A Second Chance – Things I Did Wrong the First Time Around

As farmers, we have one of the lowest inventory turns of any retail industry. The majority of grain producers in Western Canada get once per year to get it right, and if you are lucky enough to live this life for 40 years, that is 40 chances. With this limited amount of time combined with the steep learning curve and responsibilities that come with agriculture production, how do you minimize mistakes and maximize efficiency and success? What I have learned in my later years is that you learn it from others.

 

In an industry where we are known for our “rugged individualism”, and coffee row is about as accurate as the weather network, we are left wondering if we can get it right before we run out of time. I believe we can , and these are the second-chance items I wish I had known sooner in my career.

 

Agronomics

 

Most of my clients will be the first to tell you that I unequivocally state I was a “terrible farmer”. That is why I love the job I have today, my focus is on my unique ability, and I let those  with much stronger skillsets handle the other areas. 

 

Growing up, I was more enthralled with machinery and “shiny iron disease” than I was with what a good crop looked like. Hell, even into my twenties and thirties I was not strong at scouting or anything to do with agronomics. I knew what I needed in order to be dangerous (soil testing, nutrient packages, crop rotations), but when it came to truly strong agronomic practices on the farm, I was not that useful. Don’t get me wrong, my father was a farmer from day one and could do what was needed in this area, but even back then we were not early adopters, and it was hard to tell the snake oil from the effective products as things really started to change.

 

Being in the position I am today much of this has changed. I am still terrible at agronomics, and I state this numerous times on stage in front of truly more experienced farmers than myself, but I have seen enough farms to know what is working. The majority of producers today are strong when it comes to macronutrients (nitrogen, phosphorus, potassium, calcium, magnesium, and sulfur), but we are still significantly behind on micronutrients. And as new technologies continue to enter the nutrient and chemical front, I believe the gap will continue to widen.

 

So, what is the first step? If I could go back,  I would have hired a progressive strong agronomist much earlier in my farming career, and I probably would have also pursued additional education. I never wanted to be a master of it all, but knowing a little something about  every major farming process would have been helpful. Soil sampling getting into moisture probes and other soil data tools, and not blanket fertilizing across the farm would have been another area of interest I should have followed. But as the saying goes, “you don’t know what you don’t know”. 

 

Capital

 

As I stated earlier, I have always had “iron disease” when it came to farming. Heck, even today, I drive a one-ton diesel truck and have never pulled a trailer since. I have told clients numerous times, “do as I say, not as I do”.  Thankfully, due to being a growing farm with a smaller land base, we didn’t  have the ability to truly overspend like I probably would have. In fact, looking back my regret is “what” I bought and not “how much or how expensive” it was.

 

When I came back to farming full-time, we were already into the para-link and dual-shank technologies that were built in Western Canada. I had neighbours and friends, such as my current business partner, that had early adopted  these drills and were finding success. However, I was stuck in the mindset of “the way it has always been done”. So Bourgault air-seeder  was what I had tied my rope to. We focused on increasing our harvest capacity first as I believed that we were using a drill that was good enough  to grow a crop. Now seeing trial results and all the data later in life, this was a mistake.

 

Lesson number two, if you don’t grow the crop, the machinery at the end is a lot less useful. Increasing yields should have been my first prerogative but after combining barley all my life, my comfort in harvest overtook my thinking. It goes back to conversations we have had on the farm numerous times. What is the most important asset during harvest?The 16” auger, because the number of combines and carts doesn’t matter if the bottleneck is at the bins.

 

Data Management and Technology

 

I can boldly say that I don’t take this one to heart because the majority of farms are still not utilizing information and technology to its fullest. I believe that in Western Canada we are slightly ahead of the US and other provinces, but as my business partner often says, “we are less awful”.

 

Sectional control and variable rate technologies have been around since the 90s. Now, the critics will say they have never seen a viable return on investment with these items. My answer to them is – then you haven’t collected enough data. I have numerous farms that have trialed, tracked, and ran the data over decades and there is proof that both these technologies have a return. The part I like best is that return is on both revenue (production) and costs (input efficiency). Hard to argue these two points. And if coffee row uses the data that sectional control is saving them 8%, please disregard this as this is what the original drill pamphlets used as their number. Just like my truck is supposed to get 20 mpg, I promise you it does not. 

 

The other part of data management that I would have employed back then was tracking of production and profits at a quarter-by-quarter level and an acre-by-acre level. In one of our last expansions, we did something that no farm I have ever been a part of did, we gave up land (almost a sin these days). However, in looking at the data over the last decade we also never made enough EBITDA or profitability off the land to warrant keeping it. How long would you work a job that never paid you? In agriculture, we often don’t have enough information to make these decisions, which makes that question a moot point. However, in using data I have seen that the correct decisions are being made. This is another regret as on our farm we always had the capabilities, just never the freedom of time or purpose.

 

Debt Management

 

It wasn’t until recently  that I truly understood how inefficient I was in my early farming years at debt management. In my own defense, not many consultants or advisors were doing this type of work back then, and the banks had yet to identify the true potential in agriculture. Now, seeing the benefits and planning that we do for our clients on an annual basis in terms of financial institutions, I realize how behind the times we were.

 

I can remember my dad submitting his annual net worth to the bank on looseleaf (in pencil). The truth is that the industry has not come around to financial management and debt strategy until really the last decade. Even during my first stint as a public accountant, the banks were not looking at agriculture as a viable industry for growth or a place to put their money.

 

Now, why the second chance on debt? I would have known how to truly utilize security effectively and plan short versus long-term obligations for success. It may surprise many that banks and credit unions still don’t use “margining” on operating lines today. In fact, my associate at Maverick got yelled at recently for even suggesting one of our farms look at this. So, a quick line just to piss off those same lenders – if you still have land securing your main operating credit, look for a new bank. Whether you like it or not, tying up long-term assets on short-term obligations is one of the many mistakes I made early in my career and I promise I won’t make it with my clients today.

 

 On another note, stop using land to cover your machinery debt (unless you are in too tight and need to push amortization periods out). Many farms have come into the consulting business and claim they did not have machinery debt and that is why they roll the equipment to new every year. By not having debt the only “amortization” or “principal” cost is the cost to flip each year. This is a false statement in 90% of those conversations. I often find that a large portion of the machinery debt was rolled into land in the earlier years. If at all possible, make sure your equipment secures your equipment, your buildings secure your buildings, your land secures your land, and your inventory secures your operating line. This is truly the only way you can maximize security across your farm for future growth.

 

In conclusion, regret is not something I take lightly. Trust me, unless you have lived a different life than me, my estimate is that something in your past  keeps you up at night. I have been out of farming my own family farm since 2013 and I still think about the drill before the combine I mentioned above. It doesn’t even matter these days, but regret is a funny thing.

 

If anything above opens up a conversation regarding change, I will feel like I did something progressive. Remember, we only get a few kicks at the can in farming, so make sure you don’t miss and fall on your ass any of those times.