Agribusiness SBA Stimulus Package

Alex Tiller - Monday, March 23, 2009

For those of you contemplating starting a new (non-commodity farm) agribusiness venture, 2009 might be your year.   On March 17 President Obama unveiled a multifaceted small business initiative to try and stimulate the small business economy with a major focus on unfreezing small business lending. Reactions to the plan were generally favorable, although I personally am not sure this is enough to turn around our economy.  -Most of you know I believe that much more should be done to assist small business and entrepreneurs in America since small biz is the engine that drives this county and is the largest single employer.

The key elements of the package included reducing fees on SBA 7(a) and 504 loans, the Treasury buying $15 billion of small business loans on the secondary market, and a business stabilization loan program. Giovanni Coratolo, director of Small Business Policy at the U.S. Chamber of Commerce called the program a "huge step in the right direction."

It’s good to be reminded that not all our venture financing has to be dictated by the USDA/FSA and FCS.  See what your state SBA can do for you.
 
The White House and SBA released a number of documents detailing the plan. They can be accessed from the links below:
 
1.   SBA Statement on Recovery Efforts
2.   White House Fact Sheet
3.   Talking Points
4.   SBA Policy Notice - Up to 90 Percent Guaranty on 7(a) Loans
5.   SBA Policy Notice - Fee Elimination Provisions
6.   FAQ for Small Businesses/Entrepreneurs
7.   Lender Q&A

11 Point Checklist for Planter Maintenance

Alex Tiller - Friday, March 20, 2009

A farmer is only as good as his equipment – and this spring, one of your principal pieces of equipment will no doubt be your trusty planter. Equipment maintenance is one of those “everybody knows” pieces of information, but planters require a fair amount of attention to prevent damage and poor operation thus resulting in poor yields at harvest. Here is a general checklist for maintaining and inspecting your planter, to keep it working smoothly for years to come – remember to check your owner’s manual for the specifics of your model.

  1.   Check all parts and replace any that are worn or damaged
  2.   Replace all rubber seals that have become worn
  3.   Check the alignment of disc openers and coulters – and if disc openers are worn out, replace them
  4.   Repair or replace planter chains or rusty chain links – lubricate the chains that you don’t replace
  5.   Inflate tires to the proper pressure – under or overinflated tires can throw off your seed drop pattern
  6.   Clean your monitoring sensors and clear out the seed tubes
  7.   Check the end of seed tubes to ensure the tube hasn’t become deformed – that can throw off your seed drop
  8.   Look for rust buildup or treatment residue on the finger-pickup back plates
  9.   Inspect backplates for worn spots – resembling dimples – that can cause double seed drops
  10.   Adjust finger tension to manufacturer’s recommended values
  11.   Visually inspect the seed conveyor belt and the belt drive sprocket teeth for wear and to make sure these important components haven’t become brittle

When it comes time to start planting, I also suggest making a test pass, then going back to review the results before you continue to plant the rest of the field.  Measure to test the depth and spacing of each seed while looking for doubles and/or misses. Your tests should sample 25 foot strips, for each row, on flat land, planted at a typical planting speed, and you should do this in random 100 foot intervals.  Take at least 3 samples from your test pass and write down the results. If you find a consistent problem, (i.e. row 3 has more doubles) go back to the check list and try to find the problem.  Remember, in times like these we need to make every dollar count on our inputs. (garbage in = garbage out) Happy planting!

Strip-Tilling Tips and Tricks

Alex Tiller - Thursday, March 05, 2009

Spring is on the way, and that means farmers are thinking about tilling the fields for the spring crops. Longtime readers know that despite my last name, I have been a strong advocate for no-till and strip-till systems of soil management. Strip till is a good compromise that gets the benefits both of conventional tillage (warming and drying the soil) and no-till (protection of soil quality). Here are some strip-tillage best practices that may come in handy when you hit the fields.

You probably will be applying anhydrous ammonia when you prepare your strips to provide an N boost – that should be limited to 100 pounds of actual N per acre at most in a strip till field. Since you’ll be planting along the tilled strip, wait about two weeks between your ammonia application and planting to prevent salt injury to your seeds and seedlings.

You can skip the ammonia and apply liquid N directly during your spring tillage, or you can use urea as an N source – if you use urea, separate it from the seed line by three or four inches. If you do use ammonia, place it about eight inches deep and use packer wheels to break up lumps in the soil and to reduce volatility. If you need more N, you can apply it via the irrigation pivot.

P and K applications are also commonly deployed while doing strip till passes. Place P and K between three and six inches deep to prevent erosion but still leave plenty of nutrients available for uptake. Starter fertilizer can also go into the strip till – put it about 2.5 inches deep and 2.5 inches away from the seed line to avoid fertilizer burning the seeds and seedlings.

