From farmers’ perspective, the two companies say their combined technology offering is expected to offer “seamless integration and connectivity across geographies, equipment brands and the crop life cycle.”

The structure of the deal announced Thursday will see Trimble receive $2 billion cash and a 15 per cent share in the new joint venture, for total pre-tax value of about $3 billion accrued to that company (all figures US$).

Agco, whose machinery brands include Massey Ferguson, Fendt, Challenger and Valtra, contributes its JCA Technologies business to the new j.v. and will hold the 85 per cent majority stake in the venture.

The deal is expected to close in the first half of 2024, pending the usual approvals and other closing conditions.

The new j.v. won’t include Trimble’s Global Navigation Satellite System (GNSS) or guidance tech, but Trimble will provide those to the new venture under a new long-term supply agreement and technology transfer and license agreement — along with an agreement making the new venture a “channel partner” of Trimble’s positioning services in the ag market.

Winnipeg-based JCA, which Agco bought last year, makes systems and software including the Vireo precision ag system, the Eagle autonomous equipment system and the Falcon and Oriole controller systems.

JCA also developed the control system supporting the Canadian-made DOT autonomous ag equipment platform, now owned by Agco’s OEM rival CNH Industrial.

Trimble and Agco said the new venture is meant to “better serve farmers with factory-fit and aftermarket applications in the mixed fleet precision agriculture market” and to be “a global leader in mixed-fleet smart farming and autonomy solutions.”

The deal “accelerates Agco’s growth ambitions around autonomy, precision spraying, connected farming, data management and sustainability,” Agco CEO Eric Hansotia said in a release.

It also “significantly enhances Agco’s technology stack with disruptive technologies that cover every aspect of the crop cycle, which ultimately helps us better serve farmers no matter what brand they use,” he said.

“We believe a joint venture with Agco, complemented by the successful mixed fleet approach that they have developed with their Precision Planting business model, can help us better serve farmers and OEMs (original equipment manufacturers) together,” Trimble CEO Rob Painter said.

From Trimble’s perspective, the deal streamlines its asset portfolio and allows it to increase its focus on “priority growth areas” — while reducing its direct exposure to the “hardware-centric” ag market but still maintaining its “ongoing participation in a leading precision ag asset.”

The “commercial synergies” the new joint venture will get from direct access to Agco’s OEM, aftermarket, other OEM and retrofit channels — along with “modest” run-rate cost synergies — are expected to roughly double the new venture’s earnings before interest, taxes, depreciation and amortization (EBITDA) by year five after the deal closes, Agco said.

GSI under review

In its release Thursday announcing the new joint venture, Agco also said it has placed its “grain and protein” business segment under “strategic review.”

That business segment includes Agco’s grain handling systems brand GSI, as well as grain processing equipment brand Cimbria and three livestock housing systems brands: Cumberland, AP and Tecno.

While Agco didn’t give any examples of the options it’s considering for those businesses, it said it will “assess all strategic options to ensure the Grain and Protein customers are serviced in the best way possible, and that the business is best positioned to maximize its full potential.” — Glacier FarmMedia Network

The post Trimble Ag, Agco’s JCA link up for new precision ag venture appeared first on Country Guide.

In 2014, by contrast, he was still in his quandary. He knew he wanted to step back from actively farming his 4,000-acre farm near Langham, a half hour north of Saskatoon, and he also knew that he wanted, somehow, to preserve the legacy of the grain farm that he and his father had built up over the previous 50 years.

But his children were both pursuing careers off the farm, and he had no one on hand to take over the business.

Down his road, meanwhile, a young man named Mark Thompson had just moved into the neighbourhood, and he had a quandary of his own. Thompson was trying to make his own start at farming. He knew what he had to do. He was ambitious. But it looked like a very steep hill.

In time, inevitably, the pair met. Then the idea took hold. Why not find a way to work together so each could achieve what they wanted?

Could they be that flexible, adaptable and innovative?

• Read more: Their joint venture

The search begins

Actually, history was on their side. When Wiebe had been ready to start his own farm career in the 1970s, there were some wrinkles that he and his father explored with a provincial government farm management specialist. Wiebe’s father didn’t want to quit farming immediately, and Wiebe had a life he wanted to live, including travel. He wasn’t ready to pledge everything to the farm.

So the specialist suggested a joint venture. They didn’t call it that, just “the working agreement,” but the concept saw them through the next 20 years until Wiebe finally bought his father’s remaining equity in 1996. (The agreement is outlined below. Also see the upcoming March 1 edition of Country Guide for more technical insights into joint ventures.)

That’s how it turned out that, in 2014, when Mark and Kristin Thompson moved with their first child onto a yard site just down the road and were renting some land, Wiebe had an idea to put on the table.

