Although precedent setting in many ways, at its core, this donation made by Wynne Chisholm and her father, J.C. (Jack) Anderson of W.A. Ranches Ltd. west of Calgary, Alta., was merely a family farming and ranch succession plan, like many others, with a focus on legacy, sustainability and growth potential for generations to come.

Jack, in his 90s, and Wynne, now nearing retirement, had operated W.A. Ranches together for the last 15 years, but from the very beginning, questions about succession — and the question “who?” — were always in the air.

“Without a family member interested in taking the reins of our family ranch operation, the question of our succession was always in the back of our minds,” says Wynne. “We did a lot of soul searching and asked ourselves lots of questions.”

Again, they are questions that farmers all across the country will recognize. If there’s no clear successor, what do you do?

“Could we downsize and continue?” Wynne asks. “Could my husband Bob and I keep it running for the foreseeable future after my dad passed?

The family considered an employee buyout, but it just wasn’t feasible in size and scope. And the thought of downsizing was off the table too.

“The option of downsizing was not acceptable for my dad as he feels very strongly that if you aren’t growing you are going backwards,” Wynne says.

More possibilities came up too. “What if we had a big auction?” Wynne says. “Well, the thought of having everything that we had built split up was definitely not appealing — devastating actually.”

Like other farm and ranch families, they faced an intricate and complex puzzle of family relationship dynamics with different needs, passions, ambitions and stages of life.

Add to that legal, financial and tax issues and it can be a daunting task that tests the mortar and mettle of the ranch entity and the families involved. For Wynne, though, navigating a philanthropic gift made it even more challenging.

“For us, when you added philanthropy to the mix of succession planning, all of those new layers increased the complexity,” she says. “The process made me reflect about the number of farm and ranch families that have gone through succession and ranch planning. Sadly, I know of more families that have blown up their relationships over succession planning than I do families that have done it successfully.”

Now, some 18 months later, with time to reflect on the process and on the succession plan that led W.A. Ranches to that gift to the university, Wynne shares her insights of the experience.

“For me this is one of the toughest things that my husband Bob and I have ever gone through,” she says. “It was emotionally really tough and beyond that, it was extremely hard work for us. Even getting through the discussion of what we were going to do was challenging. Having no interested next generation was huge. Was our ranch and everything that we worked so hard for and built going to die out after my husband and I? Would we run the ranch until death do us part and die with our boots on? That was certainly Dad’s plan.”

In the beginning stages, although they didn’t have an appointed successor, what they did know for sure was that it was important that the brand of W.A. Ranches live on and it was important to Wynne that her passion for the welfare of the cattle she was raising continued.

Important too, was that the ranch continue to support ongoing participation and the development of youth and agriculture, and that their current staff have ongoing employment. And of course, that they could still visit the ranch.

“It was easy to identify what was important to us in our vision for the succession. It was from there that we started to look at answering the difficult questions as to how we could ensure that would happen,” says Wynne.

The arrival at a successor didn’t come entirely out of the blue, as they had shared a long, close and supportive relationship with the University of Calgary, developing the Anderson-Chisholm Chair in Animal Care and Welfare in 2014.

Additionally, because W.A. Ranches actively offered their operation for the university’s student outreach programs, Wynne knew that the UCVM was missing a dedicated cattle ranch for research, development and learning. Although the university was using commercial farms like theirs to do so, it added cost to their research projects and also increased the variability of the data due to the diversity of the ranches that were participating.

That created uncertainty about the feasibility of some of their research projects, and having a lack of a dedicated beef cattle operation hampered their recruitment of students and faculty and ultimately stifled the growth of the UCVM.

“We asked them, in an ideal world, if finances weren’t an issue and they could have anything they wanted in order to bring the university vet school to the next level, what would they really require and need to be able to play in a bigger space globally? Those conversations started in December 2017 and then I talked to Dad. I told him the university has some needs — is this something that we could help them with?

“At the time we didn’t know if that just meant a quarter section and 80 cows or a larger gift.”

From there, Wynne peeled back the layers of a succession plan, and once they decided on a larger gift of the ranch in its entirety, it was their hope that it would create a world-leading centre of excellence in beef cattle research. It would not only benefit students and faculty but result in shared learnings that would also serve to help fellow farmers and ranchers lift up their businesses.

But they were thinking broader picture too — asking the question of how this gift could positively influence and affect public policy and play in an even bigger space with scientific, evidence-based findings that would improve animal care. Could the ranch become a platform that could affect policy at all levels of government?

Wynne and Bob then pulled together a small steering committee including executive and senior leadership at the university, with the process of formal conversations between W.A. Ranches and the UCVM starting in early 2018.

Those conversations continued through to September 2018, and Wynne briefed her father regularly to ensure the family was all on the same page. The process demanded more than conversation, though, starting with a very detailed merger strategy before arriving at writing a formal gift agreement and the terms of reference required, as well as a thorough list of details of expectations.

The vision and terms of reference had to come from Wynne and Bob and honour what they, their son, and Wynne’s father wanted — a dedicated facility for research, community and industry outreach that had alignment to W.A. Ranches’ animal care and welfare, 4-H and youth.

