October 2008 Archives
Buhler and its new majority owners, Rostselmash company of Russia, relaunched the Versatile brand this week in Winnipeg. The 4WD tractors have been rolling off the line steadily since 1966, but over the past couple of decades the once strong Versatile brand has been whittled down by owners who wanted their own stamp on the hood. Ford New Holland. New Holland. Buhler. Now Rostselmash, to its credit, recognizes there is still some good brand value — remarkably after all this time — in the Versatile name and the flying "V" logo. All tractors, including the front-wheel assist line, will be Versatile. The Genesis name is gone.
Ryan Shust has been with Versatile and its myriad owners for 30 years. He is the new manager of technical publications. His division will generate the printed support materials for the tractors. He calls the new owners a "breath of fresh air."
"It is a amazing the difference they've made in one year. Instead of working day by day, we now come to work with confidence in the future," Shust says. "This is like the old Versatile."
Versatile president Dmitry Lyubimov, a 34-year-old Russian with an MBA, says in the past few years, the company has made money on cost cutting. "Now, we want to make money through growth of the business."
Rebranding is step one. Step two is to get the 200 or so dealers from across North America pumped up again. The brand relaunch coincided with the "first annual" Versatile dealers meeting to talk about the sales strategy, describe the latest features on the tractors, and introduce the new financing option available to Versatile customers. Versatile also has a dedicated parts manager for the first time, and promises to deliver parts anywhere in North America within 24 hours. The company also has a service manager. "We've always had service people," says director of sales, Eric Allison. "But this is the first time we've had a service manager."
I don't know the long-term strategy for Versatile. No doubt Lyubimov and his team has a five-year plan, but they didn't share it. If I were to guess, it probably includes a launch of the Rostselmash combine in North America. You've probably seen a Don combine somewhere in the Prairies. That's a Rostselmash machine. In 2000, the company went from a government-owned entity to a private company. It now has 60 per cent market share in the Former Soviet Union combine market. It sold 6,300 combines last year. From what I hear, the combines are smallish — class 4 and 5 — but I'm sure the company has plans to build something bigger. Meanwhile, Rostselmash will gain a lot more experience through its Versatile relaunch into how to sell a product successfully in North America.
One apt analogy I heard yesterday compared Rostselmash to the car company Hyundai. Remember its bomb, the Pony. Now Hyundai leads the car industry in quality. Honda went through a similar metamorphosis. Rostselmash will be challenged to change North American impressions of Russian-made farm equipment. But its instincts about the Versatile brand suggest they are at least listening to what the marketplace tells them.
Marianne Stamm from "very windy" Westlock, Alberta, took this photo yesterday. A storm that blew the neighbour's topsoil all over her fields also blew this grain bin into the nearby Pembina River. "Winds were in excess of 100 kilometres per hour," she wrote.
A few minutes later another Alberta reader sent a news tip, it too related to wind. Here is what he wrote: "I know of three farmers who have had their hopper bins opened and the grain allowed to run out on the ground. This past weekend here was very windy and one farmer estimates he lost 250 bushels of canola due to the bin being opened by someone and the wind blowing the canola away. What was likely done as a prank turned out to be very expensive for the farmer. Farmers may want to consider removing the handle or locking the bottoms of hopper bins."
The same email included another warning about bins and wind: "On a related issue, a neighbour who buys oats from us each year regularly grinds oats out of a hopper bin. He got in the habit of leaving the bin open so the rubber hopper under the bin remained full. A strong wind one day started blowing the oats out of the rubber hopper and with the hopper bin bottom open, oats just kept feeding out of the bin and into the wind. In one windy day the bin emptied."
I'm working on an article about a 160-foot drill from an Australian company called Multi-Farming Systems. The drill has 96 shanks on 20-inch spacing. Each shank requires four horsepower to pull at normal depth, so you need a 400-hp tractor to pull it. You probably want a little extra for the tank.
