entirety could limit buyers who might want only one part or do not have the required equity base to purchase the whole.

All of this has to begin early so the new structure is in place at least three years prior to sale to avoid a CRA charge of tax avoidance.

Next Deleurme suggests examining the tax consequences of the sale of each asset group.

For our purposes let’s look at land only as the tax implications of its sale can be complicated and nuanced depending on how the sale is executed. Of course, the biggest of these considerations is the $1 million lifetime capital gains exemption available to every individual.

Tax tools

Unlike the sale of privately held farm land, the sale of corporate land holdings does not qualify for the capital gains exemption, meaning its liquidation will occasion a punitive tax if sold outside the corporation. Only the shares in a farm corporation qualify (See ‘Tax tools and definitions‘ further down).

“More and more the shares of the corporation are being sold with the land inside of it,” says MNP’s Dean Klippenstine. “It is an experience unique to agriculture.”

Example: Six quarters are owned in the corporation. An interested buyer meets the rules and criteria for a qualified farm company. The purchaser buys all the land in the corporation through the purchase of shares, and the seller uses any capital gain deduction he or she has remaining. The administrative burden put on the purchaser to amalgamate the two companies and for legal and accounting is minimal compared to the relative gain for the seller.

“You don’t have to sell from within the corporation, but most farms are not buying land at an after-tax corporate rate. Ninety-five per cent are now buying with corporate dollars,” Klippenstine says. “I would even be so bold as to say that if you are negotiating to sell land through corporation (shares) and they say no, you should find someone who will.”

In jurisdictions where competition for land is less intense, a slight discount might entice purchasers to go through, and pay for, this process. If a non-corporate entity wants to buy the land, it is basically the same process except the purchaser will have to set up a corporation to roll the purchased shares into.

Okay, so you might be exhausted by now. Carmen Sterling admits that having their land in the corporation created the biggest dilemma for them. “If we had understood the ramifications at the end of our farming career, we still would have incorporated but perhaps would have held the land personally… the financial management to do all of this and administer the land company has actually been harder than through our entire farming career.”

The accounting

Believe her. Remember that they had inventory creating an income stream well past the sale, plus there were deadlines around programs like AgriInvest, and they also had to monitor a variety of land ownership dates in relation to their sale and what that means to eligibility as a “qualified farmer”. Whew, shall we just say the whole thing is complex?

Dean Klippenstine admits it’s complicated even for the best accountants. “Our industry doesn’t have as good an understanding as we should simply because we never had a significant multi-generational transfer of (farm) wealth before, especially in the Prairie provinces. The last generation had a $1 million farm; now they are often worth several million.”

“Clients tell me they just want it to be simple again,” he says. “I tell them the only way to have it simple again is to be poor.”

“I want to emphasize one thing,” he adds more seriously. “Don’t assume the second you quit farming, you’ll wind up the farm corporation. You may cease operating a day-to-day farm, but most corporations continue to exist into the next generation as children use them as income and inheritance tools and use their capital gains exemption through them… It won’t be wound up, but you will live off the income generated by the assets.”

The alternative isn’t pretty. Let’s say you have a $3 million corporation, he says. If you sell the land and claim it as personal income, you maybe pay $1 to $1.2 million in taxes. If you leave the land in the corporation you will pay tax only on the annual income it generates. “Most of my clients would choose the latter.”

Both accountants believe most farmers underestimate their wealth.

Older farmers have built up a lot of equity so they need to plan how to get the most out of their sale while at the same time working on a financial retirement plan, says Lise Deleurme. She puts it this way: Are you ready?

“Are you ready if someone comes to your door with a good offer? Can you accept it without a huge tax hit? Are you ready to back away completely? What will the plan leave in your pocket, and will that make you financially ready for retirement depending on your age, how long you might live, and what you want to do in the future.”

Klippenstine agrees farmers don’t know their wealth and are consequently shocked at the post-sale tax hit. “Nobody seems to have a good handle on their taxable income,” he says. “On a grain farm you have your entire crop inventory and deferred income with no input costs, rent coming in, proceeds from the equipment auction; it’s a tidal wave of taxable income. And that’s just current taxable income, let alone the rest. So you have to think of the next generation and what will happen, look at the intergenerational, farm specific rules. You’ll need help with all of this because the consequences are huge to yourself and the future generation.”

Back at Shady Lane Farms, Carmen and Darren Sterling were ready. Their process was quicker than most, but they knew what they were getting into both emotionally and financially. They had to come to terms with letting go two long-time employees who were also friends. They are still waiting for the tax bill but are prepared for that too. And they have their head around upcoming deadlines related to landholdings and meeting criteria for qualified farming.

A few months after their auction, the Sterlings dug out the box they’d tucked away 20 years earlier and looked at the goals they’d forgotten they’d ever written. Darren had just turned 55.

Tax tools and definitions

Qualified farm property

• A share of the capital stock of, or interest in, a family farm that you or your spouse or common-law partner own.
• Real property, such as land and buildings.
• Property such as milk and egg quotas.

This seems fairly straightforward but BDO Canada warns it’s easy to run afoul of these definitions. “All or substantially all” of the value of assets in a corporation must be principally used in a farming business that a family member was actively engaged in. So be careful not to build up non-farming assets in the corp that won’t qualify for capital gains.

MNP’s Dean Klippenstine also cautions producers to be aware of the date land came into the corporation if they plan to maintain the land in an income-generating land company as the Sterling family did. The rules say your land has to be farmed more years than it’s rented out in order to “qualify,” so the purchase of land within two to five years of retiring might put you offside of the rules.

At Shady Lane Farms, Carmen Sterling says this has required them to monitor both the dates and how the land came into the farm as there are different rules regarding intergenerational, sibling or non-family acquisitions.

Intergenerational (tax free) rollover

• The transfer of qualifying farm interest to next-generation family members on a tax-deferred basis during their lifetime.

Prior to the transfer, the property must have been used principally (more than 50 per cent) in a farming business in which you, your spouse or any of your children were actively engaged on a regular and continuous basis in order to qualify for the rollover provisions. This “use” stipulation applies separately to each parcel of land.

Klippenstine says agriculture is “the only industry that has this option whether it is a passive asset or not.”

But be careful: the next generation must own the transferred property for at least three years in order to ensure the taxable gain doesn’t attribute back to the parent under charges of tax avoidance.

Alternative minimum tax

• The alternative minimum tax is a separate tax calculation determined in parallel with an individual’s regular income tax calculations. It is designed to ensure high income-earners pay a minimum despite deductions/programs available to them.

In the case of a farm sale this is triggered in the year in which the capital gain is triggered and is refundable over time.

“Older farmers have built up a lot of equity,” says Lise Deleurme from Lise Deleurme Accounting in Manitoba. “Sometimes their biggest mistake is waiting too long to sell the land. If you’re 80 or 90 you don’t have time to recoup the AMT you’ll pay and suddenly find yourself figuring out how to gift or distribute money to the grandkids because you’ve skipped a generation of succession and tax planning.”

Closing accounts

When it’s all said and done, be sure to make a checklist of federal and provincial deadlines and requirements for dissolution of a company, filing of final tax returns, and closing of all accounts such as payroll and GST/HST.

And another thing

Old Age Security, and programs such as the seniors drug plan and home care costs are all calculated based on income. While they might seem like small amounts compared to the income from a sale, they add up over the years so be aware and work with your advisor to manage these programs within your financial plan.

The post Selling the corporate farm appeared first on Country Guide.

“I actually understand Jean’s comments,” says Steph Towers, a young farmer from southwest Ontario. “My generation has the idea that if you just put your head down and work hard enough things will work out. We weren’t exposed to the real injustices, to the real inequalities women faced back then. Those were stories we heard.

“It’s hard to fight something you’re not sure exists. But as more of us get out in the industry, we see the challenges and barriers and become more aware that we need to be part of the change.”

Towers grew up on a hog farm and then worked six years on a large dairy before becoming herdsperson and HR director for Mackvilla Farms Ltd., the 120-cow dairy she and her husband Cameron run along with his family near Glencoe, a half hour west of London. At 31, she and Cameron have two small children, three years old and four months, and she spoke to me from her truck (hands-free) as she ferried the toddler to daycare.

Towers believes some things are better for women than they used to be, particularly in terms of employment in the industry. She points to Dairy Farmers of Ontario, an organization that boasts solid gender equity policies and is staffed largely by women in leadership and support roles. As for the boards and the committees that give direction to that staff and act as spokespeople to government… well, not so much.

DFO has only two women on their board of 12 directors.

There might be a reason. Towers now serves on her local producer committee, but was initially discouraged from doing so by the perceptions of others. “I was told you can’t run while you’re pregnant, and later that I shouldn’t run because it would be unfair to my children,” she says.

“In a corporate setting you simply could not say those things.”

No guff. Apparently the attitudes of previous generations are still very real; so, too, the concerns.

A Women in Food and Agriculture (WFA) survey released in December 2019 by AllTech reveals that gains have been made around the globe, but as with most recent studies — and we have been studied to death lately — a large majority of women in agriculture feel that big barriers remain to their career progress, including the gender pay gap, and the lack of mentors and a strong network.

Only half of women feel they are well represented in leadership of their organization, and only 43 per cent feel well-represented in the agri-food industry as a whole. No surprise, men generally feel women are better represented in all categories. Yet in Canada, as was mentioned in our November issue, the percentage of women in leadership roles across every part of the industry is significantly lower than either of those numbers.

It makes the objectives of the study a bit opaque. What do we gain by tabulating respondent perceptions of the workplace while providing no actual numbers to compare those perceptions against? Just because people think there are more women in leadership roles, that does not make it true.

In fact, an August 2017 Harvard Business Review article assessed five studies and found that, “seeing progress for women’s representation in top leadership (either spontaneously or after reading an article) leads both women and men to think that women have greater access to equal opportunities. This overgeneralization of progress, in turn, makes people less worried about the persisting inequalities that women face daily, across a variety of domains at work and beyond… These findings are worrisome because people’s concern with inequality ultimately predicts their willingness to address it.”