“We went through massive levels of rewrites. There were so many hurdles that we had to work through before we knew if we could even make a deal. We had a huge project management plan. There are various levels of approvals at the university level and due diligence processes, including a whole set of charity tax and government rules and regulations that affect the nature of how you do gifts like this. That being said, what was reassuring throughout the process was that we knew it was a natural transition of brands. The reality was that the university was interested not just simply because we were a ranch, but because we had really high standards of animal care and welfare and that we had been a leader in sustainability practices. We had adopted technology very early in our operation and, as a result, we had phenomenal cattle records and years and years of data that they could extract and analyze.”

Fast-forward to today and W.A. Ranches at the University of Calgary, now officially the largest working cattle ranch operated by a university, is a successful merger of two brands aligned in vision, values and culture.

When asked if she is happy with the succession path that she and her father chose for the ranch that they built from scratch — Wynne’s answer is “yes.”

“Yes. I am happy with the decision that we made as a family to gift it to the University of Calgary. The value of the gift is now transforming education and it will evolve over time as the university realizes the potential of the land, cattle and space to do the things they need to.

“I know they will do wonderful things. Today they are on the very cusp and important new research is already underway. We don’t have any regrets about our decision to gift it to the university, but emotionally it was very demanding, especially when it tested our family relationships.

“Letting go is tough, tough, tough and I still miss the cows and the land. My husband describes the gift as being a very elegant exit. We didn’t have to divide the ranch and sell it in pieces. We take comfort in that and are excited about what the U of C will do with it and the amazing possibilities and potential over the next 100 years.”

Wynne Chisholm’s succession advice and insights

Open and honest communication

“Where succession has been done, and done well, there is an openness by the older generation to have the discussion. There is a willingness for honest communication.”

Succession takes time… but be careful not to take too much time

“If the succession planning hasn’t started for the next generation in their early 30s, and the next generation are in their late 30s or even 40s and they have their own families — there is pressure and anxiety about their future in the operation. Rather than focusing on investment into the operation, they will start thinking and planning an exit plan.

“Emotional resistance by the older generation often comes from the idea that they are too young to have that discussion; ‘We aren’t going to die yet!’ Or they really have a strong need and desire to participate in the operation. They panic as the farm or ranch is not just their livelihood but their identity, passion and lifestyle. They wonder what will they do then.

“Clarity of decision-making diminishes as we age. Sometimes as people age changes can be more emotionally driven and succession becomes a daunting task. Of course too, many would rather avoid possible confrontation or conflict so it simply isn’t discussed. It is so important to remember that a will is not a succession plan, and it can be changed at any time. In any business there needs to be a strategy and plan that is more than daily operations. Where will the business be in five, 10 or 20 years? What is sustainable?”

Keep exceptional records and data

“So much of what we do in farming and ranching lives and dies in the generations that leave. As with any business, record-keeping, reports and annual business analysis are crucial to the successor and the succession of the business.”

Get the right team and support

“Having the right team of professionals in place to help with the enormity and complexity of succession is crucial — from lawyers to accountants. Not only do they need to be exceptionally good at the details of tax implications and understanding farm and ranch succession, but they need to be people that the family involved feel comfortable enough to share the intimate details of emotional and financial information involving the operation.”

Think outside the box

“Sometimes it takes a new brave and bold approach to do or consider options that have never been done or accomplished. Especially in the tradition of ranching we can slip into doing things the way they have always been done. Succession is a different process now than it was in previous generations and it will be in the generations that follow. It is more and more common to not have a next generation interested in taking on the business of farming or ranching. As we realized, there are other incredible options to let the legacy of your operation live on successfully — with purpose and permanence.”

The post Paying it forward appeared first on Country Guide.

A former CBC Saskatchewan Future 40 winning entrepreneur, 42-year-old Voss has had a varied and successful entrepreneurial career. Already a seasoned senior executive with more than 19 years of experience as president, CEO, chair or director, Voss has worked in small-, medium- and large-scale businesses spanning private, non-profit, crown, venture capital and limited partnerships.

He has worked in a startup environment, and also on the turnaround of mature companies.

And now, equipped with a strong background in technology, innovation, finance and change management, his career path has circled back to agriculture and landed him in the leadership of Canada’s largest and most successful privately held agricultural machinery manufacturer.

“This is an immense once-in-a-lifetime opportunity,” Voss says of the appointment. He calls Morris an “iconic company with a great history,” and he’s quick, too, to get on message, saying Morris “is really well positioned to be part of the future helping farmers to be more productive.”

Voss also believes he understands the opportunity.

“A company this size and in this stage of its development has a huge amount of resources and infrastructure to work with, but none of the anchors that hold back the large companies,” he explains. “That is highly attractive to someone like me. I am excited about challenging the status quo…

“I like to think of myself as a disruptor, and I like the idea of saying, ‘Sure, everyone else is doing it that way, but there are a whole bunch of new ideas that are more efficient (and add) more value to the farmer.’”

Voss credits his entrepreneurial spirit and his passion for agriculture to having grown up on the farm in Spiritwood, Sask., where he still has an active interest in farming and is the fourth-generation owner with his wife and three children.