The Probability of Profitable Farming: Stack the Deck

Alex Tiller - Tuesday, February 10, 2009

From time to time I ask experts in certain fields to provide us with their thoughts and insight.  I recently asked Dominique Depaz, an analytics consultant to the agricultural industry, to share his process and insight on risk analysis and crop selection.  I found it intriguing and have provided his words below.

FARMING BY THE NUMBERS

It is my observation that farmers are by far the greatest gamblers on earth, willing to put their entire assets on the auction block season after season; and yet they are highly risk adverse when it comes to changes in cultural practices. Most grow the same way over and over, (expecting different results); or follow a few mavericks willing to share their success stories.

Why is that?

I think part of the reason is that many farmers do not keep good data. And that is understandable. When harvest season hits, there is no time for anything else but to get the grains or vegetables off the fields. Who has time to track yield from field to field? But image the strategic value of data going back twenty two or more years? I am talking about weather information such as rain, wind, solar index on the farm, yield by fields, seed varieties, fertilizer applications and chemicals applied and pricing for the commodity.  This information can be extremely valuable on two fronts: first for planning purposes and secondly for changing cultural practices.

Planning Purposes

Data mining can be extremely useful in developing risk probabilities and as a result it can guide a farmer’s planting schedule, type of crop to rotate and changes in farming practices. If you have thirty or more years of data from your farm, in a spread sheet you can analyze your yields relative to prices, weather and changes in growing practices. Even a few years can be very helpful. For example, you would discover that at the bottom of every eleven year solar cycle a La Nina event is likely to occur. This may cause droughts or excessive rains depending on your location. An El Nino event would have the opposite effect. You could then compare your yields during those periods and see how you fared in terms or production and in terms of market prices. Did the climatic change cause prices to move and by how much?  You may find that droughts may have a huge impact in your region, but because the commodity you produce is also grown in other regions of the country, there is no significant change in price. Conclusion: you would loose money growing this crop with no chance to make up the losses at a later date. The strategic question then is: Can I grow an alternative crop which would fare better under the probable circumstances?

I have found that a simple probably matrix can be very useful. Here is how to develop it:

Based on your yield data, price and weather, you assign probabilities across a spectrum. After reviewing your data you may find that if you get more than six inches of rain within a week, you will loose 50% of your crops, whereas if you get three inches, you will loose less than 20%. Likewise the price of your commodity goes up 10% in the first case and only 2% in the second. Now, based on where you are in the solar cycle, you can go back several cycles and see how well wind and rain data correlated and you can make a projection that, for example, there is a 30% chance of getting six or more inches of rain within a week during the season, a 60% chance of three inches and a 10% of no rain. Of course you can break these probabilities further to obtain a smoother curve.

The final probability will look like this.

(0.50 (crop damage) X 0.30 (chance of 6” of rain) x 0.10 (price change) + (0.20 (crop damage) x 0.60 (chance of 3” of rain) x 0.02) + (0.10 (crop damage from drought) x 0.10 (no rain) x -0.05 (drop in price)* = 0.0169 or 1.69% financially better.

Note: * to mean that even though the farm had a drought the commodity price went down 5% because other areas of the country or other regions of the world over produced.

You may argue that this is a meaningless exercise, but it is not and I have used it many times to determine if it makes financial sense to replant after a frost, or a devastating rain, or early season drought.

Changing Cultural Practices

I have found that one of the reasons many farmers are slow to embrace yield enhancement products or to even trial them aside from not keeping good data is the belief that there are too many factors at play and the factors can not be differentiated.

One of the statistical tools used by researchers to overcome this issue is multiple regression analysis, which is available in an Excel spread sheet. For example, this analysis allows you to compare yield, against many variables such as rain fall, seed variety, wind, day light hours, growth enhancement products, disease etc.; and to factor the contribution of each variable to yield. As a result, a farmer can very precisely determine how effective a new product is in spite of changes in weather and other factors.

Most extension agents are familiar with this statistical tool and can help farmers set up trials and interpret the data for them. From experience, I have used this approach and have trialed and altered cultural practices each year based on this analysis. Multiple regression analysis is a very powerful tool which allows a farmer to determine what works with a high degree of confidence.

Farming by the numbers may not alter the risk of farming. Weather, disease, market prices and other factors beyond the farmer’s control drive the outcome. However, analyzing the risks and formulated alternative plans can have a very positive impact on the farmer’s bottom line.

~Dominique Depaz

Bio:

Originally from Martinique, Dominique Depaz comes from a family of banana, pineapple and sugar cane growers. Right out of college he was among the first designers of drip irrigation systems in the western hemisphere. He then joined the Navy and flew jets aboard carrier for many years. Dominique has owned numerous businesses in and out of agriculture and has written many risk analysis software and a very complex, task driven farm management software. He is currently an analytics consultant to the agricultural industry.  Dominique can be reached at: Dominique (at) SmartFarmingSolutions (dot) com