The Rural Voice, 1981-12, Page 25ADVICE ON FARMING
Learning from our mistakes
"We learn from our mistakes." "Those
that don't study history are bound to
repeat it." "The bearer of bad news is
often shot." I'm reminded of these old
sayings as I begin this article. It's a review
of what I see happening on farms that are
now in financial difficulty.
1. Most problems have occurred where
there has been a major expansion in
the past three years.
2. During expansion farm managers
did not make adequate arrangements in
advance for financing of total expansion
and to maintain income during this period.
3. Expansion has often been for non-
productive assets with borrowed funds.
4. On a number of farms where there
are limited -use facilities constructed with
borrowed funds (e.g. slatted floors, high
costs silos) --the owners are locked into
high repayment schedules. There are no
other uses for these facilities and the
operators cannot diversify.
5. Borrowings have increased to pay
expenses, provide family living and/or
catch up on accounts payable.
6. Most problems can be traced to
reduced income from lower prices of beef
and pork combined with higher credit
costs.
7. Borrowers and lenders were alerted
to their problem via a depleted bank
account.
8. Most of the farmers have equity,
some with substantial amounts. However,
equity is eroding away each year.
9. Farm records that do not adequately
indicate the health of the business appear
to be a major problem. Records kept on a
cash basis for tax purposes and a balance
sheet kept to provide a list of assets on
hand at fair market value to provide
security for borrowing purposes are not
adequate. They do not reflect the potential
of the business and the activity of the farm
manager. They may provide a false sense
of security.
10. Normal operating expenses and
capital expansion have occurred on
borrowed funds. Requests for additional
credit have been refused during the
cyclical production period. This is often
due to a lack of adequate proof as to where
present borrowings have been used, and
the lack of a plan documenting the need
for additional funds.
11. Two decades of inflation with the
ability to refinance as security increased
kept many individuals in business re-
gardless of the management ability of the
operator and the financial health of the
farm business.
12. Because of inflation people did not
expect farm prices to level off (as supply
and demand of commodities reached
equilibrium).
13. The criteria used in making loans
may have been too optimistic and
unrealistic expectations were used with
not enough left over for risk.
14. Individuals have operated on the
basis that bigger is better and not enough
allowance has been made for com-
plications associated with larger
operations.
15. A limited amount of business
understanding on the part of farmers
causes them to sign things that are not
understood.
16. Communications have broken down
between creditor and borrower. Individual
farmers have not been satisfied with the
requests and/or responses that they have
received from their local bank re-
presentatives. This dissatisfaction may or
may not be justified. Jack Hagarty.
Farm Management Specialist
Computer corn drying
Corn growers may soon be using a
computer to save energy by increasing
corn drying efficiency.
Low-temperature corn drying is gaining
in popularity in the United States, but
Ontario weather conditions often make it
uneconomical. The University of Guelph
has developed a computer program to
control low-temperature drying and make
it economical in any year, says Dr.
Lambert Otten of the school of engineer-
ing.
Low-temperature drying yields excel-
lent quality corn with very little dry matter
loss. A slower process than conventional
drying, it consists of forcing outside air up
through perforated floors into the corn
bin. The continuous air stream, heated
slightly by electric heaters, can dry corn
down to 14 to 16 percent. The problem
arises, says Dr. Offen, when the moisture
in the air is higher than in the corn being
dried. Then you are increasing the
moisture content of the corn by blowing
ambient air over the corn. If continuous
fan operation is used, wet air often defeats
the drying effort, wasting energy and
making low-temperature drying more
costly than high-temperature drying.
On the basis of a computer model he has
developed. Dr. Otten estimates that in
Ontario, continuous low-temperature dry-
ing without supplemental heat is less
efficient than conventional drying in 62
percent of the years in the London area
and 15 percent of the years in the Toronto
area.
"We're trying to prove low-tempera-
ture drying will work and work efficiently
if controlled," says Dr. Otten.
He estimates that once the computer
program is ironed out and the low-
temperature drier at Arkell is running
smoothly, a microcomputer with a built-in
control program will cost a farmer about
$2000. One control box would control all of
a farm's bins.
Apart from controlling drying, the
computer will also circulate air to avoid
spoiling during prolonged inclement wea-
ther. It will also shut down drying
completely over the winter if corn is not
completely dry before cold weather starts.
MAILBOX OF THE MONTH
Foamy Acres,
Huron County
(photo by
Dean Robinson)
THE RURAL VOICE/DECEMBER 1981 PG. 23