Aside from his grassroots in agriculture though, Voss also attributes his success to forcing himself to pursue new ideas and to travel outside of his comfort zone.

“A lot of my success and independence came from travelling at a young age,” says Voss. “At 19, I took the opportunity to pursue a student working ag placement in Germany. I travelled and I learned how to adapt to different languages and culture. I had to really push myself and it wasn’t always easy, but I learned that you can only discover the extent of your capabilities when you push yourself.”

He laughs at his earliest learnings gained from travel, but also says he doesn’t underestimate them. “For example,” he says, “if you don’t know how to do your own laundry — you will be pushed to learn how, and quickly.”

If doing your own laundry doesn’t sound like a breakthrough accomplishment, then Voss thinks you aren’t getting the point.

Voss has continued to travel extensively throughout his career, including working as a consultant not only in Mexico, Ecuador and the United States but also across Canada, and he says travel continues to play a vital role in his success, allowing him to remove his dependencies and broaden his vision — something he feels is also key to business leadership and growth, especially when it comes to the business of agriculture.

“A change of the old guard is happening. We are transitioning away from an inward vision in Canadian agriculture,” says Voss. “We’re moving from a heavily regulated, government interventions-based system to a much more market-driven system, but it’s not a fast process; we are still working out the kinks.”

In Voss’s opinion, that is where the evolution of the industry is going to head, thanks to the influence of the internet and the way it is broadening exposure for the industry and creating immense transparency, along with market discovery.

He likes that agriculture is moving to become a communication-driven, more sophisticated industry.

“I think the transparency across our industry in what and how we are doing things is great. We are learning from ourselves and others, and getting better as a result,” he says.

Voss also believes that agriculture has maintained its reliance on relationships as the foundation of how it does business. But, he says, those relationships now need to mature and grow into a more partnership-based mentality that includes the farm customer at every level, and he says this approach will be integral to the success of Morris.

“Farmers need to trust,” Voss says. But he isn’t asking them to trust in a one-sided way.

“Companies and organizations need to be prepared to exchange transparency for relationship building. This is especially true when it comes to grain companies. Where you see relationship building going on in agriculture, that’s where huge partnerships result in huge mutual benefits and lots of profit. Where major players in agriculture aren’t willing to do that — they will simply lose out.”

When asked what he thinks it’s going to take to lead the success and vision of Morris, Voss is quick to respond that he isn’t leading alone.

“The first thing I think of is that I need to surround myself with excellent people, build strong teams and empower them with mandates that allow them to lead. I can’t do this alone and I haven’t. It is a diversification of skillsets…

“Put the right people in the right positions and empower them to succeed. From there, they need a vision and they need to understand where the company is going. That is my job. Once they know that, they take their role and deploy it into the plan.”

But more than that, he says, the key to the company’s innovation and continued success will prove to be a philosophy that Voss learned early as a farmer himself. It’s one, he adds, that his farm customers embrace.

“I would say that one of the most important cultures that we encourage is that we make sure that our team understands that it is okay to fail,” says Voss. “This is the ability for people to try something, and it is okay if it didn’t work. It’s incredibly powerful.”

Voss feels that many people don’t pursue their ideas because of fear. But failure, he says, can be a stepping stone to success, as quite often that failing helps you to the next great thing.

This tolerance for failure, however, has to be balance with the expectation for improvement, so there’s overall progress toward success. For Voss and Morris, the end result has to be that their farm customers experience the benefits of continuous improvement and industry-leading innovation.

“People will bring forward new ideas when they have the permission to, and they’ll try something that might not work. I think this is so crucial in any business or organization. If supported by your managers and leaders throughout your company, it creates a culture that will soon have your company exploding with all kinds of interesting and successful things,” says Voss.

For Voss, though, it is equally important to follow up that culture with the following philosophy:

“But fail fast and fail cheap,” he says. “If you are going to fail, do it really quickly and don’t overspend. Manage your ideas and risk.”

It’s a lesson straight from the field, he says.

“Farmers are constantly experimenting, and looking for new ways to diversify their farm, and they’re always managing their risk,” says Voss. “Like growing a new crop. Farmers will start off by growing a small amount and get to the answer quickly before losing the farm on it.”

Deploying that kind of thinking in manufacturing business, however, is what gets him the “disruptor” label.

Voss encourages every business to value both their successes and their failures, but he says few of his competitors have picked up on the opportunity that the attitude creates. It is not something he has witnessed happening in Canadian business structure. His experiences throughout the United States and abroad have proven that your success and value are judged not only by your achievements, but just as much by your failures.

Those organizations, he says, want to know that you have had the experience of risk and failure and the insights and learnings that they provide. Unfortunately in Canada, this philosophy, he says, is not as embraced.

“I learned from failed ideas and from my successes throughout my career, and I value them both,” says Voss. “Not everything I have attempted has always worked as planned, but it has helped me evolve and grow, as well as the businesses and organizations that I have served.”

The post Ben Voss of Morris Industries appeared first on Country Guide.