Respect and flexibility

Perhaps Steph Towers’s sense of things gone awry is warranted. With a marketing background, Towers now cobbles together jobs that “fit into the existing pattern of things: the farm, the family, all of it,” she says. But she wants to engage in the larger agricultural industry.

“Just because we have more on our plates doesn’t mean we can’t do the job. We are shoved into a box by people who tell us we don’t have time. But they need to set things up so we have the option and then let us make our own decisions about what’s best for our families,” she says. “The barriers are still there to equality in ag for women, so we need to create the environment where the door is open, and then it’s up to us to step through it.”

“We need more respect for women in agriculture who have a lot on their plate,” Towers continues, indicating reliable, affordable rural childcare with flexible hours would be a start for women with small children. And for all women, an understanding of the nature of their lives is key to their engagement both on farm and in the industry.

“We need to introduce flexibility that allows us to work from home and to use technologies that exist. There is still an emphasis on face-to-face meetings but that doesn’t work for women who have complex schedules and who live far from the venue. A video call instead would mean I don’t have to travel and I can still meet other demands.”

Within industry Towers would like to see a formalized training plan around gender equity for boards and committees, and she believes a corporate approach could even work at the farm level.

“Farming is a business, so why not have policies like any corporation?” she asks. “We have to follow Government of Ontario labour laws, so how is this any different?”

You could argue this might be hard to do within family operations, but perhaps policies and procedures would give clarity to everyone involved as women transition into the farm through marriage.

An industry-wide code of conduct is also needed, she says, citing the example of a salesman who showed up, watched her walk across the yard in her rubber boots and milking bib, and asked if the men were home because he needed to talk to someone who could make decisions. “I kicked him off the farm,” she says, adding, “The onus is on us to demand how we are treated.”

Whether women should have to make such demands becomes a moot point when faced with this kind of behaviour. It happens a lot. According to the WFA survey, almost half of women respondents have been mistaken for someone in a lower level position, compared to 27 per cent of men. If you aren’t a farm woman, you have no idea how much this pisses farm women off, and the irony is that many encounter this from people employed by agri-businesses that have internal gender equity policies.

Can the Syngenta’s show the way?

It turns out farm women and corporate executives aren’t that far apart on their vision for the future for women in agriculture. Industry standards are what Nancy Tout would like to see as well. The head of research and development with Syngenta Canada, Tout also leads their North America diversity and inclusion champion network. Born and raised in rural southwest Ontario, she participates in many capacities related to women in science and innovation in the agriculture industry.

She applauds all the networking and conferencing women are doing, but says, “We need to see changes in the workplace and at the board table because otherwise we’re having the conversations without any action.”

To that end, she organized Syngenta’s first Catalyst to Connect in 2017, bringing women together to facilitate discussion leading to action. While participants talked about the larger structural and social barriers to women in agriculture that Steph Towers mentioned, Tout was surprised to find women at all levels still dealing with the antiquated bad behaviour of men, basic sexist actions and attitudes that she thought were a thing of the past.

Yes, those attitudes, this year.

Is Jean Harrington wrong to say we haven’t come as far as we thought? Having dealt with these same issues as a young woman in agribusiness 30 years ago, and seeing the results of all these studies and consultations, it’s hard to argue with her assessment.

There’s more at stake than women’s careers. Nancy Tout insists that addressing this behaviour and moving toward gender equity is critical for women, but it’s also paramount if industry wants to take advantage of a projected $11 billion potential growth in agricultural technology.

“If we don’t make the industry inclusive, we won’t attract the best talent to tackle food security challenges, environmental sustainability and technology for agronomics,” she says. “From an innovation perspective we need a diversity of minds for product development and marketing.”

Under Tout’s lead, Syngenta is attempting to move toward inclusivity and diversity by establishing a specific matrix; understand the challenges, develop a strategy, and measure outcomes. The company supports grassroots groups of female employees and provides professional development and mentorship programs. Syngenta voluntarily publishes a gender pay gap report examining both salaries and benefits in its operations around the world. It’s a means of measuring the problem in order to find remedies.

“What gets measured tends to improve,” Tout says, a succinct way of indicating that good intention is not enough when it comes to addressing gender equity in agriculture. And Syngenta has by no stretch reached equity, something difficult to do with offices around the globe. While pay equity is mandated in some of the countries Syngenta works in, Tout admits many North American women don’t like mandates and quotas. But she supports them in some cases.

“We can be inclusive, or we can be intentionally inclusive,” she says. “Sometimes we need regulations or policies to spark that initial action.”

Do women merit a shot?

Define the challenges, make a strategy and measure the results. It sounds like a plan that could be implemented from a large corporation right down to the farm. But Steph Towers balks at the mention of quotas. “That’s a tough one. We don’t want to get something just because we are women. We need to merit it.”

But do we say this about men who have jobs? Do they all “merit” their position?

“It’s up to you to walk through the door, but the door has to be open,” Towers admits. “If it’s locked and bolted, it shouldn’t be up to you to figure out how to unlock it.”

In fact, some studies (reviewed in another HBR article March 2019) indicate that corporate meritocracy actually increases bias against women because it allows companies to deny workplace inequalities exist and to claim the under-representation of women is because of their own choices or inferiority.

Clearly it’s complicated, and Nancy Tout suggests solutions cannot be found by women alone. With little forward movement after the initial Catalyst conference, she says, “We had an ‘aha!’ moment. If it was up to us (women) we could move forward right away. But that’s not how it works and we need the men in the conversation.”

Love him or hate him

Some men are part of the discussion. Prime Minister Justin Trudeau set the bar by ensuring gender equity in the Liberal cabinet in Ottawa, and this focus reaches across all government agencies, including the department of agriculture. Last year the federal government announced $500 million over three years for FCC’s Women Entrepreneur Loans Program to address the barriers farm women have in accessing capital.

This program is aimed at women farmers, agribusiness owners and those in food-related businesses. A one-time loan processing fee waiver is provided with the intent that money will be used to access skill development with access to capital available to new and existing businesses and farm women.

Candace Hill, manager of brand planning and execution at FCC, says the majority of initial uptake is from women in primary agriculture, which she says is interesting since the research found farm women have significant barriers beyond those faced by women in other parts of the industry, such as distance to urban centres and lack of childcare, as Steph Towers mentioned.

FCC conducted research in collaboration with EDC, BDC and provincial Women in Agriculture groups and found an abundance of available information, but the biggest challenge was an overall lack of awareness of how to access it.

“There are training, learning and financing options out there, but women have to know where to start and who to trust,” Hill says, so FCC created a consolidated list, with links to organizations and development opportunities. “It’s a launch pad.”

These are only a couple of government-based initiatives. Is it enough? Not likely. But maybe embracing such efforts is what action looks like, lobbying whoever is in power for the things women need to be successful.

This series began with the honest and astute observations of Leigh Rosengren in our November issue. “I can’t be your shadow,” she told her husband. “It isn’t enough for me.”

Define the challenges. Make a strategy. Measure the results. In taking these steps farm organizations, farm businesses, and perhaps most importantly for farm women like Steph Towers, farms themselves can ensure women have the opportunity to step into the daylight.

The post A question of equity appeared first on Country Guide.

Women make up only a quarter of agricultural managers, 29 per cent of agricultural business owners and a mere 12 per cent of the heads of our national and provincial associations, according to data collected by the Canadian Agricultural Human Resource Council.

This despite the fact more women in agriculture have a higher level of post-secondary education and leadership training than their male counterparts, and despite burgeoning provincial and national women’s organizations. So where the hell are we? And why don’t we seem to be fighting harder?

Do women really care?

Jean Harrington has a theory about the lack of representation of women in agriculture and — fair warning — you might not like it. She’s brisk, she’s honest, and she’s terrified at how much of the ground that was won 30 years ago has now been lost. She fears today’s farm women don’t fully understand what is at stake.

Harrington owns and operates Prairie Farm Brokerage in Outlook, Sask., and farms 7,400 acres with her husband John in nearby Glenside. She sat on the board of Saskatchewan Pulse Growers, and was an appointed member of the Western Standards Committee for the Canadian Grain Commission.

Harrington’s journey to leadership started in the mid-1980s when she sat on the founding board of the Saskatchewan Women’s Agricultural Network. SWAN was formed to provide women with information, skills and networking opportunities related to their roles on the farm. Its organizers hoped to give women agency to tackle the issues they faced, including big issues like ensuring the new Matrimonial Property Act would give farm women the right to some of the money and equity they’d helped to build.

“There was a big uproar in the farming community at that,” she laughs. “Even my father-in-law was concerned that I was going to leave John and take the family farm.”

Rural child care, parity on the farm, representation in the industry; SWAN was not afraid to dive into the weeds. “I was so incredibly proud of SWAN when it started,” Harrington says. “We fought hard for all of this stuff, not just for women in agriculture, but for women in general.”

Then the financial hit of the late ’80s. “The farm didn’t pay and we all went out and found jobs. And we found that we loved it; the income, the interaction, the independence. We congratulated ourselves that everything had been accomplished, and we didn’t pay attention. We thought we won the war, but we dropped the ball, and today we are not one step further along in the big picture with women in agriculture than we were 30 years ago… In fact I look at social media and how women do this work, and we have actually reverted back further than 30 years ago, and often we’ve done it to ourselves.”

Ouch. You might wonder how she can say this; just look at the multitude of groups and organizations representing women in agriculture across the country, how many conferences they hold, how much networking is going on. And while it’s true these things are happening, Harrington’s unease is warranted. It seems we network a lot, but to what end? It’s great to forge relationships with allies who face the same challenges and to build leadership skills, but if these are not turned into action and policy initiatives, aren’t we just talking to ourselves? Harrington argues the problem is a lack of relevant content and an absence of broad-based leadership.

“Some of these conferences are stupidly upbeat,” she says. Harrington recently declined an invitation to speak at one high-profile conference because the organizer told her it didn’t matter what she talked about, as long as she was “super positive.” “That’s not good enough. And so much of it is counter-productive to the role of women in basic agriculture. And those who don’t want to be media darlings are actually hurt by this.”