Kris Trevilyan describes the unit in a video on the Multi-Farming Systems website. The drill has independent-suspension shanks with individual on-row packing pressure, just like many of the drills now built in Western Canada. Trevilyan says the Queensland-area farmers who would buy this drill have massive fields where it takes an hour and a half to drive up and back at 7.5 km/h. This photo, supplied by Wallaby Productions, shows the 160-foot drill in one of these very large fields.
A general demise in world commodity markets isn't the only thing dragging the price of wheat down. Good old market fundamentals are also at work. Global wheat production for 2008-09 will be 680 million tonnes, according to the latest USDA estimates. That's up from 610 million last year and it shatters the previous record of 630 million.
I called Bruce Burnett today because I wanted to know the size of the market for high-quality wheat, on average. Burnett is a market analyst with the Canadian Wheat Board. He emphasized that this number can vary widely from year to year, but he said that in general, 30 to 35 per cent of world wheat traded is what we in Canada would call "high quality" milling wheat. The amount of wheat traded is 100 to 120 million tonnes per year. The rest is consumed within the countries that produce it. So let's say the amount of high-quality milling wheat traded per year is 35 million tonnes.
This is big enough, I would think, that Canada could sharpen (or should that be "re-sharpen") its focus on serving this market and avoid the mass-produced low- to mid-quality wheat. Of course we can't control the weather, which can turn our good intentions sour. But keeping our exports focused on only the high-end customers may be the only way we can keep producing wheat profitably in Canada in light of rapidly expanding production in Former Soviet Union countries in particular. FSU export-ready wheat supplies will reach 28.6 million tonnes for 2008-09, according to USDA numbers, up from 21.9 million last year.
Burnett also noted that global supply of No.1 good quality wheat remains tight, even with the rise in overall wheat production. "Supply of high quality wheat is still not up to comfortable levels," Burnett says. That should mean wider price spreads between high and low quality for 2008-09.
I'm working on a series of articles with Phil Needham, an agronomist based in Kentucky. He and a few other agronomists came from England in 1989 to work with Miles Enterprises, a large crop inputs retailer that saw an opportunity to bring intensive European-style wheat production practices to Kentucky. In the past 20 years, Kentucky yields have almost doubled. And during that time, Needham has written a book on his management techniques and spread his gospel to many other U.S. states.
I want Grainews readers to hear what he has to say. The first article will be about the importance of seed placement. A crop needs to come out of the ground evenly in order to have a chance at reaching its yield potential, Needham says. "If not, it trips over right out of the start gate," he says.
This photo is of a wheat field harvested this fall in Needham's native land, Lincolnshire, England. The field yielded 150 bushels per acre. While climate is a big factor in European wheat yields, management is equally important. From their high-tech and precise seeding equipment to their attention to disease and fertility management, European farmers might have something to teach us about wheat production.
John Morriss, editorial director for Farm Business Communications, emailed me yesterday to say Ron Settler "gets a gold star" for his opinion article on page 1 of the April 7 Grainews. Ron farms near Lucky Lake, Sask., and he's been writing for Grainews for years. In April, he looked back on his experiences with high prices and wrote an article to warn farmers that the good times won't last.
Here is the whole article again. You can see for yourself just how right he was.
Plan for the coming cash shortage
Grain and oilseed prices are good right now, but margins will get tight again so think long term.
By Ron Settler
If you're old like me you remember the boom in grain prices in the late 1970s and then the sudden drop in prices along with the 18 to 24 per cent mortgage rates. Some of you may not remember this but at that time we never thought you'd see a mortgage below 10 per cent ever again. Then there were the land prices. With the boom in grain prices, land values shot up. Gas was about $1 a gallon (that's about 23 cents a litre) and a new Chevy pickup was $10,000.
Cash flows to buy land were based on $5 per bushel wheat. If it didn't work out at $5, you just put in $6 and the bankers were happy. Lots of land was sold for high prices based on these projections. Many were saying to buy now because they're not making any more land. The banks took back lots of this same land in the ‘80s. Lots of farmers folded up their tents and moved on to other professions. Grainews had articles like "How to survive on $2 per bushel wheat." Times were tough but most of the farmers hung on and many are still farming today.