This calving season, Osadczuk is a different kind of busy. He must find a new normal, since losing his entire herd to a destruction order from the Canadian Food Inspection Agency (CFIA) following a positive tuberculosis (TB) test when he exported animals to the U.S. last September.

We meet at his kitchen table, and when I ask Osadczuk how he is feeling about the cattle business, his response is not what I might have expected. Instead, it’s a show of resilience, reflecting the spirit that is the Canadian cattle industry.

Maybe it could seem boastful to say that. But it also feels true.

“I am excited,” says Osadczuk. “I feel very positive about the potential of the Canadian cattle industry.”

It’s quite clear that Osadczuk isn’t giving in, or feeling sorry for himself. He says there is no time for that, and if it had to happen, he would be happy to be the fall guy again if it means helping to sustain the industry.

“Sure, it’s devastating to lose a herd that has taken you years to build, onto a truck to be destroyed, but it is a small price to pay for the bigger picture. Without a TB-free environment within the Canadian cattle industry, we would not have access to export markets,” says Osadczuk. “And no, it’s not perfect. It is going to take me at least 10 years to get things all smoothed out again, but without open markets for our cattle, myself, my neighbours and the industry will go broke.

“We had to eat our way out of the BSE crisis and a lot of ranchers are just getting back to solid ground. This TB would have been the last straw if it closed our border. That is why I would be happy to be the fall guy. If they had saved all of my cows and they closed the border, how bad would that be?”

Although there are 21 states in the United States on a controlled status for TB, Osadczuk believes that not having a TB-free status would mean closed borders for the Canadian cattle industry, similar to what occurred during BSE, when he says the U.S. was not BSE-free, but still closed the border to Canada.

“There are a lot of people mad about the TB-free status in Canada, but without it, we don’t have a cattle business,” says Osadczuk.

*Over 50 farms were affected by the quarantine, most in southeastern Alberta and the remainder in Saskatchewan, with a total 11,500 animals destroyed to date and 14,000 released from the quarantine. The CFIA investigation is complex and is expected to continue for several more months. For Osadczuk, however, the results are already final. It has meant the loss of his entire herd; 1,200 cows with calves at side and 50 bulls.

Despite the loss, Osadczuk doesn’t want other producers to be scared. “I want people to really understand the very minimal risk that the disease really is. Of all the cattle tested, there were only six that tested positive for the disease, and although currently there is no vaccine available for the prevention of TB, I am confident that with the protocols in place in areas formerly affected by the quarantine, and with continued sound management practices, this incident is behind us.”

Osadczuk, like any good rancher, knows his cows. So when the test came back TB-positive for cow 109Y on September 22, 2017 from a slaughterhouse in the U.S., he knew exactly who she was — a home-raised heifer, even though she, like the rest of his cattle, had showed no signs or symptoms of the disease.

The last outbreak of bovine TB in Canada was an isolated incident in the Okanagan region of British Columbia, and prior to that, in 2007 in Alberta and B.C. from a bull that lived in both provinces, which led to the slaughter of almost 500 cattle.

As for the cause of TB, which has placed the small rural town of Jenner, Alta., on the map, the trail has gone cold. What initially was thought to have been spread by elk has been ruled out, as this particular strain has never been seen in Canada.

There is speculation that a bird feeding on an infected carcass in Mexico may have carried the strain with it when it migrated back to Canada.

“To think that a bird defecating on a calf and a mother cow licking it off and ingesting the virus on my ranch here in Jenner seems like incredibly bad luck,” admits Osadczuk.

Bad luck or not, those who know Osadczuk say it’s lucky TB chose a cowboy with his mettle.

“If TB had to show up, it picked the right rancher,” says Bob Lowe, chair for the Alberta Beef Producers. Lowe accompanied Osadczuk in testifying to Parliament’s Standing Committee on Agriculture to shed light on the crisis that he and his fellow ranchers were facing: thousands of unsold calves that they were unable to move or sell, no income and insurmountable feed expenses for cattle that, in the end, would need to be destroyed.

“Brad stood up for the bigger picture,” says Lowe. “A cowboy in Parliament doesn’t happen every day. He was a great voice for the industry and brought better understanding, and most of all, action.”

Lowe says that while it would typically take six to 12 months to process funding support from the AgriRecovery program, in the TB case it took only 40 days. And this funding has put Osadczuk back in a position to start over.

Starting over

Not many people actually get the chance to start over from scratch, based on what they know now versus what they knew then, but according to Osadczuk he wouldn’t and won’t change a thing.

“I like what I had done and how I had done it,” says Osadczuk.

However, what this experience has offered Osadczuk is the chance to reflect on how he has been able to pull through this crisis. He offers the following advice and insights that he feels are critical to business survival, and not just in the business of cattle.

The first might surprise some readers.

“Understand the importance of relationships,” Osadczuk says. “And make time for networking.”

Osadczuk advocates getting involved off the farm. He’s been active on various industry boards and organizations, he is a director with the Alberta Beef Producers and he also serves as a director for Bow Slope Shipping Association and for both Community Pasture Associations in his area, as well as being a councillor for Special Areas. He is also active in industry programs, including Verified Beef Plus and the McDonald’s sustainable beef project.