Double ouch.

Where’d the leaders go?

“We have a missing generation,” Harrington says, arguing the relative affluence of the past 20 years has left women now 35 to 50 years old oblivious to issues relevant to women in agriculture. “Too many daughters were never taught how to give a damn about the farm. Now when us old girls are speaking to women under 35 they have no understanding of what came before. They sense something is wrong, but they don’t know what it is or how to address it. And when it gets uncomfortable they don’t want to deal with it, and they revert back to the basic picture of women… They don’t take agency, and worse, they don’t even seem to want it.”

Yet we need policy and leadership now as much as we ever did. A 2018 Global Women in Agriculture study by Corteva AgriScience indicates that while 91 per cent of Canadian women are proud of the work they do in the industry, “pride does not necessarily translate into happiness. Financial insecurity and other factors, especially the experience of gender inequality, negatively impact the happiness of female farmers in every country we studied.” In fact 61 per cent of Canadian women agreed with the statement that “gender discrimination is an issue in the agriculture industry.”

Krysta Harden headed the Corteva study in her previous job as a vice-president with DuPont. As women in agriculture go, Harden has pretty much reached the peak, serving in the Obama administration as U.S. deputy secretary of agriculture from 2013 to 2016, then the role with DuPont, and currently as executive vice-president of global environmental strategy with Dairy Management Inc.

The ballooning number of women with education in agriculture is translating into growing acceptance of women in primary production in the United States, but “rural areas are limited in career options,” Harden says. “There is not as much opportunity for women to use their education… If they have intentions to go back to the farm they need to prepare for how they will fulfill their career needs on the farm and what that might look like.”

To attract women back to the farm, Harden suggests a holistic approach. “Farming is a family business, so you have to address all the needs of families including child care and division of labour,” she says. Rural transportation is another issue as geographic isolation leaves farm families with few alternatives but to have one adult be “taxi” driver, excluding them from other roles on the farm operation.

“No one group is responsible to make these things happen,” Harden says. “It’s so easy to say this is not my issue, it’s not something I do. But we don’t have the luxury of doing that anymore. We can’t delegate this. We have to join forces… Strong voices that are bi-partisan are required. People want to see things as black and white but I always look for the grey… we have to look for the levelers.”

Jean Harrington sees polarization in Canada as well. SWAN became political and then became irrelevant, she says with a touch of regret, arguing women in agriculture need to seek broad-based change. “And change means someone will lose their advantage, and so they will circle the wagons for their self-interest. We need bigger picture thinkers.”

But much like the rest of modern society and politics, Harrington thinks leadership in agriculture has become too much about self-interest, with people very single-minded in what they want out of an organization. And that does nothing for communities who need representation that is broad-based and inclusive.

Women are not a homogenous group, and the only way to achieve the larger goals for women in agriculture is to step back from ideological positions and understand these are women’s issues generally. “Defend one step further back and you are defending women’s rights,” says Harrington.

If she’s right, who is up to that challenge? Who among us can run the gauntlet of finding their aptitudes and interests fulfilled on the farm, avoid ideology or self-interest in leadership roles, and still maintain the right to enjoy a manicure and good glass of wine?

High heels and canola fields

Perhaps Lesley Kelly is the exception. Or the new rule. A woman who has actively carved out her role on the farm, Kelly engages and organizes with other women in farm groups, and is, at time of writing, running for the board of the Saskatchewan Wheat Development Commission.

With post-secondary education in marketing and accounting, Kelly has worked in the corporate agriculture financing and marketing sectors. At 36, she and her husband Matt have two young children and now farm with her dad and brother near Watrous, Sask., where Evergreen Wood Creek Farm is a seed growing operation running 6,500 acres of canola, wheat, durum, lentils, oats and barley.

Kelly writes a popular blog, High Heels and Canola Fields, where she presents well-researched posts that try to bridge the knowledge gap between those who make food and those who consume it. She is also a founder of Do More Ag, a not-for-profit organization focusing on mental health in agriculture, and her full-time role on the farm is in human resource management, communications, team building, marketing, accounting, and “support person to everyone.”

It is an advantage that her background fits with her desired role on the operation. Her corporate experience taught her the value of working with the strengths of each person, and how to create a positive and open culture on the farm.

“We are not afraid to have those difficult conversations,” she says. “We are five individuals who don’t necessarily think alike and don’t want the same things. We are also vocal and open about our mental health. If you let things fester it doesn’t work. We see it and talk about it in a ‘moving forward’ kind of way… We used to be passive-aggressive and hold onto it until things blew up. Now we ask why and explain why it was a problem… We can then make adjustments to our expectations, and compromise. We express ourselves to one another. We try to know each other’s world.”

Part of their farm’s success is recognizing the different personal goals of the individuals involved. Kelly uses the example of meal preparation. Her mother made all the meals because she felt sharing meals brought everyone together, and provided an opportunity to slow down a moment and reflect. But when Kelly came along she didn’t want the job.

“It seems like a small thing,” Kelly says. “But we have to be aware of expectations and what else is going on in people’s lives. But also what do each of us WANT to be doing. I didn’t want that role and I didn’t think it should be mine. Meals are important but I feel I can help the farm in other ways that are best suited to my skills and passions.”

Perhaps her ability to stake a claim and refuse traditional roles comes from the fact this is her family farm. It was Matt who joined. And Kelly says he felt the same kind of anxiety many women feel around that, the need to prove himself and to work super hard to show his commitment. A role reversal if you like.

“There is a sprinkling of gender aspect in all of this,” Kelly says. “It depends on what the person wants their role to look like. In agriculture there is often still the view that if you’re not an operator, then you’re not a real farmer… And if you come from the outside it’s harder to feel ownership or partnership. People have to discuss what that means to each person because our intrinsic values are so different. We have to ask those questions. It’s not just good farm practice but good business practice. And it’s not gender specific,” she says. “You have to set out roles like the best companies do.”

Kelly loves the blend of personal and professional she’s achieved on the farm. She’s also practical. The couple hires full-time child care, and she sounds incredulous that people don’t think it’s a necessity, or that some still believe the woman is supposed to do it all because the business is run from home.

“We wouldn’t expect a restaurant owner to have their kids around all the time and deal with their needs while running a restaurant. They’d have child care, so why is my situation any different?”

Bringing the same practical arguments to the industry, Kelly says she’s running for a director position with Sask Wheat because “I’m a young farmer and want to be part of solutions that help make the industry stronger. Diversity on boards can help strengthen them and what I offer through my experience and background in marketing, communications, and value-add can help achieve this. I want to help foster an industry rich in female leadership that empowers future generations to do the same.”

If Lesley Kelly is the new archetype of Canadian farm women, Jean Harrington will likely be pleased. But we’ll need a lot more women willing to make the leap from networking to action if we hope to turn aspirational talk and recommendations coming out of conferences and studies into real policy changes, and create a cultural shift so women in agriculture are no longer the exception but the norm. And so we are no longer having this conversation.

The post Why aren’t farm women fighting harder? appeared first on Country Guide.

You can have it all, I thought. Ambitious career, great marriage, beautiful family. And don’t forget how wonderful it is to raise kids in the country; all that fresh air to help them grow, chores to mould them into responsible adults, the freedom to dream.

Now let’s be honest. For many women who marry a farmer, and I’m one of them, the utopian future we envisioned when we uttered “I do”, and the present we live in, well… let’s just say the two images don’t exactly line up.

Back in the day, career options for women were basically nursing and teaching, both of which were in demand in small towns. Living rurally, a woman could have a fulfilling off-farm career that also provided opportunity for socializing, albeit while doing most (read “all”) of the domestic work on the farm and raising the kids.

But in a world where women are engineers and doctors, writers and artists, business managers and carpenters, and yes — full-fledged farmers, finding a way for them to pursue their careers while living on farms in sometimes remote areas of the country can be challenging, if not impossible.

If we’re lucky, we adapt. And if that doesn’t work, we adapt again.

It’s not something “the farmer” in our life has to think much about. He isn’t often asked to fit his needs and goals into a structure mostly designed around someone else’s interests and capacities.

The situation leaves so much space for conflict, and not only within the farm marriage.

Marrying the farm

I have self-identified as a farmer from the moment I became one. And 30 years of my own adaptations should be qualification enough for full-fledged membership in the species. I learned to milk, feed and raise Holsteins on a commercial dairy; and after we sold and got into grain, ran all types of equipment. I did books for much of that time too, meanwhile raising four kids.

Yet, other women still suggest my job is mainly bringing meals to the “men working,” and town people assume a massive garden and oodles of free time for volunteering. And despite my name on all our accounts, people in the industry still call and ask for “the farmer.” It all makes my blood boil.

It’s hard not to be cynical. Perhaps this easy dismissal as “the farmer’s wife” is part of the reason educated and ambitious farm women sometimes can’t find the sense of fulfillment they seek. In my case, it was the decision to put my writing career first that provided a truly independent sense of validation.

You see, many of us didn’t choose to be a farmer. We married one. And therein lies the rub. We can love the lifestyle, we can love our man, but we didn’t marry the farm. Or so we thought.

“I don’t think we have a good way of conversing about opportunities and challenges for women in primary agriculture who are doing things beyond the traditional keeping-the-books,” says Leigh Rosengren, a farmer from southeast Saskatchewan. “It seems we really don’t know how to talk about this when women often came to their role through marriage.”

It’s a touchy subject for many couples, be they in a long-term marriage or just starting out, and whether they are successfully running the farm together, or have off-farm careers. But we need to have the conversation because the number of female farm operators in Canada is growing. In a 2015 report by the National New Farmer Coalition, 58 per cent of new farmers surveyed were women.

Some of that growth is attributed to women engaged in small local operations producing everything from blueberries to honey, goat cheese to free-range eggs. But I spoke with Leigh because I believe women on large, multi-generational farms are a distinct demographic with unique challenges when it comes to career attainment.

One of those challenges is the isolation.

