We hear much talk today about business models and strategies, and we read about new and innovative ideas to change and manage farm business. But what do the words actually mean?
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.”
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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.