Osadczuk says the support of his wife Elaine, as well as other industry peers, pulled him through the darker days of the TB crisis.

Next, Osadczuk says, “Pick the right partners. Know your customers, and let them know you.”

When Osadczuk decided to jump into ranching full time, he made a point of driving to each and every one of the buyers of his cattle as he felt that getting to know his customers and letting them get to know him was critical to his operation and bottom line. These relationships resulted in non-stop phone calls of support when the TB news hit.

“Every auction mart that I have ever sold or bought cattle from and with, the breed associations, Alberta Beef Producers… I was flooded with support,” Osadczuk says.

“Get after the business of your business.”

One of the mistakes he feels a lot of people make is in thinking that their job is to do the chores or “pound the posts.” Osadczuk has the philosophy of spending time in the areas of what is going to make money, always asking himself the question: “Can I make more money by getting out there and taking care of my business and having someone that needs the job do the chore tasks, while I can be getting out in the industry, rolling every rock over and learning new ways of doing things, fostering relationships, and marketing my cattle?”

Then, Osadczuk says, “Be transparent and live your business in the bigger picture.”

Osadczuk says that when the CFIA told him he needed to figure out what he would tell his neighbours when their trucks pulled into the yard, he says there was simply nothing to figure out. For him, transparency is the only way to do business.

“We are all in this together; this isn’t about my herd. This is about my neighbour’s herd, their neighbour’s herd and the welfare of the industry as a whole,” says Osadczuk.

“Rally support when needed,” Osadczuk then says. “Take a team approach.”

Osadczuk was quick to rally with those also affected by the TB quarantine. He, along with 18 producers also on the destruction order, got together immediately at the local community rink and made the easy decision to work together and navigate through the crisis, forming three boards: one for legal, one for compensation and another board for media. This resulted in one voice and the ability to negotiate and achieve action more quickly.

According to Osadczuk, although not everyone is bouncing back at the same speed, the healing has begun for those affected by the quarantine and destruction ruling.

“Love what you do and take one day at a time,” he also says.

Osadczuk says having a genuine love for what you do is what will carry you through the tough times. But keep balanced. He found it’s important not to look too far into the future or you can get overwhelmed and discouraged.

That’s advice Osadczuk says he will take himself as he starts the process of cleaning and disinfecting his facility to meet the requirements of CFIA, re-building his herd and getting back to the business of what he loves — cattle.

So, has this whole episode made him more worried? “Not even a bit,” Osadczuk says. “It’s what I love to do. I believe in what we do and I wouldn’t change a thing.”

AgriRecovery*

The AgriRecovery Framework is part of a suite of federal-provincial-territorial (FPT) business risk management (BRM) tools under Growing Forward 2. AgriRecovery is an FPT disaster relief framework intended to work together with the core BRM programs to help agricultural producers recover from natural disasters.

The focus of AgriRecovery is the extraordinary costs producers must take on to recover from disasters. Extraordinary costs are costs which producers would not incur under normal circumstances, but which are necessary to mitigate the impacts of a disaster and/or resume farming operations as quickly as possible following a disaster. Further, AgriRecovery is intended to respond in situations where producers do not have the capacity to cover the extraordinary costs, even with the assistance available from other programs.

Natural disasters which may be considered under AgriRecovery are those resulting from a disease, pest or weather-related event, such as flooding or a tornado. Events which are cyclical, such as pricing cycles, or part of a long-term trend, such as a change in markets, cannot be considered under AgriRecovery.

*Reference Agriculture and Agri Food Canada

*[Update included a correction to the number of farms affected by the quarantine and the number of cattle destroyed]

The post Back in business after bovine TB appeared first on Country Guide.

Which means that ignoring opportunities to change, or actively resisting change when it arrives can actually be the paths of greatest risk.

Because change will happen. In fact, like other farmers, Lewis has seen continuous change during his over 40 years in the business, including volatile markets, BSE, new consumers, new industry players and, of course, the weather, and he has tried to be smart about meeting those changes and opening the farm up to them.

But of course, that doesn’t mean luck has nothing to do with it. Lewis in fact thinks it has been part of his story, either because his timing seemed somehow to be just right, or because he happened to be the right person with the right experience at the right place and time.

But, too, he’s the first to agree that luck isn’t what you want to hang your business on, because luck can and will run out.

In Lewis’s opinion, the keys for succeeding through adverse conditions include attention to risk management and diversification, plus determination and a keen passion for what you do.

For 85 years, Lewis Farms has embraced change, managed challenges and somehow turned them into opportunities. Today the farm has a purebred Simmental and Angus cow herd of 900 and two co-operator herds with Lenard Mark and Kyle Martin, consisting of mother cows contributing to their bull program. They also grow about 400 acres of seed potatoes and 5,000 acres of wheat, canola, barley, and silage (corn and barley). Their 3,000 to 4,000 acres of hay and pasture are on a combination of deeded and rented land.