“I don’t think there is a more isolating role than being a farm woman,” Leigh says. “And we can’t seem to talk openly about it without people saying we’re bitchy and whining, but that’s not what it is. We need to be able to talk about our work on the farm honestly, and about how it affects us, if we want to empower women.”

Choosing our roles; is it possible?

In many ways, the 42-year-old seems particularly empowered. Leigh is a veterinarian, has a PhD in epidemiology and is back at school this fall starting an MBA through distance education. She and her husband Colin run cattle and they crop 7,500 acres near Midale, and have three children aged 14, 11 and nine. Leigh is ambitious. And she’s driven. And yet, even she admits she’s building a career despite the farm.

Consider the choices she’s had to make. After becoming a vet, and just prior to her marriage, Leigh found her dream job in a clinic 500 kilometres away. Colin moved with her, but in the spring packed up and headed home. “Well, I have to go home and farm,” he said. Of course he did.

“How did I expect it to go?” Leigh is incredulous at her naivety. “So I moved home and changed my life.”

That change meant working around the farming schedule to earn a PhD, and establishing a consulting business she could manage from home, all while raising her kids. The couple hired a nanny to help with that, but though Leigh was a successful consultant, and her kids were happy, there came another pivotal moment. Working on her computer most days, she overheard her young daughter’s response to a question about what mommy does. “She pushes buttons.”

“Hearing that, I realized I wanted to do something I could involve the kids in, and to be able to work without pushing them to the sidelines,” Leigh says. So she made another choice, and bought cows, managing 200 head independently from Colin’s grain farm. Structured as two different companies, they share contracted staff and resources, with Leigh doing human resource management and accounting for both. “If you’re a cow, a dollar or a person, you fall on my side of things,” she laughs.

It’s striking how matter-of-fact Leigh is about all of this. But she’s also intensely honest.

“I left my dream job for my husband, and I didn’t realize I was bitter. But I can see it now… As you get involved in the farm, it’s like a vortex. I was envious of women who had off-farm jobs, but then I’d think of that one day when I’m not there to make the right decision, and the potential consequences of that one decision, and I just couldn’t do it.”

Many farm women would understand this sentiment even if we can’t articulate it as well as Leigh does. And even if we have supportive husbands as Leigh and I both do. To be clear, this isn’t about the men in our lives (okay some farm men are dinosaurs and need to smarten up); this is about making choices for ourselves within the farm setting, a process complicated by the fact we are married to our business partner.

Because of the all-hands-on-deck nature of farming, we are quickly absorbed into the vortex, and become instrumental to the farm operation in ways we didn’t expect, or necessarily want, doing work which is often not fully recognized financially or otherwise. Over time a sense of obligation ties us to those particular jobs even if that’s not what we want, in our hearts, to be doing. Sound familiar?

And so Leigh farms. But as expected, it’s not enough for her. And why should it be? “We are always justifying ourselves and our choices,” she says. “Our husbands don’t have to.”

Her new choice? To do an MBA, starting this fall. A person might be inclined to ask why. Perhaps her words to her husband provide an answer.

“I can’t be your shadow,” she told him. “It’s not enough for me.”

None of us wants to be a shadow, but for many women on the farm it is not easy to stand in the light. We sometimes don’t allow ourselves to see the alternatives that exist. Too often we don’t look hard enough, or we bind ourselves to family or community expectations that limit our options.

Or perhaps, and more likely, the value of our inherent capabilities and interests is unrecognized. I can quickly name several women in my area who live and work on the farm, and have degrees in commerce, economics, nursing, teaching, English, political science (that’s me), engineering, and fine art. Does their education make them more likely to want more career challenges? I don’t know the answer to this, but the level of education amongst farm women is also growing, so it’s a question that needs asking.

Impact of education

According to Ag Canada stats, in 2016 farm women were almost twice as likely as 20 years earlier to have a university level education, and the number of female farm operators with degrees in agriculture-related studies has soared, from about one in 12, to 20 per cent.

In 2016, 52 per cent of female farm operators had college or university level education. Men were at 33 per cent.

Amongst women farmers, 22 per cent of their degrees are in business, management and marketing, with studies related to agriculture and agricultural operations at almost 10 per cent. The numbers for male farm operators are the direct inverse, with eight per cent having business degrees and 28.3 in agriculture.

With those statistics, it’s little wonder that roles still look gender specific on the farm. But is that necessarily a problem?

If women — and men — are directed toward certain types of education because of their gender, or pigeon-holed into certain roles on the farm regardless of their aptitudes and interest, then yes, it’s a problem. In my own family, we have a daughter with a degree in animal science, and our only son is in law school. So who is the more likely to farm? And why do people still raise their eyebrows and look skeptical when the answer is our daughter?

Leigh Rosengren agrees gender and interests shouldn’t limit anyone, even if those are more traditional. “My oldest son came out a born farmer. My daughter looks a lot more likely to run the business. In agriculture we need to see there’s room for both, that there’s more to farming than the physical labour. Women are often unpaid on the farm.

“Not getting a paycheque just about killed me,” she grimaces. “So how do we value something that is not as tangible but equally valuable?”

Maybe the answer is again found in her own words about what she hopes an MBA will do for both her career and her farm.

“I think — hope — the MBA will enable us to grow the farm in a way that is smart, sustainable and manages risk. That’s the easy answer. The harder answer, and maybe the more honest one, is that every time we grow and expand it seems to take over another piece of our lives. I’m hoping that what I learn will enable us to keep taking on new opportunities while figuring out how to oversee/manage them in a sustainable and profitable way that doesn’t require 100 per cent hands on. And as for certainty where it will take me… no idea. I just know that I’m on this farm for good (career-wise) so I need to grow and learn as best I can to make it as successful as possible.”

Success for Leigh includes taking time for herself and her interests, doing things she loves for her own mental and physical health. Did I mention she competes in triathlon as well?

“We want to be a whole person,” she says, “and we can’t do that if we are trying to do everything.”

Leigh is a passionate woman, and her passion is contagious. But so too is her very real worry that we aren’t honest about the challenges for women on the farm.

Writing this, I wasn’t sure if I was viewing the career dilemma too harshly, or from a generational perspective. Maybe I’m out of touch? Leigh is younger, but maybe she is unique in her observations? But long-time family farm coach, Elaine Froese, sees all kinds of couples in all kinds of farm situations, and she concedes most women are still in traditional roles, and that many of them are not happy about it. Problems crop up, she says, when couples don’t communicate, or don’t allow each other to grow and change. And her 2017 blog post “How to Prevent Divorce on the Farm” is still one of the most popular, which says something in itself.

Are we glossing things over in agriculture? And at what expense? I could find no stats on how many women have given up promising careers because they can’t make them work from the farm.

Despite farm groups and networks doing great advocacy and support work for women in agriculture, it often seems we aren’t getting to the heart of the thing. Why does the choice for many continue to be either/or when it could be “and”?

(Next issue, see Anne’s story about aptitude and career choices featuring Lesley Kelly)

The post Into the daylight appeared first on Country Guide.

But today, a new kind of tension has emerged as the trajectory of land management changes. We’ve tended to focus on escalating land prices as farms attempt to consolidate acres. But perhaps more disconcerting is land scarcity, farmers left to jockey over the few acres actually offered for sale and increasingly turning to leasing from landlords who have expectations about the return on their investment.

Leasing does work for many farmers in many ways. Young farmers in particular find many advantages in renting land. The authors of Saskatchewan Agriculture’s Land Rental Arrangements (2018) argue leasing is really a means of “financing” a land base. They also point out that when funds are limited, which is often the case with new and young farmers, it is more profitable to spend money on inputs and machinery. Investing scarce funds in land may restrict operating capital, thus lowering the efficiency of the farm. Renting allows farmers a gradual entry into the industry.

Based on 2016 Stats Canada numbers, farmers new and old are taking advantage. While the total number of acres farmed in the country decreased by just under two million, the percentage of rented acres increased from 23 to 25 per cent as a proportion of all acres, with the actual number of rented acres increasing by nine per cent over the period.

In Saskatchewan that number is even more significant, with leased land rising to 27 per cent of total farm acres. As Ken Evans reads it, larger farms in the province are picking up leased acres while smaller 1,500- to 2,000-acre farms are cash renting theirs out. “I’m surprised how many large-acre farms have significant leased acres,” says Evans, an agriculture program specialist with Saskatchewan Agriculture’s Weyburn office. “I often wonder how those acres are obtained, given that there is a lot of competition from similar sized nearby operators also seeking leased land.”

One way farmers are obtaining more land is to travel farther from home, but Evans isn’t sure how they’re penciling it out. “Some are going 40 or 50 miles to lease land and I’m not sure how efficient that can be. They need huge tracts of land to be worth it.”

There’s a lot of risk for those leasing a lot of land, and the potential for a huge setback if a farmer gears up with machinery for those extra acres and loses them.

“It’s hard to find 3,000 acres overnight and the producer will find themselves with excess capacity,” Evans says, although some of that risk can be mitigated with longer-term contracts. “Lots of operators taking on substantial land will negotiate a three- to five-year lease with the ability to renegotiate the annual lease rate but not the availability of the land.”

Sticky rental rates

Efficiency and security are parts of the land equation, but the hit to cash flow from escalating lease rates is another. “It’s counterintuitive,” Evans says. “There’s more land available for lease, but I think that is countered by a lack of available land for sale so rental rates are rising.”

J.P. Gervais, chief agricultural economist with Farm Credit Canada agrees. “Rental rates are notoriously sticky. Despite a couple of years of depressed (commodity) prices, the rental rates are only starting to shift now, and not everywhere, and not by much.”

In recent years owning land has been very profitable, and not just for investors. Retired producers who might have once sold and invested the capital are choosing to keep their land and rent it out.

“The FCC Farmland Values Report shows there are fewer (land) transactions generally,” Gervais says. “Demand has weakened a bit, but I think it’s more a question of supply because of the profitability of owning land relative to investing.”