How can we make sure we're still tilling the soil in 2015? How would I know anything about it? Well, I'm just a small grain farmer but we did make it through the ‘70s and we're still farming today. Here are a few thoughts and observations that you might want to keep in mind when that big grain cheque hits your palm and your eyes start wandering to the stores and showrooms.
1. Remember the tax man
Every dollar you make, he wants his share. If the past few years were tight for you financially, you likely haven't paid much tax. But with a big increase in income and no large increase in deductible expenses, the taxman will want 25 to 40 per cent of that extra profit you have in your pocket. Do the math. How much will your tax bill be this year? Don't spend all your cash on purchases that aren't deductible such as vehicles, equipment and personal items. Save some for the taxman. He doesn't like to wait for his money. If it looks like you've got a big tax bill coming see someone smarter than yourself for some advice. There's no point in giving any more to the taxman than is absolutely necessary.
2. Pay down your bills
Make sure you get all your bills paid off before you buy that new truck. Your creditors will like you better and you'll sleep better.
3. Plan for crop failures
Remember that sometimes it doesn't rain. Crop failures happen all the time. Make sure you are covered with crop and hail insurance at a rate that is livable if you have a complete failure. If you don't carry full crop or hail insurance, then make sure you can make it through the year if you have no crop income.
I remember 1988. I think it was June 3. We had seeded some wheat and I was harrowing it with the John Deere R. It was 40 C with a hot wind. (The R had a cab but air conditioning wasn't available on the 1953 model.) We started the year as dry as we are now or drier and we got very little rain. Dust was blowing and the hoppers were thriving. We might have got an inch or two of rain all year. The summerfallow wheat crop on good land went about 10 bushels per acre, or less. Wheat on stubble was about three or four bushels, if you bothered to combine it. It can happen again.
4. Don't buy too many things
Just because you've got a lot of money sitting in your bank account, you don’t have to spend it all. I know we've been getting along with this old machinery and stuff for years and it would be nice to have newer things, but make sure you stop and do a cash flow analysis. Plan for higher prices next year for inputs, plan for your income tax bill, remember it might not rain (or rain too much), then see if you are comfortable buying a few things. Look at the items you are planning to buy. Should you buy a new truck or a new vacation trailer? How about that holiday you've been putting off? Does the house need some renovations? New or newer machinery is always nice to have on the farm.
Some of the above items can be deducted from income. Others cannot. Make sure you take that into account when you buy. Most machinery repairs are 100 per cent deductible in the year you pay them. Buying a piece of machinery must be deducted over a number of years. That vacation to the south will be nice but you likely can't deduct it from your income. Think before you buy.
5. Borrow to buy large items
Spread purchases out over a number of years by borrowing money to buy large items. Maybe you have the cash to buy it now so why get a loan? It makes sense not to get a loan as long as you've got your cash flow planned and have taken into consideration all the bumps in the financial road that can come along in the next few years. But it's a lot easier to get a loan for a machine when you're buying it now than to go with your hat in your hand to the banker and try and get a loan after you've bought it and you've run out of cash. You can always pay a loan off early if things go well.
6. Buy land based on average grain prices
Want to buy more land? It might be a good time if the price is right. Just don't do all the projections on $10 durum wheat and $15 lentils. Perhaps a person should use a 10-year average crop price and if it makes sense at those prices maybe it's a good buy. Don't bite off more than you can chew. It might be better to buy a quarter or two that you can afford rather than take a chance on a couple of sections and have to give it back to the bank in five years.
7. Watch where you get your advice
Sure the truck and machinery salesmen may tell you that good times are here forever but they don't have to make the payments when it doesn't rain. Think things over carefully before you put your name on the line. Your farm is at stake.
About the same time we had the boom in the ‘70s Alberta had a boom in the oil industry. They also had a crash and I heard of a bumper sticker that was floating around Alberta in the ‘90s. It said, "Please give us another oil boom and this time we promise not to p*** it away." The same could probably be said about grain farming. Hopefully we don't spend all our new found income on fancy baubles and expensive equipment and we're here to enjoy the farm life for a number of years yet.