In the beginning, the Lewis Farms risk management and diversification strategy was more influenced by natural evolution or need, rather than a formal plan. Lewis’s grandparents grew just over 400 acres of seed potatoes, half of which were under contract with Frito Lay. Cattle didn’t become part of their operation until the 1950s, as a way to use the cull potatoes and to feed the other crops in their rotation. (Potatoes require a wide crop rotation, so other crops like barley and wheat are grown.)

“The cattle were an evolution of the crop business,” says Lewis. “What drove the diversification of our business further from there was a keen interest specifically in purebred cattle.”

From potatoes to grain to their globally recognized and respected cattle business, for Lewis, diversification is a layered effect strategy, with each enterprise building and enhancing the others.

This risk management and growth strategy didn’t end with the simple diversification from crops to cattle. In the late ’70s and early ’80s, Lewis Farms entered the purebred cattle sector, where they established more than one market for their purebred bulls, as well as embryo and export markets.

Finding their niche in the cattle business took some experimentation. They started by using artificial insemination of Simmental, Charolais and Murray Grey on commercial cows in the ’70s, which helped to define their specific interest in Simmental cattle in the early ’80s and now their growing expansion into Black and Red Angus.

The purebred business was a good fit since they were already running cattle and were quite involved in showing cattle.

The next shift in diversification was from female production to supplying bulls, not only for the purebred industry but also for commercial herds. That commercial diversification pushed further expansion, so they could meet cow-calf producers’ growing demand for stronger genetic influences for their calf crop and breeding replacements.

Having several enterprises helped spread the risk and any potential impact on their bottom line, and it allowed them to withstand market challenges, like BSE and major fluctuations in prices market volatility. With different breeds of purebred cattle and different markets that they cater to, their commercial bull business has more stability than feeder and fat markets. Progressive cow-calf producers invest in bulls for the long-term benefit of their herd. Their diversification also helped when the semen and embryo business and embryo export market was hit hard by border closures from BSE.

“But sometimes what is a benefit to the business can also be a challenge,” says Lewis. “Being diversified, our risk management is spread, but that also means we aren’t as efficient as we could be when you compare to other operations really specialized in one commodity like grain and oilseed or strictly cattle.”

The ability to adapt and diversify, and then to grow and to take advantage of opportunities as they arise relies on financial backing and ability. For Lewis Farms, this financial foundation has been and continues to be land equity. “Fortunately for us, we have a large enough land base, allowing our business to grow,” he says.

Lewis says this is the case for many farmers and it’s what makes agriculture an opportunistic enterprise compared to other businesses. “The farm is a great equity builder in North America, not just Canada,” he says. “On the flipside, though, is the challenge of cash flow. It is always pretty limited relative to that equity.”

Lewis believes that one of the great pillars supporting the survival of the family farm throughout time has been land equity, combined with the fact that as a whole the farming industry is fairly conservative. “Our debt-to-equity ratio is usually relatively low compared to other businesses, and we tend to be pretty conservative in our industry,” says Lewis. “I think that is a differentiating factor in the business of agriculture versus other businesses.”

In addition to land equity, when it comes to supporting their continued growth, Lewis Farms is now reliant on the next generation’s knowledge and energy. What keeps Lewis up at night is also his biggest source of pride in the operation — the enthusiasm, passion and involvement of the next generation.

Since its inception Lewis Farms was built on a foundation of family working together. Ken farms with his father, Jack, wife Corrie and their children, Kyle and Kirbie, and his sister Sandy and her children, Jordan, Jamie, and Tyler. They’re all involved to some degree with Lewis Farms, and that brings many complexities to managing succession for Lewis Farms. This generational change demands a succession plan and a strategy that fits the large, multi-faceted operation and family.

Succession has been an eight-year project for the Lewises and they’re still working through it. “You try and build a format that the next generation will have a template for, and one that will support their growth and success and keep the family together,” says Ken. “Family business can be tough on the family, its emotions, livelihoods and business. A succession plan is more complex in today’s family farm than it ever used to be.”

Reputation

Lewis Farms’ annual bull sale sees over 340 bulls through the ring and caters to an audience of 1,000 in-ring and online viewers and buyers, many of whom have been attending and supporting their growth since their first on-farm bull production sale in 1985 where 37 bulls were sold along with five females.

When it comes to surviving change, a solid reputation is what has kept his auction ring full at their bull sale, despite the ups and downs in the marketplace. Often it’s hard to find a seat, many of which are taken by customers who attended their first bull sale and are now close friends.

It’s something Lewis and his family have worked hard for and are very proud of, and what he believes is the backbone for the success of their business. “Reputation helps manage risk. You need to stand behind and in front of your product,” he says.

Lewis says sticking with one thing and doing it well helped with their credibility and reputation. “Don’t flip-flop; adjust and change what you need to, of course, but stay focused. It sounds simple and it probably is, but just trying to stick to that zone and building from there and being quality-oriented rather than numbers driven. Numbers can be short-term. The vision of your business is long-term.”

And when it comes to longevity, Lewis agrees that the Canadian cattle industry has and will continue to endure times of change and adversity, but he feels it is set to survive risk and change perhaps better than other businesses. “The one thing that doesn’t change for our industry is that people need to eat and hopefully they continue to choose beef,” he says. “We are a legitimate industry providing safe, reliable food and the reality is that somebody still has to produce the cattle.”

