Archive for January, 2009

Tiffin Conference – Melanie Mainquist – The Real Beef Consumer

January 25, 2009

The final speaker of the day at the Tiffin Conference in Lethbridge was Melanie Mainquist of Cargill Meat Solutions in Guelph. Melanie spoke about the real beef consumer, a fictitious character named Zoe. Zoe is not unusual or weird, she is real for the majority of female consumers. She eats beef once to twice a week and is a working mother with two kids. She does not have a lot of time to cook meals.   Zoe is someone that all of us can identify with because she is the beef consumer of today. As Melanie stated to me, Zoe is not someone that prepares 16 oz T-bones for the Sunday barbecue.  Zoe is who the beef industry is trying to market to.

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Tiffin Conference – Rick Paskal – Creating Branded Beef

January 23, 2009

At the Tiffin Conference in Lethbridge yesterday, Rick Paskal, Chairman of Canada Gold Beef discussed the need and benefits of a truly Canadian branded beef product. Rick passionately told the crowd how Canada Gold is trying to change the way money is distributed through the value chain. The key point being to make sure that money gets back to the cow calf producer. Rick stated that the premise is to provide an age, source and production verified Canadian branded product to the rest of the world. I interviewed Rick before his address to the Tiffin Conference audience.

Tiffin Conference – Larry Hicks – Managing Risk in the Beef Business

January 23, 2009

Larry Hicks of Cattlehedging.com was one of the keynote speakers at the Tiffin Conference yesterday in Lethbridge. Larry spoke about the necessity of risk management in the beef business. Larry very clearly outlined what hedging is and that there is much more involved than calling your broker to buy or sell futures contracts. He emphasized that you must have a hedging plan in order to really obtain success.

I had a chance to sit down with Larry before his Tiffin speech to discuss some of the pressing issues in the beef business and get a better idea of how he views the beef business going forward.

Tiffin Conference – John Knapp – Alberta Agriculture Refocuses

January 22, 2009

Alberta Agriculture Deputy Minister, John Knapp, spoke to producers about how Alberta Agriculture is putting a strategy in place to reconnect with rural Alberta and help to enable success for members of the livestock value chain.

Two examples that he gave were:

  1. Creating an irrigation department that focuses on improving the efficiency of water application and improving crop production in Alberta. With the use of irrigation Albertans are able to produce high value crops.
  2. Attaching a specialist to every Ag service board in the province. This will increase the two way communication so that initiatives can move forward and allow for change to happen at a faster rate.

John Knapp focused most of his discussion on the Alberta Livestock Meat Strategy (ALMS) which is an integral part of bringing livestock producers back to profitability which will lead to sustainability in the sector.

ALMS is the big umbrella strategy which includes Alberta Livestock Meat Agency (ALMA) and certain programs of the Alberta Financial Services Corporation (AFSC). ALMA will be the catalyst and funder to make sure the industry moves forward. John Knapp said that Alberta has to move forward by improving the cattle genome and improving barley yields by investing in feed grain research. There are also cost issues between Canada and the US. Our American friends have a $64 a head cost advantage over Canadian producers. Much of that cost is due to the slow drug registration system in Canada. Knapp said that we need to reform the time it takes to get new advantageous drugs approved in Canada in comparison to the US.

The one characteristic about John Knapp that I really like is that he is very approachable and willing to at least have the discussion about what needs to change to improve agriculture in Alberta. In the couple times that I have met John Knapp, he is willing to talk to producers and not just fly in and fly out like some other politicians tend to do. The one thing that I completely agree with the Alberta Government on is that all beef industry groups and all members of the value chain need to finally work together and stop pointing fingers and work together to make sure we have a successful industry going forward.

Tiffin Conference – John Scott – The Grocery Business is Changing

January 22, 2009

John Scott, President, Canadian Federation of Independent Grocers, spoke on the grocery market this morning in Lethbridge Alberta at the Tiffin Conference. John emphasized that grocers are trying to “be something” to the consumer. He emphasized that consumers are going to different stores to get different products. When I think my families purchasing habits we buy different products at different stores which apparently is common. Rarely do we purchase all of our food products at the same retail point.