While Canada does not have good stats on land rental rates, the U.S. does. There, the evidence shows that even after their major downturn in the farm sector, it took almost four years for any significant downward shift in land rental rates, says Gervais. He expects the same slow response in Canada.

It’s only been this past spring that Tim Hammond has seen resistance from farmers to the annual rental rate increases expected from the 50,000 acres he manages for investors at Tim Hammond Realty in Biggar, Sask.

“These are sophisticated investors with perhaps 15 different contracts. These investors are return specific (as opposed to location), and might eventually divest if they don’t get that four or five per cent they’re looking for. At $2,000 per acre, that means an $80 per acre rent. And they can’t necessarily get that anymore. Saskatchewan still has a better rate of return than anywhere in the world, let alone in Canada,” Hammond says. “A $3,700 investment in Saskatchewan generates $500. You can spend $11,000 in Ontario for that same return. Prices scare people in Saskatchewan but they’re still low.”

Hammond believes investors filled a gap in land ownership the past few years.

“Six or seven years ago investors were a higher percentage of our business. Farmers were suffering and slowly accumulating capital until they became more confident. Investors who bought 10 years ago expected a four per cent return with two per cent depreciation. They met their 20-year objective in five years and are selling and moving on… The guy buying the land is the farmer previously leasing it, so the investors filled a role there when the tenants couldn’t afford it. By investing they gave the farmers time to build capital (while renting) until in a position to buy.”

Since January, Hammond has seen more land hit the market with values holding. Leasing or buying, he understands the pressures on farmers; “You stare at that half section across the road every day and know it’s only going to go up for sale every 25 years. You’re going to do what you can to get it. That’s why in sales there’s a high end and a low end. Sometimes it’s worth more to one person than another and it would be the same with rental rates.”

Indeed. So, leasing land is working for landlords keen on investor return in an otherwise weak investment market, but just how do those farming it determine rental agreements that allow for business expansion and growth? It’s a question top of mind as competition for available land becomes fierce, and not always friendly, the days of renting almost exclusively from family and neighbours rapidly coming to an end.

Determining the rate

“On the face of it, the decision to rent should be based on margins,” says FCC’s Gervais. “Am I making a profit off this land. Obviously it is more complicated than that. It is not that static.”

The rental rate matters to cash flow, but the Catch-22 for producers is knowing those acres might never become available again. So despite a possible loss at a particular cash rent, a producer might decide to take on those acres to fulfill part of the farm’s strategic plan, to spread fixed costs over, or for succession purposes.

“Ultimately, the land contract has to allow the farmer to make a profit so it can’t be an emotional decision,” Gervais says. “It has to be part of a larger strategy and be made objectively.”

Farmers should have realistic expectations of yields and costs, he says. From a lender perspective, FCC would look at the debt service capacity and whether there is room for an unexpected shock, such as weather volatility, commodity prices or trade disputes, all of which we’re seeing at present. “If a farmer is signing (rental) contracts that would impede the ability to service debt, then FCC might say that’s not the best plan for us as a lender. We’re not in the business of setting up the strategy for the farmer, but we can help point out flaws.”

Landowners want to tie the value of the land to the rent regardless of the land’s productivity because they’re looking at a simple percentage return on investment. It’s up to the farmer to know the productivity of the land and determine if the rent is worth it.

While Ken Evans feels most operators are good at analyzing their costs, at some point they’ll go backward if they’re paying too much rent, and he shares a rough guide for calculating a start point for lease rates: take four per cent of the value of the land, add taxes, and divide by the number of acres.

“Most farmers would be willing to pay more for heavy clay than for sandy, light soil,” says Evans. “It only makes sense from a risk and business perspective. But it doesn’t always work that way. It comes down to making sure you’ve done your analysis so you know what you can afford and putting a risk management strategy in place.”

Is insurance the answer?

Escalating cash rents drive cost of production up, having an impact on the bottom line and necessitating new ways to mitigate risk on those acres.

“Land rent takes a lot of cash out of the operation. Cash flow is the number one driver behind how farms make risk management decisions,” says David Sullivan, chief marketing officer with Global Ag Risk Solutions. “If you’re a larger, growing farm, you’ll likely have thinner margins and so mitigate risk differently than an established low-debt farm with declining cash needs.”

Based in southern Saskatchewan, GARS is a quickly growing player on the farm insurance scene, offering private, revenue-based insurance. A multi-peril product, GARS insures input costs on fertilizer, seed and chemicals, plus a specific amount of revenue per acre. As input costs increase so does coverage, with no ceiling and no effect on premium, the idea being that farmers can then use best practices at optimum timing.

Sullivan says mitigating risk on rented acres depends on how the rent is structured. Cash rents mean higher COP on that land, both fixed and input costs. Producers then need higher insurance levels and separate insurance on those acres and that’s where private insurance like GARS fits, filling the gap between what is needed and what government programs can provide.

Crop-share arrangements are another beast entirely with a variety of structures such as percentage of crop or percentage of margin. “Lots of these structures are thought to be more flexible,” says Sullivan, formerly an accountant with MNP, but most end up more expensive for farmers than cash rents. “For eight or nine years the crop share is higher than cash would have been so when you have a bad (production) year you’ve been pre-paying on that. It’s a business decision, but the numbers indicate the farmer ends up paying more over the long run and foregoing a lot of profitability.”

Working capital, cash flow and equity all influence insurance needs. On rented land a backstop is more important than ever, Sullivan says. “You’re not paying grandma and grandpa anymore. They would wait a few months for the cheque.”

Renting comes with risk and farmers need to know the worst case scenario for their farm and clearly articulate a plan to deal with that scenario. That means knowing the farm’s working capital, refinancing and mortgaging options, and what risk mitigation programs are available. “Then if it happens, you simply execute the plan and it’s not a scramble because the banks and insurers and farmer all know what’s going to happen. The plan can kick in seamlessly and you avoid financial disaster,” Sullivan says.

From an insurance perspective, he believes it is often a combination of crop and hail insurance and GARS that works best, especially as cost of production rises, partly due to the rent on leased acres. While government insurance provides coverage on yields, GARS insures cash, which is generally what the banks want to see.

But lenders have yet to embrace insurance as security and that is another less obvious risk of leasing land.

One of the downsides of leasing is a lack of credit available to the tenant farmer who usually has a more difficult time obtaining intermediate and long-term credit than does the owner. Lenders require land as security; leased land does not build equity.

“Traditional bank securities don’t allow for expansion on new land,” Sullivan agrees. “In the future there will be more rented than owned land. Operating credit will be needed but without a lot of land (for farmers) to mortgage, the banks will need to figure that out and will need to recognize insurance as security.”

This is especially true for young farmers trying to enter a market with few options for land purchase. Sullivan points out that in the U.S., half of all land is leased, and in Europe many farms are 100 per cent rented. He sees Canada headed in the same direction, which means young farmers will need a new way to access credit, perhaps using insurance as security.

With land prices escalating, available land scarce, and land owners expecting a return on their investment, the competition for acres is real and growing. It’s time for a cool head, an eye on costs and keeping the tools of risk mitigation handy.

The post The ever-changing landscape of farmland rentals appeared first on Country Guide.

With this joint venture, Wiebe Farms might even rival most marriages, with its combined attention to detail, its commitment to shared goals, and its focus on strategies for honest communication.

But there’s more. Designed to address his own succession needs, Wiebe’s approach also includes a system of returns for the joint venture partners that allows for flexibility in planning while ensuring not only his own financial security but the long-term viability of his young partner, Mark Thompson, and the future of the farm.

It’s working. Since the joint venture was implemented three years ago the farm has increased from 4,000 to 6,000 acres and added fababeans, lentils, soybeans and quinoa to the staple canola, wheat and feed barley rotation. Thompson was able to quit his job in nearby Saskatoon to farm full time, and Wiebe has stepped back and become more engaged in agricultural politics as he sits on the boards of SaskCanola, Canadian Canola Growers Association and Grain Growers of Canada.

This particular joint venture strategy came out of Wiebe’s meticulous research, put into motion with an ad on Kijiji.

The background

Wiebe farmed with his dad for 23 years until 1996, and only 15 of the years since have been full time. Another life in economics and business, plus stints volunteering abroad with his wife, artist/musician Valerie Wiebe, and their two sons, meant he used off-farm income for most of his farming years to add to a contributions-based return structure that was well ahead of its time. Father and son had a working agreement designed around their lives. When Doyle wasn’t there, his labour contribution decreased but he was paid a return on his portion of investment in land and equipment.

When his father was no longer actively farming, Wiebe farmed with an older employee willing to work the strange seasonal hours required on a Prairie grain farm. That employee left at about the same time Wiebe began to consider how he might ease out of the everyday demands of farming while maintaining a business interest.

Frustrated after three years of hiring annual summer help, Wiebe had an epiphany.

“I realized I was selecting people for their long-term potential,” Wiebe says. “So I thought, ‘why not just advertise for what I was looking for — a joint venture partner.’”

Which is what he did, placing an advertisement on Kijiji and telling his neighbours and members of the community what he was looking for. After numerous responses to the online ad, Wiebe screened the applicants for aptitude, commitment and like-mindedness in terms of what he calls “the essential principles of agricultural production.” When he thought he’d found the right person to partner with, they planned a non-binding “courtship” year which allowed either party to back out if things didn’t work out.

Well, they didn’t, and Wiebe wondered if he would end up simply pulling the pin. Unlike other areas, there is not a lot of demand for rent or purchase of land where he farms, but he has a number of landlords and puts great value on the relationships he’s cultivated with them. And his community is important to Wiebe. He didn’t want to leave anyone high and dry.

Then in 2013 Mark Thompson moved onto an acreage just down the road with his wife Kristin and their infant son. They had come from nearby Saskatoon where Kristin continues a career in architecture, and Mark worked in the pulse breeding program at the University of Saskatchewan Crop Development Centre.

Mark had grown up on a mixed cattle farm in the southeast, had a degree in agriculture with a minor in business, and wanted to farm.

“Not long after they moved in, I went over there and talked to Mark,” says Wiebe. “Within five minutes his eyes lit up. He could really conceive of the idea.”