As with Wiebe and his father, this new arrangement would be based on linking their goals. Wiebe needed a successor. Thompson needed to invest in his future.

But there was also a first step. They had to be sure they could be a good fit, so they agreed to work together informally for a year, even though this would mean Thompson would have to quit his full-time job at the University of Saskatchewan.

They did click, though, and yes, it looked like they could work together in a more serious way, which meant turning their attention to the big job. How could they formulate a joint venture plan, and how would they organize the real-life running of the farm in a way that would work for both?

One of the most important decisions was also one of the earliest.

“The model we came up with divided management responsibilities right off the hop,” Wiebe says. “Mark took on the tasks that I never felt that great doing anyway, which was the agronomy, equipment maintenance and the human resources part.”

And they also focused on one of Thompson’s big objectives. “It took a lot of risk off the table,” Thompson says of the agreement. “I wasn’t asked to find a million dollars so I could buy my way in.”

“Basically, we took Doyle’s last year’s inventory and that became an operating loan into the joint venture on the books that we had to pay back to him. It wasn’t fixed, so when we had bad years, we didn’t pay as much back, and when we had good years, we paid more than we had planned on.”

Flexibility turned out to be a good thing because the joint venture’s first crop year turned out to be one of the worst in a decade.

“If I had jumped into (the farm) on my own,” a relieved Thompson soon realized, “I would have had a hard time paying the bills that year.”

Today, Wiebe’s main labour contribution to the farm operation is on the financial management side of things. He does all the bookkeeping and most of the financial planning work, although he’s slowly sharing this part of the business and the financial decision-making with Thompson, so he can eventually take that over too.

The exceptional idea

“It’s still not very high on the priority list of consultants and advisors,” Wiebe says of joint ventures. “They still mostly deal with corporate share structures to try to mitigate tax implications, give shares away and do different things.”

That means, he says, that the incoming farmer, whether family or not, gets locked into something they have probably not helped build and may not fully understand or value the operational logistics of. 

By contrast, with a joint venture, each party is continually looking at what they can contribute and how to make the business successful. It also means that by making it successful, they are making progress with their own short- and long-term goals.

“It has a much better management training aspect to it,” Wiebe says. “You are looking at how every decision impacts your own income and the overall profitability of the farm in total.”

Much of the benefit comes down to the contributions approach that characterizes a joint venture. Contributions for each participant are calculated so they are responsible for a pre-agreed percentage of the expenses and also receive the same percentage of the revenues, which means they assume a certain amount of risk.

These revenues and expenses are recorded and reported separately, for tax purposes, by each of the participants.

Wiebe and his father had found the contributions approach worked well for them over the 23 years they farmed together, because it is flexible enough to allow for one party’s contributions of labour and investment to fluctuate as their level of involvement in actual farming activities vary over the years.

“There’s no firm number that you have to equal,” Wiebe says. “I left the country for three years in the middle of our 20-year agreement and my dad was supportive of that. He carried on farming and my labour contribution came out. When I came back to farm, it went back in again. While I was gone, the proportion of the profit margins that I still was owed made my land payments, so it was fine.”

The basics of making it work

Wiebe and Thompson use a fairly simple spreadsheet to flesh out their annual contributions of the joint venture. There are two columns, one for each party, listing the contributions they make in three categories: labour, investment (which includes land, building and equipment) and depreciation.

Contributions of labour are valued at a dollar figure, but investments in land, equipment and buildings have an annual contribution value based on what the parties agree is a reasonable return on investment, for example a set per cent for depreciable assets. (Land is calculated off local cash rental rates. Depreciation rates are 12 per cent on all equipment and five per cent on buildings.)

Then, based on their percentage of contributions, each party is allocated a percentage of the farm’s revenue and expenses, with all these values reviewed and reassessed, if needed, annually.

An extra benefit, Wiebe says, is that the system shines a light on all the components of cost of production. “Not only does the calculation of all of our contributions help us see what our total costs are, but our returns are relative to our costs, and by doing the calculations each year we can look at, for example, if one of us does buy land or a tractor, how is it going to change our percentage of the income? The spreadsheet tells you right away.”

It also helps cash-flow forecasting, which Wiebe calls a key element of what makes them sustainable, especially as they tie it in with their marketing program so it helps them evaluate opportunities to make improvements and changes.

To make it work, though, both Wiebe and Thompson say it’s essential to understand depreciation and be comfortable including it in the agreement’s financial planning.

Another ingredient is essential too. Even though Wiebe and Thompson maintain their own separate farming corporations with their own books, they look at the farm as a whole, which solves all kinds of issues that other business structures can cause and lets them take advantage of opportunities because they are always looking ahead.

