March 19, 2014

Agronomist Notes

Hello Reader

In a decisive move and after a couple quick phone calls, I embarked on a two-year farm management program on Monday night. We’re looking at risk management, financial assessment tools and farm business governance. Yesterday we toured a couple very high level businesses that focus on beef production, feedlot health optimization and vertical integration of production, processing and retail. It’s been highly rewarding so far and I look forward to sharing what I learn in the coming year.

This week we’ll look at the economics of moving to narrow row spacing. Next, I’ll recap some of the nuggets I’ve learned on my farm excellence program so far. Last, I’ll discuss a model called DACUM that can lead to improved employee performance on farm. We’ll finish with technical grain market news.

The economics of narrow row spacing

Whenever you look at research comparing wheat and barley yields to row spacing, narrow row spacing inevitably leads to higher yields. You can pull this information from research in Canada, Europe, New Zealand and Australia. Now, there is research that supports wide row spacing but on average, the research points to narrow rows. From a purely economic point of view, we’ll look at the cost of moving to narrow rows and see if the numbers stack up.

First, if you look at research in Alberta from the late 90’s, the yield increases in wheat ranged from 15% to 22% higher for 8 inch row spacing compared to 12 inch. See research. You can find a summary of other row spacing research here.

The picture above from Peter Johnson of OMAFRA shows the yield difference between 7.5 inch and 15 inch row spacing in winter wheat.

For now, we’ll simply begin by looking at the return on investment a drill with narrow row spacing would cost relative to the yield increases it may produce. To be realistic, we’ll compare a hoe drill with 7.5-inch and 12-inch row spacing to a disk drill on 7.5-inch row spacing. (A disk drill is the default in narrow row, high residue system.) We’ll take a conservative yield increase of 8% from narrow row spacing to work the economics.

Steve’s quick math
Narrow rows: 60 bu/ac x 8% x $6.00/bu = $28.80/ac

The prices below are all 50 feet, base priced with no air cart.

JD 1890 disk drill, 7.5-inch spacing = $228,000
JD 1890 disk drill, 10-inch spacing = $203,000
JD 1830 hoe drill, 7.5-inch spacing = $138,000
JD 1830 hoe drill, 10-inch spacing = $126,000
JD 1830 hoe drill, 12-inch spacing = $117,000

The price difference between a 50-foot, 7.5-inch disk drill and a 50-foot, 7.5-inch hoe drill is $65,000 ($228,000 - $138,000). If you could actually pull a hoe drill on 7.5-inch row spacing through no-till residue without plugging every 50 feet, you would breakeven on 2,300 acres of wheat in year one. The reality is, you would likely move from a hoe drill on 12-inch spacing to a disk drill on 7.5-inch spacing to continue seeding inside a high residue no-till system. The price difference is $111,000 and based on a $28.00 an acre increase from narrow rows, you would need 3,960 acres of wheat to breakeven year one.

From a purely economic standpoint, choosing a narrow row disk drill over a wide row hoe drill would pay for itself in wheat within two years on most farms. If you seed barley, you may see a bump in yield and generate a quicker ROI. Now, if only it were that simple to buy a disk drill and start seeding. Disk drills require more patience, maintenance and a focus on proper residue management to make them perform well. If there truly is a 15-22% yield increase in wheat from narrow rows, perhaps it’s time to revisit the row spacing debate.

A big thanks to Ron Armstrong, my very supportive John Deere sales rep, for the pricing on the drills.

Photo source: Peter Johnson, OMAFRA

Canadian Total Excellence in Agricultural Management: CTEAM

I’ve recently committed to a farm management program called CTEAM. (No derogatory comments about not making the A-Team, okay?) It is a series of one-week courses across Canada that help farm businesses develop and implement strategic operations plans. The modules include strategic planning, operations management, succession planning and managing information systems. You can look them up here.

We’ve toured Western Feedlots, a high level cattle feeding business, Feedlot Health Management Services, a very innovative consulting business and Sunterra Markets, a vertically integrated farm to retail business. Here are my key points from the course and business tours so far.