Initially, Thompson kept his job and worked weekends, helping Wiebe with the 2013 harvest. Then the pair roughed out the courtship year as if Thompson was a full partner. By the fall of 2014 he was farming full time.

“I wanted to stay in farming, but knew I’d have to work at the same time,” says Thompson. “Once I met Doyle, I could walk away from my job and farm full time with way less risk to my family. I could make a career change without getting a PhD. It was a pretty easy decision.”

Nuts and bolts of the joint venture: The way contributions work

The sample spreadsheet (below) gives a clear picture of how the joint venture works.

Basically, it allows individuals to combine resources but retain ownership to create larger operations. It is based on three categories of “contributions” each party brings to the arrangement: labour, investment and depreciation.

“A dollar’s worth of labour is an annual contribution value,” says Wiebe. “A dollar’s worth of investment in land/equipment/buildings is only shown to have an annual contribution associated with a reasonable return on investment. We use five per cent. Depreciation is similar for depreciable assets. We use 12 per cent for equipment and four per cent on buildings.”

Each party shares a percentage of revenue and expenses based on their percentage contribution.

For the sample spreadsheet, there is a 60/40 split of contributions and income, although of course each joint venture would be different depending on individual numbers and the number of entities involved. The value for each of the contribution components is reassessed annually.

As this example indicates, one party may have considerably more invested in equipment and land, but may be contributing less labour as time goes on. As the percentages change, the incoming partner is provided greater opportunity to pay for the new capital contributions they are making.

This explains the beauty of the joint venture in succession planning.

In terms of accounting, the balance sheet for each party remains intact as long-term assets and debts remain with the individual parties. “Getting working capital into the joint venture is a little more tricky, accounting-wise,” says Wiebe. “But the most important aspect to get a good handle on is the cash versus accrued accounting that needs to happen each year after proper sharing of cash and accrued profits.”

According to an Alberta Agriculture report, Joint Ventures in Agriculture (revised Apr. 2017), the structure can be reasonably simple to administer, and is relatively easily dissolved at the end of an agreed to term (or, in a succession situation, when the original partner fully retires). It also has the added benefit of tax efficiency. Corporate entities in a formal partnership share the small business deduction threshold so whatever is earned above that number is taxed at a higher rate. But in a joint venture, income is allocated to the parties separately and therefore each entity can take advantage of the full small business deduction, meaning more of their income is taxed at the lower corporate rate.

While it might be simple in theory, the complexity of transitioning from a single balance sheet for his farm to accounting for the joint venture was a surprise to Wiebe, as was the discovery that professional accountants wouldn’t be of much help. Maybe that’s because while many farmers claim to be working within some sort of joint venture, true joint ventures are actually quite rare, according to Saskatoon-based farm management consultant John Spencer. Wiebe hired Spencer to help with the “soft” stuff related to the agreement.

A professional and forensic agrologist who’s worked in consulting for over 30 years, Spencer says everything about Wiebe’s joint venture is unique, adding that he’s used what he’s learned from Wiebe to help other clients. “Doyle’s books are in phenomenal shape. He’s inclined that way. And whatever he does, he does so well. He’ll worry a problem to death. He sinks his teeth in and chews until it’s solved.”

It took a lot of chewing.

Wiebe looked at other models of farm business including incorporation and simple family succession and didn’t like what he saw. He believes neither creates a sense of ownership as they are based solely on shares. In those models young farmers don’t have the opportunity to learn how to manage because they don’t grow into the business.

Case in point. In their first non-binding year, Thompson and Wiebe had a good crop with significant returns for each of them. But the first year of the formal joint venture was very poor. “The ups and downs were a good object lesson, a way to learn perspective and management,” Wiebe says. “I’m convinced of our model. If we’d have had a structured buy-out commitment, that poor first year would have changed everything immediately.”

He continues, “Mark is integrally involved in the impact of the decisions he makes. The model is not just about the numbers and making them viable, it’s also about making sure everyone understands the model. Your contribution according to the spreadsheet can be laid out and show that this much in means this much out… it’s easier to understand that buying a tractor affects my contribution and I can then take that to the bank.”

“The fundamental advantage of the joint venture is flexibility,” says Wiebe. “I know my numbers better than anyone. And we have a 10-year plan. But then you have a bad year or an exceptionally good year and it’s irrelevant. With the joint venture, every year we are responding to the resources available.”

Thompson agrees. “It took me a while to get my head around the joint venture, but after the first year of purchasing I could see how the contribution aspect worked. If I’d have been farming myself that first year, it would have been game over. But with the joint venture, the risk was shared and it wasn’t so bad. Doyle wanted to make it work so he carried over my losses and helped to weather the first year.”

The Alberta Agriculture report indicates that one of the critical components for a successful farming joint venture is the “development of a financial model that projects to the farmer what his individual bottom line will be in this new structure. This model has to answer the questions of whether the farmer will be better off financially through their involvement in the process.”

It’s pretty clear that both Wiebe and Thompson would agree that the answer in their case is yes. It’s also clear there is more going on in this relationship than what’s on paper. Their voices reveal a mutual respect and trust. Wiebe believes his young partner brings “brain trust” to the farm in his knowledge of pulse crops, and Wiebe’s experience has “knocked off five years of lessons and learning,” says Thompson.

While they have drawn up a legal document outlining the particulars of the joint venture for operating and Revenue Canada purposes, “there were no lawyers involved from my end,” Wiebe says. “If we can’t operate under these terms then we won’t do it. It’s a real human endeavour.”

“It works because we have the same goals and point of view on farming,” Thompson says. “The legal document ties us to each other and now we’re far enough into it, there’s incentive for both of us to make it work. It’s a symbiotic relationship.”

Making it work: The ‘soft’ stuff

“I’ve known Doyle a long time, and I thought he was crazy at first,” says John Spencer, back at Spencer and Associates. “You’re kidding right? You’re going to just pull some stranger in? But I’ve learned a lot about joint ventures by helping with this one. With Doyle you know the material will be exhaustively researched.”

While the joint venture operating agreement spells out the legal structure, contributions, accounting, etc., perhaps the most important part to Spencer is the communication plan.

He pushes such “soft skills,” insisting they are required to make any farm business arrangement work, whether it’s between family members, corporate interests or joint venture partners.

“Before you plan anything like budgets or cropping plans, you have to look at life plans,” Spencer says. In the case of this joint venture, he sat down with them individually, with the couples, with the wives, and hashed out their short- and long-term goals. Each was asked to outline what they value in themselves and the things they do, and to then make those values and goals the basis of the farm plan.

“If you don’t include everyone in the planning, then eight out of 10 times the plan will fail,” Spencer says.

Both Kristin and Val are “city girls” with their own businesses and interests outside the farm, but they needed to be involved in the planning to ensure their goals are realized and their needs met. And Mark Thompson is determined to spend family time with his wife and growing boys.

“The biggest stretch for me is to balance the family time with growing the joint venture to what I want it to be,” Thompson says. And he’s ambitious. “My goal is to have the equipment and people in place to maximize our 6,000 acres. I’m looking to reach 7,000 acres and run with two combines. That will give us a little wiggle room.”

While Wiebe has watched Thomp­son taking over more of the operations, maintenance and human resource management, he admits it hasn’t necessarily been easy to let go. And perhaps that’s where personality comes into the success of a joint venture designed for succession: the older partner has to let go.

“The difficult piece for farmers is to allow themselves to see another way of doing things,” Wiebe says.

“At first I missed running the tractor, but I’m getting used to coming home to find things moved around when I hadn’t asked anyone to move them,” he laughs. “My stress level is way down… and it feels good when you make a plan and it works, to have the feeling that I’ve made the right decision.”

Spencer credits the personalities of the two men, plus a good communication plan and a conflict resolution process for the early success of their agreement and seems convinced this joint venture will succeed.

“The key thing, and what is so cool, is this was a crafted decision,” Spencer says. “They built something that will work for them, is individual to them. They took the time and resources to come up with a solution to their situation. They built it to meet their needs.”

As the size of farms increases and as machinery costs climb, Spencer believes we will see more operating agreements between corporate entities, with the joint venture providing potential to create effective scale.

The joint venture dreamt up by Doyle Wiebe and enthusiastically embraced by Mark Thompson is a significant achievement and provides an example that can work for both family and non-family succession. It might also be an example of what can be done in the larger context of farm business structures to address diversification and economies of scale. And it all started with best laid plans, and an ad on Kijiji.

The post Their joint venture appeared first on Country Guide.

Noor Faridi, Faisal Usmani and Aftab Ghouri might just be the face of that change. Their new company, Superior Pulses, is taking advantage of rapidly increasing pulse acres in southern Saskatchewan, and with the local shortline railway eager to increase volumes, it might be a match made in heaven.

Heaven, in this case, is Verwood, a picturesque little community of about 14 souls some 20 minutes east of Assiniboia. Centred in the midst of wheat, canola and lentil crops, and backdropped by the hills of the Big Muddy Valley, Verwood was chosen by the trio of entrepreneurs who bought the elevator and producer car-loading facility for their startup pulse processing company.

Driving in, one easily gets a sense of how tenuous life is for the shortline railway company and anyone hoping to build on it. There’s little here to distinguish Verwood from the next place destined for extinction except for the old elevator painted blue and the Great Western Railway locomotive chugging its way toward it.

President Faridi, and directors Usmani and Ghouri have backgrounds and education in tech and business and began their exporting experience in the manufacturing and trade of textiles to European markets.

• Read more: Shortline prospecting

About seven years ago, the childhood friends met over their regular evening coffee and decided to venture into agricultural products, establishing Global Commodities Traders Inc.

“We started out with four or five containers a month and were like, ‘wow a hundred tonnes,’” laughs Faridi. Now the company exports chickpeas, lentils, beans and a variety of other pulses and products to countries around the world.

As their customer base expanded, GCT began looking for ways to ensure the volumes and quality they needed. “We were dependent on others and were having some quality control issues,” says Usmani. Knowing it would be impossible to find or afford anything on the main rail lines, they looked at several shortline locations, eventually choosing Verwood.

