On the morning that Country Guide caught up with him, Leon Ternan was heading out to drive combine after he had worked on some bookkeeping and then made time
to read his marketing newsletters.
What other profession gives you this kind of variety? Leon says. Sometimes I am asked why I spend so many hours working, and I respond that I haven t worked a day in my life.
There s a difference, though, between loving what you do and trying to run your farm business as a feel-good, lifestyle operation. It s a difference, Ternan feels, that is crucial to his marketing success.
For Ternan, there is no other sector as exciting as agriculture, and certainly none with as many people filled with as much common sense, logic and goodwill. He beleives it s because everyone from elevator managers and processors to primary producers like himself is involved with the production of food.
It is the intrinsic bond that is common to all of us, Ternan says. It doesn t make us better than others it just sets us apart.
Lest comments like these leave the impression that Ternan is an adherent of the farming-as-a-way-of-life school of thought, it should be pointed out that his farm in the Luseland district close to the Saskatchewan-Alberta border comprises 15,000 acres on which he grows canola, peas, soft white spring wheat, barley, durum and lentils.
The only way to successfully build an effective marketing plan for an operation of this size, he says, is to take the emotion of it.
You can t be emotionally attached to your farm no more than you can be philosophically bound to a certain way of marketing, Ternan says. You have to come at it with an open mind and ask yourself things like: What amount of risk am I comfortable with? What are the products that I can best grow and market with the set of resources land, machinery, labour that I have at my disposal? What are my specific costs and cash flow requirements?
Once producers have a good sense of these big-picture issues, Ternan believes it is imperative to look at ways of structuring the farm s finances so that production is sold where and when the market will pay the most.
As producers, we often have very significant payments to be made in the fall, Ternan explains. Unfortunately, when you sell right off the combine, you are often selling at a time when the market will pay you the least for your production.
Invariably, the only way to avoid having to sell on the basis of cash flow requirements is to have a partner like a financial institu- tion that is able to bridge the gap between when the crop is harvested and eventually sold. It is also important, he believes, that bridge financing like this be sought outside the trade in other words, the buyers who will be eventually bidding for his production. In his mind, the financing that a producer obtains should be independent from marketing considerations.
Name one other major commodity sector that looks for financing from its customers, he says. It doesn t happen.
Ternan prefers to wait until harvest is over before kicking his marketing plan into gear. That way, the quality and the quantity of the crop, including its potential for blending, are known with certainty. This is not to say that he will not sign some forward pricing or production contracts if specific opportunities present themselves. He calls this virtual vertical integration on the part of grain companies. As a whole, however, he prefers to not have his hands tied in this fashion.
Gathering market intelligence is a major preoccupation for Ternan. He turns to market newsletters, market analysts, people in the trade and his broker for information on where markets are headed. He believes it is important to keep in mind, however, that such advice remains the best estimate of the individual providing it. There are no guarantees.
This is especially the case now with an ever-increasing presence of investment funds in the marketplace.
It seems that markets move now even when the fundamentals don t, Ternan says. It could be that, as producers, we must become technical traders to take advantage of some of the pricing opportunities that this has created. There are people involved in commodity markets now who can actually help to move prices in our favour.
What is more of a threat than market volatility, in Ternan s mind, is the ongoing consolidation in the grain-handling and transportation sector. Where there were once six different elevator managers to speak to, he says, there may only be one now. This changes the nature of the conversation that takes place between the producer and the purchaser. Furthermore, he believes the consolidation is far from over. It is a trend that will continue, just like the increase in the size of farms and in the variety of crops that are grown.
We need competition to make our agricultural sector stronger, Ternan says. As producers, if we re faced with loss of competition at the local elevator level, we have to be ready to search out other markets and look at other models.
Examples of this, he says, are groups of producers who have banded together to load producer cars or process their crops and sell them further up the value chain. Ultimately, the Canadian Wheat Board is meant to be a tool that enables grain producers to extend their reach in this way as well.
Marketing means a lot more to Ternan than deciding between basis contracts and cash prices. It is a matter of finding the right structure and enterprise mix to optimize the production that his assets and resources can generate.
Even the sheer size of his operation is in part a response to his focus on marketing, says Ternan. I wanted to make sure my farm was of a sufficient scale to be a player in the industry. CG