“Over time, you have to align yourself, you can’t be completely offside,” Wiebe says. “You agree on what’s going to be seeded and where, and you don’t have to worry about seeding or harvesting his field or my field first because it’s all part of the big plan.

“It’s more of a marriage in that sense. In my experience, I often saw families torn apart later because how do you change that family relationship of sharing equipment when there is more investment in equipment needed? How do you fairly split assets, or inventory or production when the proportions of the different types of asset classes are owned differently, and there’s no formula for it in a lot of cases. The joint venture provides a formula for that.”

Getting started

Thompson and Wiebe start the process of determining the contributions by pencilling in what they have to contribute. In the first, trial year of their joint venture, Thompson’s primary contribution was labour, and Wiebe’s was cash flowing the working capital.

“The way we set it up is that labour is valued quite highly, so that allowed me to build because I could put a lot of labour into it even though I didn’t have a lot of investment into the farm yet,” Thompson says.

“That allowed me to make some more money, and although it was slow at the start, as I have gained more equity over the years I have bought and paid off some equipment and was able to buy some land,” he says, adding “We paid Doyle’s loan off a few years ago, and that gives us more power to invest and put ourselves in a better financial situation with the farm.”

Because Thompson was contributing the value of his labour to the venture, in the interim, he needed another source of income, which luckily, he could provide through the family’s off-farm sources, which includes some rental properties and his wife Kristin’s career as an architect.

“One of the key factors with Mark and his wife was that that they were willing to sacrifice a bit of their own personal income to put into something like this,” Wiebe says. “They are both business-oriented people and understand that you have to build up equity … It was a big factor that Mark was able to plough almost every bit of earnings back into the farm, whether as debt payments or purchases if the cash was there.”

The percentages have gradually changed as they continue to work together and Thompson has built equity and has been able to help grow the farm to around 6,500 acres by renting and purchasing more land. Meanwhile, Wiebe continues to contribute his assets like land and equipment, and provide some of the working capital as needed, but has reduced his labour to pursue more off-farm activities.

“The flexibility to change the proportions within a joint venture every year is something that people won’t maybe understand,” Wiebe says. “Each year you redo the addendum to the agreement to sign off on how you are splitting things this year, and next year it’s going to be a little bit different. The pendulum moves, that’s the nature of it.”

Making the relationship click

While flexibility and commitment were key factors for both Wiebe and Thompson, another was being open to compromise and new ideas.

“Although we hadn’t talked about it that much before we signed on the line, he wanted to grow the farm more,” Wiebe says. “For sure he was right, that if he could grow it a little bit more than the initial size with his extra rented land to make two combines worthwhile and that kind thing, he’d be able to build equity a lot faster, and that’s what happened.”

Thompson sees it like that too. “We haven’t butted heads a lot because Doyle is easygoing and willing to let me try new things,” he says. “I think part of the success of our relationship, too, is because Doyle came to me, ready to transition the farm. It wasn’t me trying to convince him that it was time to retire. When you talk to a lot of people, the parent is still farming when they’re 70 or 80 years old and they haven’t given up a lot of control. Whereas Doyle, he’s happy to step back and whenever I’ve got questions, he’s ready to sit down and discuss them.”

Although the end game for Doyle and Thompson is ultimately to transition the farm, neither is in a rush for Thompson to take complete ownership.

“We sit down every year and talk about where we think we’re going with the farm and go through a bunch of numbers,” Thompson says. “Part of that discussion every year is what Doyle’s labour commitment is going to be that year. He’s to the point now, where doing the labour aspect of it is not high on his priority list, but if I need a hand, he’ll come out and help, but he’s still got a lot of investment in the farm with land, equipment and buildings that is not a huge priority to transfer out.”

Their initial plan projected that they would work together and gradually transition the farm over 10 years, but even that is not set in stone, because it’s the success of the transition that is more important to them both than the time frame.

“We didn’t set it up to say after 10 years, make sure I can pull the pin and that you’re ready to take it all,” Wiebe says. “It was a 10-year planning horizon and we may carry on for another 10 years.”

“Doyle is ready to retire, but he’s still willing to put into it what is needed to make (the farm transition) succeed,” Thompson says. “It wasn’t like he said, ‘Okay here it is, good luck.’ When we started, he said that in 10 years for the most part, he would like to not be physically working on the farm anymore. But, things change, and his willingness and desire to see the end game, to see this transition that he was ready to do, is probably one of the biggest factors that make this work. We’ve been together long enough now that I think the trust has grown that he can see this succeeding.”

Mentoring comes with the deal

A big aspect of Wiebe and Thompson’s joint venture is the mentoring that has come along with it.

“When I look back at my earlier career with my father, I realize that was a mentoring situation,” Wiebe says. “My father wasn’t long on words, but he was big on lifelong learning, and I would learn from his response to my exuberance about trying new ideas … There were times when I could tell that he was biting his lip more than I was biting mine, but I think he was saying to himself, well if it doesn’t work, we won’t lose the farm, so we might as well try it.”