“We’d been sourcing from this area for quite a lot of our product,” says Faridi. “This area has 20 per cent of Canada’s green lentils and chickpeas.”

“It’s perfect because it’s in the middle of the action,” adds Usmani. “The market is not saturated because the mainline companies around us don’t handle pulses.”

Superior Pulses also handles yellow and field peas and draws from an area of 200 or 300 kms, including into the U.S.

Faridi believes their competitive edge comes from being small. “We can match price and handle more products. We are more flexible and can help to solve problems and address individual farmer needs,” he says, surveying the site from the Atco trailer they’ve set up as an office.

“Things are more transparent with smaller companies,” Faridi says. “For example, our grading is all done by a third party. It’s human nature to benefit yourself, so we take that out of the picture with third-party grading. And we have unique price structures. I think the farmers are quite happy with how we do business.”

With a goal to run at capacity of 50 to 60,000 tonnes, Superior Pulses shipped 105 cars in less than two months this fall.

For a community facing extinction, their enthusiasm must be welcome. Working with SaskPower and the RM of Excel, they’ve brought 3-phase power to Verwood and are in talks with SaskTel to provide high-speed Internet to the area. Superior Pulses employs three full- and two part-time workers, all local. And work has begun on a cleaning plant with expected completion next crop year.

“Cleaning is still an area where we are dependent on others,” says Usmani. “We want to avoid dockage and quality problems and this way we will have greater control over the product from field to port.”

The rail companies have been very helpful, he says. Superior Pulses relies on three rail companies to get its product to market. Red Coat Road and Rail owns the line through Verwood and they contract Great Western Railway to haul cars to the interchange in Assiniboia where they are picked up by CP.

“It gave RCRR another life because they needed volume on this line. And for CP, their oil shipments are down so this is a way for them to keep their haulage up,” says Usmani. “We can’t say enough about their help. We’re making this huge investment and without cars we die.”

They try to sell most of their product to Canadian markets, but also export to countries around the world. Usmani says that while port congestion at harvest is normal, Superior Pulses has good port access through the existing relationships of Global Commodities Trading. “It can be hard to get a foot in the door. The port companies want to secure themselves and want to ship year-round but that’s not how agricultural products work. We’ve had some delays but we mitigate them as best we can.”

Faridi adds, “It’s all about how you solve the problem. If you’re part of the solution they are willing to help.”

Superior Pulses is a new company, with experienced owners willing to work with the local community and the shortlines in a mutually beneficial way. A perfect match? Their mutual dependency and respect might just ensure it is.

The post That little blue elevator appeared first on Country Guide.

But now, a move from single-farm producer car loading to higher-volume sites might become the key to sustainable success for shortline railway companies, especially if it is combined with diversification in operations and commodities.

Today there are 50-plus shortlines in the country and, according to the Railway Association of Canada, they ship over $20 billion worth of freight at a cost of about three cents per kilometre for one tonne of goods.

Impressively, in 2010 shortlines shipped 23 per cent of all carloads.

Saskatchewan has perhaps the largest and most cohesive shortline systems in the country, such as Great Western Railway in southwest Saskatchewan, a locally owned shortline that runs 375 miles of track and 40 siding locations, and that ships over 6,000 cars annually. It services the most producer loading sites in Canada, as well as two crude oil loading facilities.

• Read more: That little blue elevator

The company also works on a yearly contractual basis to service 60 miles on the Fife Lake Railway and another 72 miles of the Red Coat Road and Rail in the southeast.

“That was a dog of a line in 1992,” says Mark Hemmes, referring to the line before GWR took over. Hemmes is president of Quorum Corporation, an agency appointed by the federal government in 2001 to act as monitor for the prairie grain handling and transportation system.

“There was no volume on it and the grain companies were bailing,” Hemmes recalls. “But they came in as a private operator with a producer mindset to support local. They’ve also been able to keep mainline grain companies on their tracks. Great Western Railway is a good model.”

But still it ain’t easy, according to general manager Andrew Glastetter, who says the company is constantly turning over rocks to look for new opportunities to make a dollar. Aside from their primary business of moving grain, GWR services the potash and oil industry with storage for 2,000 cars, and it is building relationships with other companies for storage. They’ve also made arrangements to rail sand for the Saskatchewan oil field from southern Alberta into Moose Jaw.

“We focus on our core commitment to service local farmers,” says Glastetter. “But we have capacity on the line and we need to find ways to use that capacity so that in the soft grain years, we have ways to stay financially viable.”

And let’s not overlook that the local farmer has changed as well. While there are still instances of single auger sidings that ship in one or two car spots, the bulk of deliveries are now consolidated at elevator points, often with companies new to the industry. Glastetter says the biggest change he’s seen is a boom in pulses. A drastic drop in durum shipments to the U.S. from last year to this has been almost entirely offset by traffic in pulses.

It’s a common trend. In Western Canada, shipments of cereal grains declined 10 per cent from 2013 to 2014 crop years, but oilseeds and pulses more than made up the difference, according to Quorum’s 2015 annual report. And while it might not be a boom, there are companies with the required entrepreneurial spirit and risk tolerance looking for access to new markets and setting up shop on the shortlines.

“They (small companies) are usually shipping four or five cars at a time so the Class 1 carrier is not interested,” says Glastetter. “The shortlines can provide more intricate and detailed planning and switching… we have the flexibility to provide a high level of personalized service.”

In contrast to many of the small independent elevators, which only operate weekdays, Great Western Railway moves cars seven days a week in order to meet the needs of the Class 1 companies CN and CP. While an individual site might only do four or five cars per day, GWR is moving 25 to 30, often moving several cars in a day to several separate destinations.

It’s a lot of co-ordination, and the switching to various interchanges has to work with CP.

All cars are ordered by producers (or a line company) through the Canadian Grain Commission which passes them on to the shortline and Class 1 carrier. GWR will confirm with the Class 1 carriers and co-ordinate with them for supply and pickup. All are hauled under common carrier obligations and through shortline haulage agreements as set out by CN or CP.

“We need to be innovative, efficient and modernized, with a focus on the small- to medium-sized farmer in southern Saskatchewan. And we need to keep up with the Class 1. That’s not going to stop,” says Glastetter.

Mark Hemmes agrees. “It’s always going to be a tough business. (Shortlines) don’t have the luxury of large volumes and so are hurt bad by a bad crop. But the advantage of the shortline is that dealers have access to grain they might not otherwise get their hands on.”

Hemmes cites the example of a deal in northern Saskatchewan with Quaker Oats that sees hundreds of cars moved on shortlines into the U.S. to serve that company. A niche kind of thing, as he says.

“The bottom line is (shortlines) are still dependent on producer loading, and this is shifting to high-volume sites,” says Hemmes. “Shortlines will stay, but the trick will be efficient loading facilities. The old days of the guy with the auger and three-ton are gone. If they don’t have efficient loading and railside storage it’ll be a challenge.”

The steel hits the rail

A bit of history. Many shortlines began as an attempt to keep communities viable by servicing existing mainline elevator companies that provided good traffic at first.

Shortline companies such as McKenzie Northern, Carleton Trail and Hudson Rail acted as agents for the Class 1 lines, CP and CN. Haulage fees were attached to each station, but, according to Hemmes, as the mainline grain companies shuttered elevators along these lines, there was no way for the shortlines to manoeuvre in a commercial sense, and the money they received covered only operating costs.

Without cash for maintenance or capital costs, it was a slow death for many of them. And for the most part they were left to die.

But, early on, the Saskatchewan government took a different approach that might be paying off in ways that couldn’t have been predicted. The shortlines there were seen as a way to keep trucks off the road and to save on highway infrastructure, says Hemmes. The government provided low interest loans to shortlines and acted as guarantor.

It seems it was a fortuitous decision, especially as the oilfield opened up and more oil was moved by rail.

According to the Saskatchewan Shortline Railway Association, with a combined expense budget of $31 million, 14 shortlines now operate on over 2,000 kms of track, or about 24 per cent of rail lines in the province. They run through 18 per cent of urban and 26 per cent of rural municipalities, employ 183 people and service 70 small- and medium-sized businesses, plus 79 producer car sites.

Over 10 years, Saskatchewan shortlines moved 215,000 railcars and 10 million tonnes of wheat.

Shortlines invest roughly 12 per cent of their annual revenues into maintenance of their own infrastructure, according to the Canadian Railway Association, while trucking companies operate on publicly funded roads and highways. And if the CRA claim that a 10 per cent shift from trucks to shortlines would result in a 500,000 tonne reduction in greenhouse gas emissions is accurate, it might be something all levels of government want to support, given the federal commitment to emissions targets.

The shortlines are aware of their advantage and they are prepared to seize the moment. “We are not afraid to go to the government for funding,” says the Great Western Railway’s Glastetter. Citing the environmental benefits of rail versus truck and the savings to highway infrastructure, Glastetter says government should be supporting shortline construction and rail infrastructure, and it should also encourage increased traffic on the shortlines.

In fact, the SSRA submitted a full response to rail transportation recommendations from the current Canadian Transportation Act review.

SSRA is asking for shortline inclusion in a formalized policy around a National Freight System, a tax credit program to offset track rehabilitation and maintenance, the ability to apply for federal infrastructure money without a government sponsor, assistance to secure reasonably priced insurance separate from that required of the Class 1 companies, and federal support to address the costs of regulatory changes around safety.

But public funding and support are only one part of the answer. “They (shortlines) all still work on a commercial agency relationship with the Class 1 companies,” says Hemmes. “They can’t really market their services outside those parameters… and the Class 1s see the shortlines as gravy for them.”

There is one recent exception. Mobil Grain, now owned by Alliance Grain Traders has managed to negotiate a rate structure with CN. Hemmes believes it’s working quite well and sees it as a test case. “If the negotiated rate structure works, it might give shortlines more stability and power over their company.”

“At the end of the day, it’s about how much money you get for each car you move,” Hemmes says. “They need to squeeze more money out of the Class 1 companies to make a margin. If they’re beholden to the Class 1s indefinitely, there’s likely a clock on them.”