Lewis says losing Western Feedlots is definitely a loss for the industry, not only in Alberta but for Canada. But, he says, this is another example of how we need to adapt to change to make progress. For cow-calf producers there’s more opportunity to diversify and think about backgrounding. “This is what always creates a margin in a market like this when nothing is working. It requires a change, and with that change, brings opportunity,” says Lewis.

This article was originally entitled ‘Game changer’ in the February 1, 2017 issue of Country Guide

Managing change with risk

Risk management has always been a need in the cattle industry, and it’s growing rapidly in response to the extreme volatility in the industry over the past few years. New companies, like Agra Risk in Strathmore, Alta., are emerging in the industry to meet this growing realization and need for risk management.

The company helps both crop and cattle producers by educating and taking the fear out of unknowns in the markets. “People forget that there are tools that protect all commodity participants from disaster and extreme loss. When it comes to risk management, one of the major issues is lack of education and fear of the unknown,” says Greg Appleyard, Agra Risk president and founding partner. He’s also participated in large-scale crop and cattle production for over 20 years.

“For years I believed following the industry gave us a road map to what the cattle are worth. I was wrong. Our success has come from running our own returns on a daily basis — fully understanding that if you don’t buy them right, you may never have a chance to get out of them,” he says.

When it comes to surviving and succeeding through change, a risk management strategy must support prediction and profitability in the business. Not easy in the cattle industry, but one that in Appleyard’s opinion is possible. “The day you buy cattle they are not losers,” says Appleyard. “There’s 100 per cent gain or loss.”

With a hedge strategy, it will not get worse unless there is a major event like a border closure, he says. As a direct participant in the industry, he hedges 100 per cent of the cattle. “This has allowed profitability for us even in a year like last year,” says Appleyard. “As a cattle investor, it just becomes common sense to me to hedge every animal under a consistent program that makes returns not only predictable, but profitable.”

The farm is a great equity builder in North America, not just Canada,” Lewis says. “On the flipside though, is the challenge of cash flow. It is always pretty limited relative to that equity.”

Changes devastate feedlots

Recent market volatility and new government programs have been blamed for the shutting down of Canada’s biggest cattle feeder, Western Feedlots. The company, which has been in the cattle business since 1958, claims the strong “headwinds” facing their operation like the high markets in 2014 and 2015 and recent policies introduced by Alberta’s NDP government, including Bill 6 and the looming carbon tax, forced them to close the pens on their operation in September.

Western Feedlots wasn’t the first feedlot to close recently, just the largest. Five family-run feedlots have closed over the past two to three years, according to a group called Stop the Head Tax in Lethbridge (Alberta) County.

“Our industry is under attack on all fronts,” said Rick Paskal, president of Van Raay Paskal Farms Ltd., an Alberta cattle feeding operation and a major backer of the Stop the Head Tax group. “We are going to see more cattle feeders go under in the next six months in Lethbridge County,” he warned, “and see more cattle fed in the United States, which will mean job losses, further price reductions for ranchers and another blow to Alberta’s already faltering economy.”

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Too many young men and women are starting their discussions about the path to farm succession by asking the wrong question, says farm business consultant and succession expert, Merle Good.

Rather than asking what can the farm business do for them, they should be concerned with what they can do for the business.

The next generation should ask: What is the business looking for? What does it need? How can I add value?

Letting the business lead the often difficult path to succession will not only help you work your way to a better succession plan, it will set you up to make better decisions for your farm business in the long run, says Good, former farm business adviser with the Alberta agriculture ministry.

But most of all, Good says, making the business the focus of your discussion will help the younger generation get on the right page, and it will help them set reasonable expectations.

For Mom and Dad, meanwhile, it will help shift the discussion toward their asking themselves whether they’re being good business leaders, and away from the minefield of whether they’re being good parents. And, adds Good, “It’s no longer a conversation of what do Mom and Dad want, but rather a question of what does the farm business want and need.”

What does your farm business need?

“Before the business can lead the conversation, the farm business must first be defined as to what it is,” says Good.

In his experience, that can be eye-opening. The business needs to know what it consists of. In farming, of course, the business may consist of producing and selling grain, for instance, but that only means the business needs to have access to land, not necessarily that it needs to own that land.

That’s a crucial point, Good says, because it highlights the very important fact that the succession discussion has to be about the business, not about the estate.

In working with his farm clients, Good is very clear about this, saying the first step in defining what your business is and what it needs is to get a clear picture of the business, which means the business discussion must be separate from the parent’s estate plan before either generation can take an analytical look at their involvement.

Before the next generation can decide whether they want to come back to the business and make it their full-time career choice, they need to know what exactly is being talked about.

“The separation needs to be really clear,” says Good. “If the farm business is not separated from the estate, proper succession will never occur. An operational business separation plan absolutely needs to be put in place.”

Separating the farm business from personally owned assets is a must

Good says that separating the farm business from personally owned assets can be quite simple, since most farm assets are usually tied up in land. He suggests creating an operating company that owns some of, but definitely not all, the land.