That same attitude is crucial to making the relationship with Thompson work.

“With Mark, there is mutual respect for both new ideas and for experience,” Wiebe says.

Thompson is the first to acknowledge that he would likely have made some dangerous mistakes if it hadn’t been for Wiebe’s guidance and advice, both in the field and, even more importantly, on the financial and business management end of things.

“That has been huge,” Thompson says. “Just understanding the amount of money that comes and goes through a farm, the planning ahead and managing your cash flow, having your sales throughout certain parts of the year and things like that. I would have probably had a few painful lessons without his advice.”

The value of an open mind

“You don’t know how to evaluate the risk if it’s something new,” Wiebe says of ideas that would change their farm business.

Wiebe had learned a lesson on alternate crops in the ’90’s: “I don’t grow malt barley, I don’t grow certified seed, I don’t grow anything high cost because I have to grow as cheaply as possible and get the most production in a commodity business.”

But Wiebe knew that Thompson had to have that experience for himself, and was willing to let him give the new crops a try. Eventually, they both concluded that only peas made economic sense for their operation, so they dropped the others.

“I had to allow Mark to experience that, and not ever say ‘I told you so,’” Wiebe says.

These days, Thompson consults less with Wiebe on areas that have become his responsibility, which doesn’t bother Wiebe at all. Instead, it’s the road to success, paved with respect for each other.

*Update: The article incorrectly indicated ‘University of Saskatoon’ instead of University of Saskatchewan.

The post Joint venturers appeared first on Country Guide.

Blair’s and Federated Co-operatives (FCL) announced last week they’ve reached an agreement to set up a joint venture which, pending regulatory approvals, will own and operate the seven Blair’s ag retail outlets in central and southeastern Saskatchewan.

The seven locations, at Lanigan, Nokomis, Watrous, Liberty, McLean, Lipton and Rosthern, “will offer a broad range of crop input and animal nutrition products and services to continue to meet the business needs of local area farmers and ranchers.”

The retail business includes Blair’s AgIntelligence ag consulting services, its proprietary PerforMax line of beef cattle nutrition products, and other feed products for the poultry, hog, sheep, horse and dairy sectors and companion animals.

Other Blair’s businesses, such as its Texcana Logistics fertilizer terminal near Hanley, Sask., and its farming operations including Blair’s Ag Cattle Co., will not be part of the joint venture with Saskatoon-based FCL, the companies said.

Blair’s management and staff will continue to lead the day-to-day operations of the ag retail business, the companies said Feb. 3 in a release.

Financial terms of the deal weren’t released, though the companies said the new venture will be subject to closing conditions including Competition Bureau approval and other clearances.

The bureau must be notified of transactions when the involved assets in Canada, or revenues from sales in or from Canada generated from those assets, are valued at $93 million minimum. That threshold for 2021 was announced Thursday and is expected to take effect Saturday.

“Blair’s is a trusted and well-respected local family business with history of serving farm customers and communities for generations, and whose values match our own,” Ron Healey, FCL’s vice-president for ag and consumer business, said in the companies’ release.

“The joint venture is an opportunity for FCL to expand our presence in central and southeastern Saskatchewan, which will ultimately benefit our local Co-op member-owners and the entire Co-operative Retailing System.”

“We believe the joint venture with FCL, which shares the same core values and long-term commitment to agriculture as us, will ensure that we continue demonstrating value to our customers, employees and communities in the future,” Blair’s chief operating officer Darren Blair said in the same release. — Glacier FarmMedia Network

The post Federated Co-op buying into ag retailer Blair’s appeared first on Country Guide.

Merchants have been grappling with lower profits from sourcing and shipping commodities such as grain and oilseeds, prompting cutbacks in trading teams, investments in food processing activities and acquisition speculation.

Investor pressure has centred on Bunge, which has drawn interest from both Glencore and Archer Daniels Midland for a potential mega-merger.

But LDC CEO Ian McIntosh is unconvinced on the merits of wholesale tie-ups.

“Each of the participants — the ABCDs, Gs, Cs, all the various acronyms — are becoming increasingly different businesses,” he said in a telephone interview, referring to the so-called ABCD quartet of ADM, Bunge, Cargill and Dreyfus, along with Glencore and Chinese-owned COFCO International.

“Which means that consolidation at total-company level is, I think, increasingly difficult to execute because the business fits have become less obvious.”

ADM CEO Juan Luciano is another who has played down the prospect of major consolidation, telling Reuters in January that he didn’t see the need for his company to enter “monster” transactions.