The shortlines recognize their tenuous position. In its response to the CTA review, the SSRA is asking directly for rate protection for shortlines, and also asking that careful consideration be given of the proposed elimination of maximum revenue entitlement (MRE) provisions.

As much as short lines are independent operations, Hemmes says, many operating elements are at the mercy of the Class 1 railways. For example, car supply, schedule and rate structure are dictated by the Class 1s. As well, there are currently no arrangements or limitations for the rate relationship between short lines and Class 1s, as there are between shippers and Class 1s.

“Creating a protected rate for shortline operators increases the likelihood that grain will start its transit by rail closer to the farm, protecting the environment, public roads and middle class jobs” Hemmes adds.

The SSRA goes on to compare single and multiple car rates between MRE and non-MRE routes, citing in one example a 229 per cent spread per mile on non-MRE routes for small shippers.

While shortlines await the outcome of the CTA review, it’s obvious why Hemmes is watching the deal between CN and AGT’s Mobil Grain. “Shortlines might be able to strengthen their position. We’ll follow this story and see how successful it is.”

If change is a constant, the ability to keep up with it might be the key to success for Canada’s shortline railways. Looking to Saskatchewan’s example in general and Great Western Railway in particular, it seems adaptation to market demands, leveraging economic and environmental contributions, and pursuing positive relationships with the powers at CN and CP might make the difference for the future of shortlines and their ability to provide the kind of local, specialized service at which they excel.

The post Shortline prospecting appeared first on Country Guide.

A “good idea” can be a proactive idea or even a reactionary one; it can be traditional or alternative. But it would seem that in order to change, and in order to create something new, farmers must first look in a mirror and see where they are at. And then look to the distance and see where they want to be.

Large or small, organic or conventional, family or corporate, there’s a process to changing the direction of your farm. It may not be obvious. And it almost certainly won’t be easy. But if done right, a farm might just find its true calling.

For Manitoba siblings James Kuhl and Kristen Gray, it started with asparagus. Well, technically, it started with potatoes. But a decision made by their father 15 years ago to put a few potato acres into an alternative crop set the farm on a course that would see them not only grow the asparagus business, but examine new business models for their operation and design new strategies to reach their goals.

Today near Bagot in the Assiniboine River valley just over an hour west of Winnipeg, their newly incorporated River Valley Specialty Farms grows and sells edible beans, quinoa, and hemp along with the asparagus. By 2019, the brother and sister plan to more than double their certified organic acres to 2,500, acquiring gluten-free certification of some products as early as this fall.

Two years ago the farm was still primarily a potato operation. But last year, the farm grew 900 acres of potatoes, 1,200 acres of edible beans, 1,000 acres of grains, 120 acres of asparagus, 35 acres of quinoa and 400 acres of transitional hemp. So what changed?

According to James, it was a storm in the potato world. With the Canadian dollar until recently at par with the American, there was no advantage to processing potatoes in Canada, he says. “We saw that contracts were being cut and it made us really nervous because potatoes are so capital intensive. With the potential to lose the contracts, we could see it was not good for us from a business perspective… so the past three or four years we’ve been talking about how to survive.”

• Read more: Better decision making for the farm

In the midst of this discussion, the siblings (James is 36 and Kristen 38) were also trying to figure out how to transition the farm in a way that would allow for growth of their business while seeing to the needs of their parents. “With the asparagus we could see potential market growth and solid prices,” James says. “And we were learning about it and having fun.”

“We love the marketing aspect of it,” chimes in Kristen. Early on, Federated Co-op helped them with marketing and management, growing with them as they figured out what it is that buyers want and how to provide it.

“We’ve grown and our product is now in Safeway, Sobeys and Loblaws, with the possibility of Costco this year,” Kristen says. “The foot in the door with asparagus was huge. We just have to ask what they need and they trust us to supply it. We know where the markets are and what’s coming up, and we will adjust our cropping accordingly.”

Able to gain marketing savvy through the asparagus business, they can also use its existing coolers, grading lines, and packaging and storage capacity for other crops. As well, the farm has on-site housing for up to 60 employees.

River Valley Specialty Farms employed 66 people to cut and pack product last year, all accessed through the Seasonal Agricultural Workers Program, a program both say is vital to their success. “We wouldn’t be able to do this without SAWP,” says James. “Without that program it would change this conversation entirely.”

It’s clear that the foray into asparagus laid the groundwork for what comes next. And what comes next is pretty huge.

Business Models: Making the tough decisions

“We haven’t made this business go yet,” says James, “but it’s so exciting to try.”

And it’s exciting just to listen to these two. James and Kristen have such clear goals and timelines around transitioning the farm to organic production of a variety of crops, it’s hard to believe most of their plan has yet to be realized.

With a diploma in agriculture, James is chief operating officer, lives in Portage la Prairie, and is responsible for all operational and production areas of the farm business. Kristen has a degree in psychology and criminology and is chief administrative officer. She directs the financial and marketing side of things, traveling from her home in Winnipeg to work most weekdays at the farm office. They each bring their own particular skills and perspective to the table.

Their process of change began with a hard look at their business model. Most of their farm is comprised of small parcels of irrigated river flatland without easy access to each other. This makes it clearly unsuitable for say, canola, but perfect for specialty crop rotations. So while most farm business models tend toward increased acres to offset decreased margins, James and Kristen chose the opposite. They are downsizing. They’ve kept all the highly productive river flatland that’s perfect for vegetables and beans, sold some other parcels, and are counting on the larger margins that organic and specialty crops can provide.

“Every farm has to find out who they are and what they want to be,” says James. “We discovered who we are by first looking at crops and management and realizing we were not profitable in the structure we had… we started to understand what potential we have with the assets we have left.”

They worked very closely with an accountant to do their financial analysis, breaking out each part of the farm and taking a close look at the numbers to project their financials into the future.

“It’s a three-part plan,” says Kristen. “Right now we have the asparagus, conventional, and organic crops. Eventually we would like to be all organic except for the asparagus.”

Strategies: What’s it going To take?

The scrutiny doesn’t end once the planning is over. The business does a monthly financial health check, analyzing the numbers and revisiting and revising the plan as necessary, says Kristen. “We are in constant communication with buyers and we plan according to market opportunities.”

“We don’t have a five-year crop plan and we won’t make one because it allows us the kind of flexibility we need,” says James. It doesn’t hurt that smaller parcels of land are more easily transitioned to new crops, allowing for rotations that meet the market as well as soil fertility needs.

It’s another aspect of organic production that appeals to James. He’s implementing green manure crops to satisfy a portion of the land’s fertility needs. “We struggled under conventional because sometimes due to economics we had to push the rotation and I didn’t feel good about that in terms of the soil. Hopefully we’ll have a bit more freedom now to change options and build the soils back and be sustainable on the production side.”

Another critical area in terms of operations is equipment.

“We won’t need big, expensive equipment,” he says. “I can use older, smaller equipment. Instead of a half-million dollar rotary combine, I can use a $75,000 conventional. I’m very excited about not tying up so much capital in equipment.”

Currently James manages 60 people, the vagaries of growing specialty crops, irrigation, and weed control.

James admits he might get a bit of a breather in terms of intensive management as the farm transitions, but he knows that once it is fully organic he will need all his management skills to make the plan work.

If transitioning land to organic is an exercise in agronomic patience, it is also a world of paperwork, and as head administrator Kristen is in charge. Food safety, traceability, organic and gluten-free certifications are all on her plate.

“We are making sure we have the top certifications with top marks in each,” she says. “And we want to make sure we have it before we’re even asked for it. It’s a must in today’s marketing world. We can’t be naïve about it. I used to think all the paperwork was just a pain, but I realize how important it is. In fact, for some buyers a pass isn’t good enough. They are looking for a particular percentage mark so we have to be on top of it.”

But the transition to organic is about more than markets for Kristen. It’s personal. “I want to feed my own family as many locally grown and organic products as possible, so these aspects are very important to me.”

The next three years will see continuous change at River Valley Specialty Farms as parcels of land are transitioned to organic. One might logically wonder how the farm will survive the financial burden. To that end, James is looking at opportunities for value-added on the farm to provide income and a little security against risks.

“We formalized a really good business plan without the value-added,” James says. “But it’s a little extra security.”

And the asparagus. Always the asparagus. Both Kristen and James agree the farm will rely on the asparagus business to see them through.

“It’s a proven, profitable business,” Kristen says.

While they agree the planning has been hard and there’s a huge learning curve they will continue to navigate into the future, James and Kristen are also confident that their experience and growing expertise in producing and marketing specialty crops will see their plan to fruition.

“There’s been many lessons learned over the past 10 years that have given us confidence dealing with direct marketing,” says James.

“A big part of this was going to Toronto a few years ago and meeting with a Loblaws buyer,” James adds. “A lightbulb went on for me. I realized these companies want to deal with me. I was just a young guy and it was intimidating, but they really wanted to deal with me.”

Hearing the enthusiasm in their voices and the confidence these two have in their plan and for the future of their farm, it’s little wonder.

What does success look like?

Essentials that are on farm adviser Terry Betker’s checklist:

• Specifics on structure, with clear organization and accountability for important roles.
• Structure around farm meetings, actual sit-down-with-an-agenda-type meetings. Robert’s Rules aren’t necessary, Betker says, but regular meetings allow farmers to drill down into how the farm is doing, where it needs to go, and how to get there.
• Testing progress, establishing the metrics around what needs to be accomplished in four or five key areas, including finance, operation, marketing and human resources.

Barriers to change

Farm adviser Terry Betker sees a big hurdle in the way of making changes to farm businesses.

Basic resistance to change seems self-explanatory, but it’s not easily overcome.

It’s easier to work on symptoms than to tackle root causes. By nature farmers are doers. They like to see concrete results. But long-term success requires identifying the root issues that need to be addressed. This too is work.

Farms also don’t always know how to develop measurements of success (i.e. not just financial). These, Betker says, are crucial too.

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