—Ron Settler farms and runs a salvage and used parts yard at Lucky Lake, Sask.
Adam Reid, communications manager for Buhler Versatile, is back from visiting an 80,000-acre farm near Rostov-on-Don, Russia. The farm has seven Buhler Versatile tractors, including this 2005 Model 2425 — a 425-hp 4WD — with 6,200 hours on it. The farm assigns two drivers per tractor, and when field work is required, these drivers take 12-hour shifts keeping the tractor going 24 hours a day. A tractor putting on 2,000 hours per year might seem outrageous, but it's not abnormal. The European average is around 1,200 hours and 1,600 hours per year is not uncommon.
“They do their scheduled maintenance, and there doesn’t seem to be any reason why it won’t keep running,” Adam says.
What's more, the tractors on this big Russian farm pull discers at 17 km/h and drills at eight to 10 km/h. Adam talked to a Russian technical advisor who says North American farmers are doing their fieldwork too slow.
And this advisor, by the sounds of it, would probably suggest that 10,000 acres is reasonable for a single tractor-and-drill unit.
Janet Kanters, communications manager with the Beef Information Centre and past president of the Canadian Farm Writers' Federation, sent out a notice to watch Oprah's Tuesday show. So I did. The topic was California's "proposition 2," which will enforce new rules to give poultry, sows and veal calves more room in their cages and more time in group housing or free-range enclosures. This proposition will be on the federal election ballot in California in November.
Oprah had a number of guests, including many farmers, speaking on both sides of the issue. Lisa Ling, an Oprah "reporter," shared video of her visits to chicken and hog farms, some with your typical containment, some that have gone free range. There was nothing new there. Here are highlights from the discussion in Oprah's studio:
1. Matt Kellogg, a hog farmer from Illinois, was a guest at the show. He says if he had to produce under the rules of proposition 2, he would go out of business. The first reason is economic. It would be too expensive to convert his barns away from gestation cages. The second reason has to do with his views on animal welfare. Sows in crates are individually fed and watered and they are not threatened by alpha females that can make life miserable for other sows — and for employees. "I wouldn't want to farm that way because I don't think it's right for the animals."
2. Jude Becker lets his sows roam free on 32 acres. He has mobile birthing pens to keep piglets safe from other sows. "Consumers want this product and will pay the farmer to produce it this way," he says. He also says it makes him feel good to raise pigs this way.
3. Ryan Armstrong produces eggs in the common way, with hens six to a cage and indoors all the time. He also says proposition 2 will put him out of business. He adds that if California voters support the proposition, there will be "no safe, affordable eggs in California." The eggs will come in from other states and perhaps Mexico where they can be produced more cheaply. And he says "consumers are already spending more on eggs than ever before because of the rising cost of feed."
4. When given a choice between eggs from free-range and caged hens, only five per cent of consumers choose the higher priced free-range eggs. Oprah said that perhaps after her show, that number will rise. That might seem awfully presumptuous of Oprah, but millions of grocery shoppers watch her show. The show did lead off by encouraging consumers to be more particular about where their meat and eggs come from. In time, that may be enough to change practices — even without a law such as proposition 2.
Europe is leading the way when it comes to wheat technology advancements, says Garth Hodges, who is the Bayer CropScience’s oilseeds manager based in Calgary. What does Bayer know about cereals? You wouldn’t know it by looking at its Canadian seed portfolio, but Bayer's most important crops, globally, are cereals — wheat, barley and oats. Western Canada needs major research investment on cereal seed and production practices to match Europe, Hodges says.