Privately held LDC expects consolidation to happen more locally, with more-focused tie-ups to speed its own shift further along the food chain, McIntosh said.

“I think you will see consolidation at a regional level,” he said, arguing that some struggling niche players would be taken over or exit some businesses.

For LDC, such deals could take the form of acquisitions or joint ventures, McIntosh said, noting that his group had reinforced its acquisition last year of an oilseed processing factory in Tianjin, China, by forming a joint venture to produce fish feed at the site.

McIntosh was talking after LDC reported a 12 per cent jump in group net profit last year, supported by a strong oilseed performance linked to demand for Brazilian soybeans during a U.S.-China tariff battle.

Profit was also helped by a very strong year in cotton and improved returns in other businesses, he said.

This year looks similar to last in terms of market conditions, but a settlement between Washington and Beijing would change the outlook, McIntosh said, adding that it is too early to talk about LDC’s performance this year.

McIntosh took the helm last September at a turbulent time for the 168-year-old company that also changed its finance chief, reported lower first-half profit and was burdened with an acrimonious buyout of minority shareholders and a bailout of Brazilian sugar business Biosev.

— Reporting for Reuters by Gus Trompiz in Paris.

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The Regina-based grain handling arm of commodity firm Glencore announced Thursday it has closed a deal to buy U.S. food processor General Mills’ 50 per cent stake in the two companies’ grain terminal at Northgate, N.D.

Viterra didn’t disclose any terms of its deal with General Mills Thursday, other than to say the sale has already “received all necessary approvals.”

“We’re pleased to take on full ownership of this facility, and to continue building our presence in the U.S.,” Kyle Jeworski, Viterra’s CEO for North America, said in a release.

The two companies’ joint venture dates back to 1997, when they agreed to build the terminal at Northgate, just south of the Canada-U.S. border and about 60 km southeast of Estevan, Sask.

Saskatchewan Wheat Pool, as Viterra was then known, was in its first year as a publicly traded company and in the midst of an aggressive capital spending plan to build higher-capacity inland terminals on the Prairies.

The Northgate terminal, which opened in November 1998, was expected to be a “key marketing facility for north- and southbound grains, particularly oats, as changes occur in market dynamics, the rail regulatory framework and global market demand,” the company said at the time.

During fiscal 1999, the steel bin terminal moved over 45,000 tonnes of grain, SaskPool said at the time.

Viterra’s assets in North Dakota today also include special crops facilities at Minot and at Ray, about 150 km west of Minot. The company in 2017 also bought Gavilon Grain’s former Peavey Co. grain elevator at Grand Forks. — Glacier FarmMedia Network

The post Viterra buys up all of North Dakota grain terminal appeared first on Country Guide.

Regina-based Input, which trades publicly on the TSX Venture Exchange, announced Wednesday its board has launched a “comprehensive review of strategic alternatives to enhance shareholder value.”

The review, which will include GMP Securities and Cormark Securities as advisors, is expected to look at “the full range” of potential alternatives for the business including, among others:

• a potential sale of the company,
• business combinations or joint ventures,
• acquisitions of other companies,
• moving into “emerging” crops such as cannabis and/or hemp,
• scalable mortgage debt financing, or
• a “go-private” transaction.

Wednesday’s announcement follows the company’s decision in December to renew its share repurchase plan, aimed at buying back up to 10 per cent of its public float.

Input on Dec. 14 said its management believes the company’s shares have been trading in a range that “does not adequately reflect their value” and buying and cancelling shares under a normal course issuer bid “will enhance shareholder value in general.”

The company in December said its previous such plan, launched a year earlier, resulted in the repurchase of about 1.65 million Input shares at an average price of $1.23 each by the end of fiscal 2018. Input shares (TSXV: INP) traded early Wednesday afternoon at 96 cents each.

Input emphasized Wednesday there “can be no assurances” that this review will result in any transaction.

Input, in business since 2012, bills itself as a “non-operating farming company” which currently deals in canola, obtained from Prairie farmers by way of “multi-year streaming contracts,” including capital streams, marketing streams and, more recently, “mortgage streams.”

The company’s canola purchases, from growers in all three Prairie provinces, generally involve up-front payments in return for agreed-upon tonnage over a specified number of years.

“To canola buyers, Input is like a large virtual farm which produces and sells canola over a large geographically diverse footprint, but does not own the land, or equipment or operate the farm,” the company says on its website.

At the end of fiscal 2018, Input reported 388 streaming contracts in its portfolio, up from 301 at its previous year-end.

Its mortgage streaming option, soft-launched in January last year, yielded 42 mortgage stream contracts by year-end, the company said.

Input last May was the plaintiff in a high-profile court case against a Saskatchewan farmer, alleging breach of contract over unmet canola delivery obligations against several upfront payments by the company.

