Ian Portsmouth: Ian Ron Bonnett: Ron

Ian: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of PROFIT Magazine. And we’ve developed this podcast in cooperation with BMO Bank of Montreal.

It’s no secret that agriculture is big business in Canada. According to the most recent numbers from Statistics Canada, primary agriculture represents nearly 2% of Canadian GDP and nearly 3% of total employment, a number that grows exponentially when you include all of the businesses that are involved in the agriculture sector. What’s less well known to Canadians are agricultural issues. Agriculture touches each of us every day, which makes the issues of Canadian farmers important issues for us all. Here to discuss some of those issues and how they affect both consumers and businesses is Ron Bonnett, President of the Canadian Federation of Agriculture. Based in Ottawa, the CFA represents more than 200,000 farmers and farm families. Ron, welcome to the Business Coach Podcast.

Ron: Thank you.

Ian: Ron, a lot of talk during the recent federal election campaign centered on the need for a national food strategy. I think the reason for a strategy is pretty obvious but is there a reason for the broader business community to concern itself with food policy or the lack of one?

Ron: I think the broader business community and society in general should be a little concerned about the lack of a food policy being in place. I think if you look at the way policy has been developed in Canada over the last number of years, it is been knee-jerk reactions to crisis after crisis, and I think with a discussion we see, media outlets are talking about the rising price of food and what that might mean to consumers and it also has a great impact on business. What we have been saying is that we need to step back and take a look at where are we going from a market perspective? Canada has a huge amount of our agriculture sector targeted on export markets, but we also have a huge component of our agriculture targeted at domestic markets. And we need to take a look at what are the types of things that we need to do to capture the opportunity that’s there.

Ian: So what in your mind is the biggest issue facing independent farmers today and what advice would you give them on addressing that issue?

Ron: Well, I think one of the biggest things is market volatility for both the cost that they are incurring with everything from fertilizer, fuel to the selling price of their products. What farmers are looking at today is to get some predictability in to pricing on the product itself and some predictability in to the cost of their input. The thing with the farm community getting a handle on those variable costs is then you can pencil in some profitability for the primary sector and that in course leads to sort of sustainability through the whole chain. I think one of the things we have a tendency to overlook is the fact that there is a whole series of jobs and businesses that are focused on supporting a strong agricultural sector. If you get profitability at the primary level, then they are buying machinery, they are buying technology, they are using inputs, the products coming off their farm are being transported either to domestic or export markets. There is a whole distribution network.

So the whole concept of sustainability has to be built around the idea that it’s got to be profitability to the sector, primary sector process and retail distributions so that we can take advantage of opportunities that are out there.

Ian: So certainly the farmer has to operate as efficiently as possible to preserve their profit margins, but is there anything that they can do to shield themselves against that volatility you have been speaking of?

Ron: Actually we are looking at new tools to try and shield themselves, forward contracting on some of the product, taking a look at opportunities for hedging. One of the other things that farmers are doing is becoming much more focused on what market they are going after. There is a lot of talk about local and niche markets. And some farmers make a choice that’s the market they are going to go after and they are going to build some profitability into that. Other farmers are going after the larger commodity markets, but what they are doing to really get a handle on their cost is investing in new technology and trying to get as efficient as possible, fine-tuning the management practices, fertility practices, using everything from GPS technology to computer programs that basically help guide their businesses.

Ian: Now my next question was going to be, how important innovation is to agriculture, but I think you’ve just answered that. So instead, let me ask you this, what is your advice to farmers who might be reluctant to invest in more innovative ways to produce their product, or who might not know where to start?

Ron: I think as far as reluctance to innovate, that’s very seldom been a problem at the farm site. I think with the cost squeeze that is always on, most farmers are fairly quick at identifying new opportunities. I think with the advent of internet technology, farmers are using the internet to do a lot research to find new approaches and new technology. I know even on our own farm, I’ll go on websites and search the information coming from universities around the world. If I’ve got a specific question with respect to some of the production, I don’t think it is a question of encouraging them to innovate. I think one of the things though, and this is also tied in with having an overall strategy for agriculture and rural Canada, is making sure we’ve got things like high speed internet access on farms, out in the country side. Because it is becoming more and more a tool that farmers use, not only for sharing information but for research and for actually making marketing decisions as well.

Ian: So let me ask this then. What are today’s most successful farmers doing that perhaps others should be doing to a greater degree? What are the best practices out there that people need to start adopting?

Ron: Number one is they clearly identify what markets they are going after, making a clear choice that they are either going after a high value niche type market or they are going to go after commodity market. The other thing they are doing is finding ways to improve all of the business management practices. Getting a real close handle on what their costs of production are, taking advantage of forward contracting opportunities, building relationships with processers and retailers, to ensure that they are producing a product that is very close to what the end consumer is demanding. I think that’s one of the things we’ve seen an evolution in the last number of years is that producers are becoming very much focused on what the final market is for their product and then customizing the system to produce that end market but making sure they keep control on cost all the way through the chain.

Ian: Now a lot of listeners to the Business Coach Podcast are entrepreneurs from sectors other than agriculture and they are looking for new market opportunities. So what do you think Canada’s farmers would buy more of if the offering were right? What sort of the better mouse trap that farmers are looking for from the rest of the business community?

Ron: I mentioned some of the technologies. There has been a huge amount of sale of global positioning systems now that actually are used to steer machinery in the field, improve accuracy, reduce the number of passes that have to be made in the field. So anything related to that GPS type technology, computerized systems again an emerging market, machinery is always a big expense but it’s an opportunity for people to supply that equipment.

But one other thing I think that is really emerging is the service sector as we adopt a lot of this new technology. I think having a skilled group of people who can come and service equipment, I think that’s becoming more important. An example would be a lot of dairy farm operations now are putting in robotic equipment for milking cows. But once you get into robotics, that’s a whole new technical skill you need to service. So I think if you are focusing on this new technology, there is a huge market for products there. Also one other thing I think that is developing is all types of different packaging that is used for products to sort of enhance value at the end-use as well.

Ian: So as you mentioned off the top, food prices are rising. What, if anything, can the average small or mid-size business like a restaurateur or a grocer do to reduce their food costs?

Ron: First of all, I wanted to say, rising food prices in themselves are likely not necessarily a bad thing. Volatility is a concern. If we are going to feed a growing world population, there has got to be profitability built into the system. But as far as businesses, let’s say like restaurants or independent groceries reducing their cost, one of the things I think they can do is start talking to their suppliers and working it down the chain. I remember a conversation I had not too long ago with a person from Keg Restaurants and they were saying that if they could buy exactly the size of steaks that they wanted, they would have huge savings in labor cost. But in order for that to work, you’ve got to work down through the chain to the factories and the feed lots and the person that is actually breeding the cows to make sure that, OK, if we are going to be targeting this market, here is the type of animal that we want to produce. So I would suggest the biggest thing that we can do to making sure the system operates as well as possible is to increase the lines of communication all through the chain.

Ian: That’s great advice Ron. I want to thank you for joining the Business Coach Podcast.

Ron: Thank you.

Ian: Ron Bonnett is the President of the Canadian Federation of Agriculture in Ottawa.

That’s it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com/coach, profitguide.com and iTunes. For other tools to help you build your business, visit the small business resources section on BMO.com. Until next time, I am Ian Portsmouth, the Editor of PROFIT Magazine, wishing you continued success.

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