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Peer Groups and Financial Design and Analysis

“Joining this peer group is absolutely one of the better decisions we have made as a farm and I look forward to every meeting. The peer group has been immensely valuable to me and my farm. Any opportunity to learn about other farmer's operations has great value, but what makes the peer group so effective is that we have time to get to know each other.

We understand the context within which they operate, which offers so much more clarity on why they do what they do. You just can't get that anywhere else. It really isn't just about farm operations either; it's about HR, management, communications, budgets and, importantly, mental health (and so much more),” says Jake Leguee (Leguee Farms, Fillmore, SK).

Peer groups are defined as “a group of people, usually of similar age, background, and social status, with whom a person associates and who are likely to influence the person's beliefs and behavior”.

One of Backswath Management’s most important programs is organizing peer groups for the Canadian farming community. We see the value in bring farmers and farm families together to meet, share, learn while building relationships with other like-minded participants in an open, trusted and confidential environment of peer group meetings up to three times per year (working around the planting and harvesting seasons). We advocate the “farmers learning from farmers” process as there is great value in sharing experiences, tips, contacts, and connections from others doing similar farm business management.

Backswath Management provides administration and coordination services to the peer group as well as facilitation of the meetings. This includes planning the in-person meetings; coordinate data collection where applicable; prepare reports as required. Facilitators are provided and their role is to lead and guide the discussion and to keep the peer group on point based on the goals and objectives identified by each peer group’s Charter. They are there to engage participants, to make sure that everyone is heard and encouraged to speak up, and to keep the group focused on the agenda as determined by the members of the peer group.

For more information about Backswath Management’s Peer Group program, please contact us at 204-275-0458.


Keeping an Eye on Financial Performance - first published in The Western Producer

So, how do they look? The crops that is. A bit late for a lot of farmers but maybe a good enough start. They say that you can’t make a crop in the spring but you can sure lose one. It may be fair to say that it’s not lost yet and that there’s some potential. There are definitely areas that are struggling – especially in pockets of the United States. How all this will affect prices remains to be seen but some substantial profits could be realized when everything is in the bin and sold.

For years, ‘profit’ in the grain and oilseed sector was a distant memory with financial strain being more the norm. In recent years, things have changed and coupled with historically low interest rates, ‘profit’ is almost now an expectation.

I had the opportunity to attend a couple of meetings in the past month. One in Canada and one in the US. The focus of the meetings was farm management in general, but there was some specific discussion on financial performance. There were discussions, as you would expect, on the risk of rising interest rates and the impact a modest increase would have on farms. Issues from rising capital costs got a lot of attention; especially related to land. Increasing overall debt load was a popular topic as well. Lots of discussion but not a lot of answers. This actually makes sense as the ‘answers’ lie in what will happen in the future.

One of the ways to put some context around the discussions and issues is to look for historical context – what happened in similar situations in the past. History doesn’t necessarily repeat itself but it can provide some meaningful insight.

The upside of the 70’s was followed by the brutal reality of the 80’s. I spent a lot of time working in debt mediation, trying to help farm families work through varying degrees of financial crisis. I’m NOT suggesting that we’re heading for a similar financial crisis. I do though, like a lot of people, wonder what the future will bring. It causes me to remember a common comment I heard from farm families who were struggling in the 80’s. That being “If we had only known, we might have been able to do something”.

This brings me back to the meetings I attended. There was discussion about whether, and how much, the financial management skill sets of farmers, in general, have improved. Personally, I think there’s been improvement but at the same time, I still see room for even more attention to managing financial performance.

There is an aspect of human nature that will be a reality for a lot of farmers – when things are good, the purse strings can get a little looser. Less attention to financial management in general. My first recommendation is to keep your focus on financial performance, even if you have no financial concerns or issues. Four things come to mind:

 Strategically manage the investments you make.

 Monitor your overall debt load.

 Focus on operating cost control.

 Manage your liquidity (cash flow).

A general observation coming out of the meetings I attended was that farmers should expect, and plan for, significant volatility stemming from prices, weather and global economic pressures. There’s also the chance that we could see a return to more modest profit potential. In both situations, the first financial impact is on cash flow. 

My second recommendation is, then, to watch your cash flow like a hawk. There are three things you can do. First, calculate your average working capital for the past five years. Working capital is the best liquidity indicator. Note that if your farm has increased in size in that period, you may need to make an adjustment to the average to arrive at a reasonable current value. Next, determine how much additional working capital you think you should have to act as a buffer to the financial pressures mentioned above. Last, adjust your management practices so that you achieve, and maintain, the working capital you need.


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