A Queen’s Bench judge in May ruled the farmer was “unjustly enriched” by the upfront payments and must repay that money. However, the judge also ruled the farmer’s various agreements with Input “must be set aside as unconscionable” and described the contractual relationship as “substantially unfair.”

Input said in May it would appeal parts of the Queen’s Bench decision “with respect to the interpretation of the streaming contracts and security.” — Glacier FarmMedia Network

The post Input Capital to consider company sale, merger, cannabis appeared first on Country Guide.

Privately-held Louis Dreyfus had previously earmarked dairy as one of several activities to be sold or turned into joint ventures in order to focus on core products like grain and oilseeds.

“The (dairy) business accounted for roughly one per cent of our revenues in 2018 and demanded substantial working capital resources,” chief financial officer Federico Cerisoli said.

“The exit will have practically no impact on our global sales… and is expected to have a slight positive effect on our working capital from 2019 onwards,” he said in a statement.

Like rival agricultural commodity groups, Louis Dreyfus has reorganized operations amid declining margins in traditional merchandising while also planning to develop higher-margin food processing and ingredient activities.

Its biggest divestment has been the sale of its profitable metal trading business for US$466 million last year. It has also sold fertilizer distribution activities in Africa and Australia.

The orange juice division had also previously been earmarked for a sale or to be turned into a joint venture. A spokeswoman said Louis Dreyfus considered juice a core business and it was looking for partners to support growth plans requiring “significant investments.”

Louis Dreyfus last month announced the creation of a new role of head of food innovation, mirroring efforts by other agricultural traders to into higher-margin areas.

The firm has been trying to revive profits after they slipped to a decade low in 2015.

It suffered a sharp fall in first-half earnings, blaming a hedging effect relating to soybean crushing, but new CEO Ian McIntosh pointed to a improved performance in the second half.

The group, which dates back to the mid-19th century, has also been wrestling with family shareholding issues.

Majority shareholder Margarita Louis-Dreyfus, who inherited control of the group when her husband Robert died in 2009, said in November she had secured financing to cover a requirement to buy most of shares in the holding firm held by other family members.

— Reporting for Reuters by Gus Trompiz.

The post Louis Dreyfus to exit dairy by mid-2019 appeared first on Country Guide.

Calgary-based GrainsConnect Canada, itself a joint Prairie grain handling venture between Australia’s GrainCorp and Japan’s Zen-Noh Grain, announced Wednesday it now has a formal 50-50 partnership agreement with P+H to build and operate the Fraser Grain Terminal at Surrey, B.C.

The deal, pending approval from federal competition regulators, calls for GrainsConnect to buy shares in P+H subsidiary Fraser Grain Terminal Ltd. The deal’s specific financial terms weren’t disclosed.

P+H executive vice-president John Heimbecker said Wednesday the new partnership “helps ensure (FGT) is ready for service in 2020.”

FGT, when launched in 2016, was billed as a joint venture between P+H and another privately-held Winnipeg grain firm, Paterson Grain.

P+H said it had explored involvement with Paterson early in the FGT project’s development but applied independently for the project permits; FGT remained wholly owned by P+H throughout that process, the company added.

FGT in November received its project permit from the Vancouver Fraser Port Authority. P+H then said it expected to start construction work on Dec. 3.

The new port terminal’s construction is now expected to take about 24 months, expanding an existing terminal with capacity for about 500,000 tonnes of annual throughput. Demolition of old buildings at the site was approved in June last year.

The expanded terminal is to include about 70,000 tonnes of storage capacity, for combined throughput of over four million tonnes per year, the companies said.

FGT will also have capacity to “rapidly” handle and discharge 120 rail cars and include three ship loader towers, which are expected to cut ship loading times by allowing “simultaneous” loading of multiple holds at about 2,000 tonnes per hour.

Crops loaded into the terminal’s silos would go mainly onto cargo ships, though the site will also have an “integrated” loading facility and container storage site to load rail cars and trucks to move grain to Fraser Valley customers, and containers for export via container terminals such as Deltaport.

FGT is expected to load about 80 bulk vessels a year, or about one to three vessels a week, including Panamax, Supramax and Handy-size vessels.

Most vessels would be fully loaded at FGT, though larger-class Panamaxes would be loaded to the maximum capacity according to guidelines for river draft (depth) and may be topped up later at deepwater terminals.

P+H has previously said FGT, when complete, will “improve loading efficiency, reduce rail shunting and dramatically improve rail car cycle times between the Prairies and metropolitan Vancouver.”

GrainsConnect launched in 2015 and has since built and opened grain elevators at Maymont and Reford in western Saskatchewan, with two more under construction at Vegreville and Huxley, Alta. for opening in spring and fall 2019 respectively.