Of course, Bayer has a vested interest in promoting more intensive cereal production. European growers use a lot more crop protection products on their wheat, partly because they have to. European wheat crops are incredibly thick, the ground is moist, and the crop goes 10 or 11 months from seeding to harvest. But rather than discount Hodges’s comments, I will dedicate some of my blog space over the coming months to wheat research and production practices that could improve your returns from wheat. Wheat is a terribly important crop in Western Canada, and it doesn’t get the attention it deserves. Discussions on the future of wheat production too often boil down to whether we support or don’t support the Canadian Wheat Board. As Larry Weber once said, we have other important issues to deal with.
Back to Hodges. He says the biggest advantage Canadian farmers have over farmers in Europe and pretty much anywhere else in the world is your on-farm storage capacity. This gives you incredible flexibility in terms of identity preservation and market timing. His long-term view is that Western Canadian wheat production will move toward IP production of high-value varieties. That way, we move into a different market realm from the high-volume commodity wheat that Ukraine and other countries can produce far more cheaply than we can.
I just called Bill Vant Erve, crop production solutions rep with UFA in the Grande Prairie territory. I've never talked to Bill before, but I wanted to chat about article ideas from Peace River country. He was heading into a dead zone for cell phone coverage, so he was kind enough to pull over to the side of the road and give me a few minutes of his time.
One topic that came up was the big issue with canola regrowth. Bill says there were some fields of canola that regrew so quickly after harvest that they were in flower. It's all dead now with the killing frosts, but the depressing thing is that those plants sucked up a lot of the reserve nutrients in the soil.
Bill says many growers, even some zero tillers, took a discer to the worst fields. "They're worried that it will be too much growth to direct seed into next spring," he says.
Yes, discing up the regrowth will return nutrients to the soil, but that "green manure" won't release all its nutrient until after the 2009 crop needs it, Bill says. So that probably means a higher-than-expected fertilizer requirement. Spring soil tests are in order.
Gerald Pilger emailed to say the combination of high fertilizer prices and falling grain prices is "pretty discouraging." Gerald farms near Ohaton, Alta., and is a regular contributor to Grainews. He's on hiatus right now while he runs for District 2 director of the Canadian Wheat Board.
Gerald writes: "Farmers in this area are really wondering about fall fertilization this year. I have checked prices at all the suppliers in Camrose and urea is $900 per tonne and anhydrous ammonia is $1,500 per tonne. That works out to 88 cents per pound for urea and 82 cents for NH3. This is double what it was last fall and about 20 cents per pound more than this spring."
I just finished editing Mike Jubinville's market report for the October 20 Grainews. He wrote on the topic of fertilizer, and here is a paragraph from his report that will interest you:
"Nitrogen and phosphorus prices have dipped on the wholesale market, though the retail price for what farmers pay for fertilizer has yet to see a noticeable decline. PFCanada maintains its view that growers should hold off fertilizer pricing commitments for the time being as retail values are likely to start moving off the summer highs. Let’s see what happens to fertilizer prices in the coming months before locking in prices."
Look for the whole report in your next Grainews.
I am thrilled to announce that our website, www.grainews.ca, won gold at the Canadian Farm Writers' Federation annual awards banquet October 4. We won in the "world wide website" category.
I expect continued growth in the importance of online media, and I believe Grainews and most other successful farm papers will have to increase their online presence. Winning this award tells me that Grainews is on the right track. Sure, we have a long way to go in making full use of the web. We could have more original audio recordings — podcasts. We could also do more videos to demonstrate "how to" do something, such as set your combine for more efficient threshing.
And as a business, Grainews needs to figure out how to get subscribers to pay for our online version or how to get advertisers to pay more for online spots. While I believe web media will only get stronger, it can't be a loss leader for us. Websites can take a lot of work to keep fresh, and we can't do that work for free. These are exciting times in the publishing business as we balance our efforts between "print" and "digital" worlds.
Other winners
It was a good year for my colleagues at Farm Business Communications, particularly Country Guide and the Manitoba Co-operator. The CFWF 2008 awards press relase.pdf lists the winners for all other categories. I'd like to give a special thank you to Dave Bedard, who arranges the daily news reports on grainews.ca. Dave also won silver in the press editorial category for an editorial in the Manitoba Co-operator.