1) If you want a successful succession plan you must separate

Ownership
Management
Finance

2) The 427/809 rule: Perseverance.

The Wright Brothers took 427 attempts to get their aircraft to fly.
It took Edison 809 times to create a switch to go along with the light bulb he invented.
Skeptics are your best friend. They want to be on board with your idea or vision, you just have to convince them why. They will be the future champions of your vision once they buy in.
Cynics are cancer. They will never be convinced and will drag your team down.
Hire slow, fire fast.

3) Western Feedlots

They focus on the optimization of beef production through a model called Individual Animal Management (IAM).
IAM uses 8 measurements to score cattle coming into a feedlot and separate them into groups they know will produce a certain carcass and quality.
One of the 8 measurements includes the face pattern of an animal.
There is a strong correlation between face pattern on cattle and feeding efficiency. Who knew!
The Halal market for beef is the fastest growing market due to the young age and higher family incomes of Muslims worldwide.
There is portable, near infrared technology (NIR) available today that can analyze feed grain quality on farm before it is shipped. The sellers of feed grain are not ready for that technology and it’s implications on the price of feed grain.

4) A committee called Culture Club

In a workplace with many different nationalities, it can be difficult for employees to bond or team build.
Culture Club is a fund that each Western Feedlots employee contributes a small amount to each week and the owners match those contributions.
The funds are used to support team activities of the employee’s choice, such as music, theatre, sports events, adventure, etc. The program has been well received.

5) Optimization vs. economies of scale

Until now, most of the gains in farm margins have come from economies of scale.
There is a point where you reach diseconomies of scale and lose operational efficiency from being to large and less nimble to perform tasks.
The focus must now shift to the optimization of each asset. For example, the focus must shift away from maximizing yield to lowering input cost per tonne of grain or per pound of gain. Each asset such as sprayers, seeders, combines, land, crop inputs must be optimized; lowering running costs while increasing output of each asset. SL

A new way to improve HR on the farm

The DACUM model

One of the most difficult things in farm human resource management is coming up with well-defined job descriptions and career plans for employees. Equally, it’s hard to evaluate employee performance when you don’t have those job descriptions in place. On most farms, it’s hard to set a career path when there’s only one degree of separation between a farm employee and the owner. Meaning, you don’t move from sales person to sales manager to territory manager on a farm. You start as an operator and over time, tasks and responsibilities are added but your title still remains “operator.” That said, there is a way to measure employee performance and it’s through a model called DACUM (Developing a Curriculum).

The DACUM model is a process of defining what skills and competencies are needed to carry out the tasks of each job. Once you have outlined a job description and the required skills and knowledge necessary for that position, you can start to evaluate employee performance. You can also start to build a career path by adding skills, roles and responsibilities to each level of salary or compensation.

For example, you could have Level 1, Level 2 and Level 3 operation roles. Level 1 operator would have basic skills like Class 5 license, farm equipment operations experience and be required to maintain equipment. A Level 2 operator would have a higher salary but a longer list of skills and knowledge requirements like a Class 1 license and be required to develop, keep track and manage the equipment maintenance program. A Level 3 operator, in addition to Level 2 skills, may be able to manage the logistics of daily activities whether seeding, spraying or harvest.

I’ve oversimplified the example here but the reality is the DACUM model is a great way to define employee roles, skills and responsibilities. From there, you can design a training and education program to help develop your employees. It also provides a way to measure employee performance because you have a clearly defined set of skills and responsibilities for each role. This also eliminates the view of favoritism in the workplace because the pay scale and responsibilities are clearly outlined.

I can see this happening with a peer focus group putting together a list a skills, competencies and responsibilities. From there, each farm can take home the lists and build their own Level 1, Level 2 and Level 3 positions. The DACUM model opened my eyes to what is possible and a new way to hire and retain employees, setting them on a successful career path. SL

To learn more about the DACUM model click here.