Klaus Pamminger, GrainsConnect’s board chairman, said in a separate release Wednesday that FGT will connect its four elevators “directly to global customers, providing a highly efficient, integrated end-to-end solution.” — Glacier FarmMedia Network

The post GrainsConnect hops aboard P+H port terminal project appeared first on Country Guide.

Sound complicated? Well then, you should try figuring out how three or more individuals with different personalities and with varying personal and business goals and objectives can, in a family farm business, discover their “relativity between each other” and “stay in orbit.”

• Guide Business: Their joint venture

Then consider where the main gravitational pull is, and how Dad and Mom feel caught in the middle.

Perhaps the diagram below is a better illustration of this concept. I call it the “Bermuda Triangle,” where there are two or more farming children involved in a family farm. As in its namesake triangle, things happen here that no one can fully explain.

Family farm succession is difficult enough where there is only one farming child wishing to farm, but I have noticed a trend where everyone wants to come back.

This article is not about financial viability but rather how to provide a business framework to allow for business success. It is about creating the opportunity. Throughout my career, my focus has been on business structures to provide clarity of purpose and a roadmap that leads to a clear destination.

Without a proper business structure only chaos ensues. This chaos is caused by not having a structure that assists in the financial and personal outcomes for each generation.

Great introduction, so now what?

To help facilitate this very complex intergenerational transfer, a certain truism is emerging. Many young women and men today do not want to be a member of a single-family farm business with their siblings and parents, even though the traditional recommendation from accountants and lawyers is to have one family farm corporation where Dad and Mom control this corporation and the children become shareholders.

I know income can be distributed through agreements, salary can be paid for labour and management, and parents can receive land rent and perhaps even a return on equity through dividends. Even future equity can be distributed through the issuance of common shares to the next generation.

Yet with all this flexibility, I see a reluctance in this type of business structure. This reluctance occurs frequently even when the farm size only needs one small $500,000 business deduction and there is only one child returning to the farm!

So what do we do?

The key to unlock this puzzle in my view is quite simple. The solution is: one agronomic mind with separate and distinct profit centres.

What does that mean?

This means the farm cannot afford two or three separate lines of equipment. The farm has to be treated as one large agronomic block. Crops shall be sprayed and harvested according to agronomics, not by a “my field first” mentality.

In order to put together such a structure, I like the idea of a joint venture. Joint ventures need to be utilized more in our complex agricultural farms, especially with all of the new corporate and partnership income rules. (These rules are beyond the scope of this article.)

The most common joint ventures I deal with are as follows:

1. Income Joint Venture. In this joint venture (JV) all crops and crop input expenses, including fuel, run through one bank account. The distribution from the JV is done by allocating the margin to each member in a predetermined way for their labour and management.

Each participant in the JV then has independence on how they wish to spend this income allocation on land expansion, personal consumption, etc. Equipment is either owned jointly or independently, but repairs are paid by the JV.

The main advantage of this type of arrangement comes with pooling production and marketing volumes. The cons through pooling are, of course, some restriction of independence and expansion opportunities. For example, if 320 acres come up for rent, the JV rents the land not the individuals.

2. Production Joint Venture. In this type there is no single bank account. Crop revenue is independent. You sell what is grown on your land. No crop pooling exists. Grain is binned separately. All inputs are purchased independently or at the retailer where the retailer simply invoices each person a percentage of their share of the total input purchase. Equipment is either owned jointly or independently and repairs are paid at the individual business level.

The pro of this type of arrangement is more independence, but with that come the cons of independent risk. The main issue in this type of arrangement, however, is determining who gets the 320 acres of new land to rent. Isn’t my combine running over acres that I am not getting compensated for?

3. Hybrid Joint Venture. In this arrangement a combination between the two occurs. First, we create an equipment partnership. All equipment is transferred into this formal partnership and in return the owners receive a partnership interest. This partnership receives a certain amount of income from each member corporation on a per acre basis. One example I saw was 65 per cent of custom rates. All fuel and repairs are paid through the partnership, and all equipment trades and purchases are also done through this entity.

What are the tax implications of an equipment partnership?

The equipment partnership is set up not to make a profit. The funds paid to the partnership are an expense to the partner corporations and income to the partnership. From this income, the repairs, fuel and depreciation are deducted, and thus the partnership has very little or nil net income. The goal is to have a jointly owned equipment entity that breaks even through a per acre charge. The new specified partnership income tax rules will therefore not have an adverse effect on each individual’s corporation’s ability to claim their own small business deduction of $500,000. (Again, these complex new rules are beyond the scope of this article).

Do I need a formal partnership? Can’t I just use a bank account with shared ownership of equipment?

The answer is that I am finding if there are more than two equipment owners, a partnership is more formal and benefits from the written document to cover all the bases.

