Farm Forum Blog
“Mom, you mean people who got cancer at the beginning of this century often died of the disease? They couldn’t just take a few pills to cure it?”
“That’s right. Not only were some cancers incurable, but many more types of cancer existed back then. Most have long since been consigned to the trash barrel of history. Scientists figured out their causes and eradicated them.”
If this imaginary conversation between a mom and her teenaged kid in, let’s say, the year 2080 sounds too far out to be believable, don’t rush to judgment. Look back 75 years and you see many inventions that give us our high standard of living and extended life expectancy today were little more than wild dreams. And in the past 150 years almost all features of modern civilization went from speculations in someone’s inquisitive mind, to laboratory, to drawing board, to prototype, to commercial introduction, to an accepted part of everyday life.
For much of this progress we can thank the chemical industry. Of course, there’s nothing new about chemicals. Every substance above, on, and below the earth’s surface is composed of chemicals in one form of another. But humanity’s understanding of chemicals and chemistry down to the molecular and atomic level is quite new. And it’s this understanding that generates the synthetic chemicals we cannot now imagine living without.
Think of the list. From vaccines, therapeutic drugs, disinfectants, fertilizers and crop protectants all the way down to artificial hips, artificial fabrics and the countless different types of plastic we now take for granted. And that’s just the beginning. Further, if we look ahead, it’s clearly not even the beginning. The science of chemistry is still in its infancy. What we’ve seen to date is barely a foretaste of what’s to come.
This special issue of Farm Forum recognizes the 150th birthday of Bayer and its heritage firms. Unfortunately, space is sufficient for only the briefest glimpse into the history of this fascinating company’s huge contribution to the science of chemistry and thus to the broader economic progress and health of the entire human race. And not all the articles that follow look back. You’ll also find some crystal ball thoughts on what might be coming down the pipeline next. The possibilities are thought-provoking to say the least.
Specifics are hard to predict. But not generalities. Our future depends on chemicals and their supporting scientific wizardry. Depend on it.
by Jonathan Small, MNP, Red Deer
For more than three decades, I have been privy to countless conversations with my Ag clients about purchasing land. And while many things have changed over the years, including the industry and the men and women involved in it, I kept hearing the same misconceptions about ownership time and time again.
There is a lot of value to be gained by increasing land ownership, but having more cannot, and should not, be the only consideration.
Purchasing land is a big, and multifaceted, decision but by keeping the following seven deadly sins in mind, you can make sure that you’re making the right purchase for the right reasons.
1. Making land ownership your first priority. This means not putting it ahead of profit, your relationships or the best interests of your operation. Ultimately, it is profit that has to pay for land and, for most owners, your first priority has to be increasing profits to a level that allows for the purchase of land.
2. Buying poor land. You’re making a long-term purchase, so take the time to make sure it’s the right one. Whether you buy good or bad, its going to be with you for a long time. Land prices these days reflect scarcity more than quality and the productive difference. If you make a purchase you know doesn’t have long-term value, keep that in perspective moving forward.
3. Getting emotionally involved with fixed assets. Your land is such a fundamental part of your operation it can be hard not to get attached – but it doesn’t do your business any good. Remember land is an asset for you to use to build profit.
4. Over-aggressive debt repayment. Far too many farms get themselves into trouble because of bad debt structure. Be practical about your capacity for debt repayment on all purchases, especially land. Remember that maintaining cash flow and liquidity is critical.
5. Employing fixed versus variable rates. Choose your rates wisely, starting with an objective understanding about the level of debt your taking on and the reality of your balance sheet and income statement. Factor in an awareness of Canadian monetary policy and do your best to make a proportionate and rational decision.
6. Losing sight of how you make money. Farmers make money from controlling farm assets; control doesn’t just come from ownership and profit comes from proper management. Optimizing your assets maximizes your ability to convert management into profit, leading into the ability in turn to own more assets. Your first priority should be business growth, not just growing your land holdings.
7. Trying to buy it all. Don’t let yourself be fooled by the idea of a once-in-a-lifetime ownership opportunity. It could lead you to overpaying, buying the wrong land and missing out on opportunities for the right land when it does come up. Make your purchases based on your strategic goals and don’t let “For Sale” signs sidetrack your decision-making.
Land ownership can be an important, and profitable, part of building your business but every purchase you make should be well thought-out and fit within your overall business plan, long-term strategy and goals. Avoid the seven deadly sins and you can hopefully avoid buyer’s remorse. Purchasing land feels good in the short term; but purchasing the right land and managing it correctly will have you on a purchaser’s high for years to come.
Farmers face unique challenges when it comes to raising their business efficiency, and most barriers are cultural, says Jonathan Small, farm management consultant with MNP in Red Deer, AB. He lists the five big ones:
Few available benchmarks. One of the key problems, in Canada at least, is a lack of standardized benchmarks to adequately measure farm efficiency. “In Europe they’re bombarded with them, but the industry here needs more and better financial benchmarks.”
Poor records. The first step in measuring and improving efficiency is having good records to measure and improve from. However, Small says, there is not a strong culture of record keeping among Canadian producers. The good news is that the situation’s improving. “The younger generation is more focused on the benefits of record keeping.”
Mixed farms are complex. Efficiency measures become more complex as the number of enterprises on a farm increases, says Small. Although today’s farms are generally more specialized than ever, mixed enterprises are still common. “It’s not a situation unique to agriculture, but the industry has more than its fair share of this challenge,” he says.
Cash-based accounting. Canadian farmers are able to report their taxes on a cash basis, meaning transactions are only recorded when cash changes hands. Although this has tax advantages, Small says the system makes it difficult to pin down efficiency measures. Accrual-based accounting, in which all transactions are recorded even if no cash changes hands, provides a better financial foundation for improving efficiency, he says.
Financial fluency. Producers generally should focus more on developing their financial skill sets, says Small. He believes that investing in education is as important as other investment decisions. A characteristic of the most successful farmers is their mastery of finance, he finds.
“Education often appears to have a lower value than most tangible investments,” he says. “When farmers do invest in education, they often choose technical training over management training. In my view, both are equally important and the benefits will frequently outweigh more tangible investments.”