“You [the grocer] must differentiate yourself or you are really going to struggle,” John Scott told the crowd. He continued by saying, “As a grocer you cannot be everything to all people.”

John also stated that large grocery chains are not grocery stores but are health and wellness stores now. There is a focus on health and wellness for people 18-33 year olds. If you are marketing a food product, you need to be willing to ensure that your products fits the trend towards health a wellness. To me this explains the recent trend of full service counters with chefs and nutritionists behind the beef counter. John told the crowd that nutritionists in the grocery store is a fast growing market in Canada. In my mind, this is much different than the traditional butcher look and feel. Meat has been not represented well at the counter in the past. When buying meat people do not want to see a butcher dressed in a blood soaked apron. It makes you wonder why we stopped there? Why not show the slaughter of the animal right in the store? Sounds appetizing doesn’t it.

John stated that, “the chain has to work together in a collaborative fashion to make sure that the beef industry is promoted effectively.” He stated that, “it is not the sole responsibility of one member of the chain.” I agree with John that expecting government to carry this role is wrong. The industry has to lead the charge, but as we all know getting the whole value chain on the same page is quite difficult and easier said than done.

Scott also mentioned that buying local is not going away. The consumer’s environmental sustainability focus will not be changed by the current recession. The”echo” consumers are pushing things like buying local that is changing the way beef and all food is marketed.

I thinks that John’s message of health and wellness is right on. This is one mistake the beef business has made in trying to market 16oz steaks to today’s consumer. The beef industry must continue to adjust and promote the healthy characteristics of beef and try to break the negative perceptions that are prevalent in the marketplace.

Is Bigger Better?

January 22, 2009

When I took economics in University, one of the concepts that I was taught was economies of scale. This concept is defined as obtaining cost advantages that a business obtains due to expansion. In farming there is a constant thirst by farmers to add land or head space to their operation. It is quite common for fellow farmers to judge success by the size of the operation and not profitability. Of course this makes sense because profitability is not a public figure due to the fact most farms are private enterprises.

As your farm grows larger the potential rises for lower costs of inputs, better interest rates and increased commodity market access. Another benefit of improved economies of scale is the lower of your fixed costs per units produced. A great example of this is spreading your office expenses (overhead) over more acres farmed provided that you keep your office expenses flat.

There are challenges for growing farms that are trying to achieve the optimal size and gain real economies of scale. As I talk to many farm customers that are larger farms, there are several common issues that they have to deal with that can be challenging:

  1. Finding staff–For the past five years, finding staff has been terribly difficult. On top of this there has been high rates of turnover as it has become trendy to look for the greener grass all the time.
  2. Managing staff–When you are working for yourself it is easy to justify that you need to work a little harder or longer hours to get the job done. When you are dealing with employees you must manage the balance of their personal life and the jobs at hand. This is not as easy as one would suspect because not all employees view the company’s objectives as their own and may have different values or personal goals.
  3. Handling the change in role–As farms get larger the owner must begin to make choices as to what is the best use of his or her time. This is a challenge for any business owner as the business succeeds. Being the entrepreneur is a much different role than the manager.
  4. Competing with smaller operations head to head–Larger operations have larger overhead costs than in comparison to smaller operations. The larger operation is fighting to survive on volume and thinner margins against a low overhead, smaller operation. To make this clearer think of bidding on custom feeding.

Don’t get me wrong the trend of larger farms is not going to slow and it does happen for a reason as equipment gets gets more productive and the quest for economies of scale are present. Like any other business you need to understand that as your farm grows the role that you may play as the farm owner is going to change and challenges will always be there. Bigger does not mean better for everyone.

Crop Week – 2009 Fertilizer Outlook – David Asbridge

January 19, 2009

Last week at the Crop Production Show I sat down with David Asbridge, Client Development Manager / Senior Economist with Doane Advisory Services. Doane Advisory Services is the largest agricultural advisory company in the United States. Here is Part 1 and 2 of the interview that I participated in with David at Crop Week in Saskatoon.