What is the most difficult part of these business arrangements?

Without “pooling” of acres under an income joint venture, a complete understanding of the independence process has to be clear. The most difficult one occurs when third-party land comes up for rent, or when the parents retire and their land is now up for access to the next generation.

Who gets it?

Analyze this example of a farmer that I met last year. The older son is farming 1,500 acres and works for Dad’s company as well. The younger brother farms 800 acres and has an off-farm job. The parents are farming 1,800 acres and now, because of health issues, have to retire early and are willing to have the sons take over.

So, does the younger son get the first 700 acres and then the parents split the remaining 800 acres 50-50? Or does the older son receive enough acres to replace his wages? Or does the younger son get more acres so he can quit his off-farm job?

Now you know why I call it the “Bermuda Triangle”!

Their parents’ answer was each child will receive 50 per cent of their land to farm and can buy 50 per cent of their equipment. The “boys” will have to decide their own financial viability based on this decision. The business structure I recommended is the hybrid joint venture model as these two individuals could never pool income.

What have we accomplished for this family?

1. Each child has an independent profit centre but has to pay into a formal “pooled” equipment partnership. The parents are transferring their equipment into this partnership and will receive a partnership interest equal to its fair market value. The parents at this time do not want to be paid for their equipment, but want the boys to take over their remaining debt payments.The boys will have to agree on the appropriate amount of equipment and what colour to buy, etc. If they cannot at least agree to this, then they probably cannot farm together.
2. By using this structure, acres farmed do not have to always to stay the same. If one child wants to expand and purchase land and the other does not, that child has to pay more into the equipment partnership, as they are farming more acres.
3. If they cannot agree to agree at all in the future, they can unwind the equipment partnership with no adverse income tax consequences, and then swap equipment and buy each other’s interest out to arrive at complete 100 per cent ownership and farm with their own line of equipment.

Conclusion

I wish sometimes the Three Musketeers’ saying, “All for one and one for all” could apply to multi-family farms.

Reality does force us to think about new structures. If we could agree that one agronomic mind is the key, then independence with interdependency can result in all operations excelling. CG

Merle Good advises on business arrangements
and taxation with GRS Consulting in Cremona, Alta. He is also a faculty member for the Canadian Total Excellence in Agricultural Management (CTEAM) program offered by Agri-Food Management Excellence. www.agrifoodtraining.com

Joint ventures need to be utilized more in our complex agricultural farms, especially with all the new corporate and partnership income rules.”

Merle Good advises on business arrangements and taxation with GRS Consulting in Cremona, Alta. He is also a faculty member for the Canadian Total Excellence in Agricultural Management (CTEAM) program offered by Agri-Food Management Excellence. www.agrifoodtraining.com

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The protests, a continuation of demonstrations that began on Sunday, were sparked by fears that land reform could allow foreigners to take over farmland, though some analysts say many Kazakhs turned up to express their general discontent.

Though relatively small, the rallies may worry Nazarbayev, 75, who has run the oil-rich Central Asian nation since 1989 tolerating little dissent but who now faces economic headwinds caused by the global slump in oil prices.

Reforms due to take effect from July 1 will allow the government to sell farmland to joint ventures, provided they are controlled by Kazakh residents.

Direct land sales to foreigners will still be banned, though they will be able to lease farmland for up to 25 years, up from 10 years.

Critics, who staged their first protest in the city of Atyrau on Sunday, see that as a threat to national security, especially after the government announced several agreements with neighbouring China on agricultural projects.

On Wednesday, protesters took to the streets of the western city of Aktobe where hundreds of people gathered at a square, according to photographs published by city newspaper Diapazon and videos posted online by activists.

According to Diapazon, police were present but did not try to disperse the rally even though it had not been approved by the city government, which made it illegal under Kazakh law. The city police could not immediately be reached for comment.

Another smaller protest attended by dozens of people took place in Semey, a major city in eastern Kazakhstan, according to several videos posted online by activists.

On Tuesday, Nazarbayev said concerns about foreigners scooping up local farmland were groundless and that “provocateurs” spreading such information “must be exposed and punished.”

Those comments, posted in a video on his press service’s Facebook page, were met with a torrent of negative comments and even insults late on Tuesday. Typically, the presidential office’s Facebook updates generate only a handful of comments each, all positive.

High oil prices in the past decade allowed Nazarbayev’s government to maintain relatively high living standards, but as prices plunged, Kazakhstan had to let its tenge currency slide 45 per cent against the dollar last year.

“This is the domino effect with the land issue serving as a trigger,” said political analyst Dosym Satpayev. “But many attended the rallies in order to express their discontent in general.”

— Reporting for Reuters by Olzhas Auyezov and Mariya Gordeyeva; additional reporting for Reuters by Denis Dyomkin.

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