Once this separation has occurred, the redemption of the parent’s equity must occur over time, and Good says it is essential that a formal plan be created and that a significant portion of income allocation occur as redemption of capital.

“This strategy helps most second generations, since the majority of this demographic would rather own a bigger piece of a smaller pie than a smaller piece of a bigger pie,” Good says.

“So if Mom and Dad have a $10-million corporate farm with everything in the company, they will be reluctant to give full ownership. However, if we take that farm and drop it to $4 million, with just cattle, machinery and some land — and kick $6 million of land to the side in a land corporation — the parent’s blood pressure will drop.”

Good says that with this approach to succession, once the operating company is established and the off-farm estate and land is off to the side, business succession can become the focus.

If farmland is being left to non-farm children (as is happening more often), then an access agreement, which usually includes a long-term lease, must be created. Good likes a rolling lease concept between family members, where each year an extension of one year is automatically added to the lease.

He says that it is important to remember that the operating business rarely wants to buy land. It’s only the owners who want see that as a benefit. The business would usually prefer to own cattle, machinery and inventory to make money.

Don’t fall into this trap

It’s a big question, says Good. What keeps the farm business up at night, especially as it relates to bringing in the next generation?

Often, it leads to another, equally important question: What can be done to create more income?

“The key factor in any farm business is income, and the focus of the business is to make income. Remembering this key factor defines the focus for both generations to strive towards the common goal of more income,” says Good. “Income generation needs to be a primary focus as you are bringing in a second person or family that needs to eat.”

It’s a discussion that also helps shed light on the estate questions discussed above. “When we talk about succession, it is an income game, whereas estate planning is an equity or wealth game,” Good says. “Because without sufficient income, you can’t run a successful business and make a living. The farm business is to create a career and, if it is successful enough, it will create the owners’ wealth.”

The common answer Good hears from farmers is that to create more income for their farm business, they need to buy more land. That, he says, doesn’t actually answer the question.

“My clients will often come to me and say, ‘my son or daughter can’t come home and farm with me because the farm isn’t big enough.’ What I tell them is that no, don’t fall into that trap. Big doesn’t necessarily equate to income.

“Where I recommend they focus is on their business plan and how it answers the question: What can we do to change and enhance the current farm business income?”

For example, Good asks them to think more along the lines of what crop or marketing approach they can adopt to build additional revenue. How can they make more income off of what they already have?

Then, once that determination is made, it’s time for the up and coming generation to say exactly how they can help make that happen.

Good also encourages the current generation of farmers to recognize the value that the next generation will offer the farm business.

“Of all the work that I have done in farm business planning and succession, what I have learned is that if you bring a second generation in that is primarily focused on really bringing value back into the farm business with energy, effort and skills, after three to five years with no change in the size of the farm land base, the farm income will go up at least 20 per cent.”

This is because the new generation will bring better marketing, advances in new technology and new approaches to the farm business operations, says Good.

There’s still more work to do. For instance, the farm will need a structure with clearly defined roles and responsibilities to support the succession plan, but the goal will be in sight, Good says. It will have taken effort, but now the expectations of both generations. have a pathway for being met. CG

The separation needs to be really clear,” says farm adviser Merle Good. “If the farm business is not separated from the estate, proper succession will never occur.”

The Big Question

When does the business model let me take ownership?

Ownership transition should start to happen when the next generation enters the manager level, farm adviser Merle Good tells his clients.

This means that having defined roles and responsibilities is important in order to set clear expectations, both for the farm business and for the next generation.

But, says Good, it also suggests that the key to long-term success for the next generation is ensuring that the business does not allow the next generation to become an owner/manager too soon.

“My best advice for a next generation that is anxious to move forward with next steps to succession of the farm business is to not become an owner too soon,” Good says. “That way you will avoid the carrot and the stick scenario. I tell my clients that as an employee and maybe even a key employee, don’t even talk about ownership yet. It isn’t going to happen.”

One of the truisms for the business, he says, is that before you become a manager, you simply can’t become an owner, since the business does not want you to become an owner until you have become responsible as a manager.

When you have been responsible for an area and have done a good enough job, that’s when it wants you to become an owner.

“It’s not what Mom or Dad wants you to be, in their mind they may want you to be an owner when you are born. It’s the business perspective and what the business needs. The business says until you are a manager you can’t have equity.”

“After all,” says Good. “It is what the business wants and needs that will best answer the question when it comes to succession. Letting your farm business lead the conversation and set the rules is the most effective and successful approach not only for the viability of the business, but also for keeping the ‘family’ in the family farm business.”

Where do you fit?

According to Good, a clear succession plan is best supported by first identifying operational roles and responsibilities in the farm business. Good suggests dividing roles and responsibilities into the following key areas:

• Employee — An employee takes direction.
• Key Employee — A key employee is responsible for a certain task.
• Owner/Manager — An owner/manager is responsible for a certain area. A manager receives advice.
• Lead – A lead is responsible to the business and accountable to the business and no one else. A lead asks for advice.

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