David Asbridge Part 1

David Asbridge Part 2

I would like to thank David Asbridge for allowing me to film this interview that we did in the media center at Crop Week and for the support from the rest of the media contingent at the event. If the video does not embed for you here are the links.
Part 1
Part 2

For more content regarding this interview go to:
What will Fertilizer Prices Do?
Fertilizer Supply, Demand and Prices

Risk, Currency and the Canadian Dollar

January 15, 2009

Risk is well known board game, played on a map of the world, in which players effectively bet (take on calculated risk) and play to take over more and more countries and ultimately rule the world.

I am just musing here, but if you were taking stock of countries and their respective currencies, would it be wrong to consider a common sense sort of bird’s eye view of the countries in the world in say five different categories and give strong consideration to the impact of the results of such an exercise?

I would consider:

  1. current status (stage and reputation in economic development and world reputation),
  2. political climate (democratic, responsible, international reputation/relations and involvement, the people/voters)
  3. resources (educated or trained people , access to credit/money, water, food production, oil, metals, minerals, lumber etc)
  4. institutional infrastructure and resources (stability of financial institutions, existence of or ability to create education/training to meet needs)
  5. location (ocean ports, proximity/access to significant markets).

It is hard for me to imagine a combined assessment of the above comparing Canada against most countries in the world, would be anything but in favour of Canada. In a time of growing world population, there is surely going to be an opportunity, a reliance even, on Canada to be a significant contributor in the world economy.

I often run strategic business decisions through a “what if gauntlet” to see how they survive different scenarios. So if this kind of assessment makes sense to you like it does to me, maybe some thought in your business should be given to business and managing risk in an environment where in the long term the Canadian Dollar trades much closer to par with the US Dollar than the flirting with the 70’s that it has been doing recently. Just a thought……

Crop Week – Global Supply & Demand of Oilseed Crops – Thomas Mielke

January 15, 2009

All of us have opinions on where canola prices are going in the future. We are all more experts in what has happened in the past rather than where the future is leading. Sometimes you need to talk to someone that knows what they are talking about and has the facts to back it up.

Thomas Mielke, Executive Director of Oil World and is one of the world’s most respected oilseed crop analysts. I was given the fortunate opportunity to participate in an interview with him before his keynote address at the Crop Production Week in Saskatoon. Mielke spoke about the supply and demand issues facing the soybean and canola market in 2009.

Due to the fact that the Ukraine and Australia have finished their exports, Canada has a great opportunity to export 1.7 to 2.0 million tonnes of canola to China this year. Mielke stated, “that China has better crops but import requirements are increasing due to the fact the country wants to increase its stocks strategically.” Mielke is concerned that Canadian farmers expecting much higher prices are not being realistic and should be willing to take advantage of the recent rebound in price relative to the lows.

I think that if you are going to listen to anyone you should listen to Thomas Mielke. I am not saying that he has been 100% of the time but the reality is that he firmly understands the fundamentals and has the data to back up his opinion. Take heed to the advice of taking advantage of the latest bump in price off the low to not be left in the cold should the price fall back again due to demand issues in 2009.
If the above video does not embed in the story please click here

Crop Week – Farm Shows Are Really About Drinking Beer

January 14, 2009

This is my first time to Crop Week in Saskatoon and I plan to return in the future. One thing that is consistent amongst farm shows is the ever present beer gardens. Now don’t get me wrong there is serious business that is done over a cold one. There is discussion about Roughriders football, who will win the Stanley Cup and who will win American Idol this season.

In all seriousness the beer gardens at any farm show is where farmers get to spend some valuable time together and collaborate and share ideas with neighbors or farmers from other provinces.

Yesterday I went into the beer gardens and ran into and old friend, Mark Lepp from FarmLink Solutions and we had a chance to catch up and discuss what was happening in the markets. To me this type of surprise encounter is what makes farm trade shows so special. Its not just about the new equipment, new seed genetics or getting a bag of collected free goodies. A big benefit of attending farm shows is that you get a chance to connect with your network. It is important that you take the time to develop a center of influence and learn form the successes and mistakes of your colleagues. I find that grain farmers are very good about sharing ideas regarding production practices. I recommend if you have not done so yet this year attend a farm show. Manitoba Ag Days, Ag-Expo and FarmTech are all left before spring. Walk the show to do your business but also take the time to network with your network even if it is over a cold beer in the beer gardens.