The Citizen, 1986-03-19, Page 16PAGE 16. THE CITIZEN, WEDNESDAY, MARCH 19, 1986.
Cash flow forecasts essentia! in modern farming
BY BRIAN HALL
FARM MANAGEMENT
SPECIALIST FOR
HURON-O.M.A.F.
To operate successfully, today’s
producer must have a good
knowledge of production practices
that will net him higher returns.
Farmers must also draw on another
important skill, the ability to
manage the large amounts of
money which flow through the
farm and family accounts. Likely
you’ve been asked by your lender
for a cash flow statement. Your
banker has recognized that failure
to plan is planning for failure.
At one time, we could borrow on
what we had invested in the farm.
This is called your equity. But I’ve
seen farms wtih nearly 100 per cent
equity that were losing money. I’ve
also seen farms with a low equity,
that were making a profit.
• Why is Cash Flow Manage
ment Important?
Managing your money is a lot
like using the road map. When Dad
packs up the family and pulls out of
the driveway on a vacation trip, up
to date information on distances,
routes, facilities should be on
hand. If not, Mom and the kids may
be headed for some unexpected
surprises during the trip.
Poor cash flow planning in
farming can yield similar results.
Whatever the goal, things will go a
lot smoother when the course for
McKillop appoints
consultants for
waste site study
McKillop Township council at its
meeting March 4 took the first step
toward a new municipal waste
disposal sight.
Council passed a motion ap
pointing Conestoga-Rovers and
Associates Limited as consulting
engineers to investigate the McIl
wain land for the purpose of a waste
disposal site.
In other business, council ap
proved a program of road expendi
tures of $630,000 for the year and
the council also requested a
supplementary allocation from the
Ministry of Tran sport and Com
munications of $130,000 for the
Roxboro bridge and $120,000 for
renovations and addition to the
existing municipal garage.
Council accepted the tender of
Donegan’s Haulage Ltd., lowest of
three tenders received, to supply,
crush, haul and spread gravel at a
cost of $2.22 per Imperial ton for a
total cost of $62,160.
The council voted to concur with
a letter from the council of the town
of Clinton objecting to the size of
the salary increases awarded to the
heads of departments of Huron
county council and asking the
county council to set aside the
second ar.'d third years of the
agreement and renegotiate.
Court of revision was held on the
Barron Municipal Drain, the B
Drain of the Nash Municipal Drain
and the Higgerson-Ryan Munici
pal Drains. There were no appeals
or landowners present for the first
twodrains and .he by-laws we re
passed.
On the Higgerson-Ryan drains,
Gerald Ryan, Russell Smith, Ben
Nyland, Frank Nolan and Ken
Ryan were present. Ken Ryan
requested that the excavated
material be placed on the northeast
side of the drain on his property.
Russell Smith recommended that
repairs be made to the culvert and
catch basin on Perth County Road
No. 10, Lot35, Concession5, Logan
township. The engineer, William
Dietrich, will contact the Perth
County Engineer concerning the
repairs.
Ben Nyland questioned the
replacement of the culvert on his
property. Mr. Deitrich advised
that the existing culvert was
undersized and not deep enough.
He also indicated Mr. Nylands
benefit assessment includes the
cost of replacing the culvert.
Appointments to the McKillop
Township Recreation Parks and
Community Centre Board for the
year were made. Those appointed
were: Roy Gingerich. Brian Murr
ay, Brian Pryce. Donald Dodds,
Bruce Whitmore, Brian Campbell,
and John George.
Reeve Marie Hicknell and Coun
cillor Brian Campbell reported on
their attendance at the annual
meeting of the Ausable-Bayfield
Conservation Authority at which
Reeve Hicknell was appointed to
the Personnel Finance Committee.
Brenda McIntosh, vice-presi
dent of the Huron County Federa
tion of Agriculture and William
Murray, McKillop representative,
were present to report to council on
the activities of the Federation and
report that canvassing for new
members will commence this
month. The pair also thanked
council for past support and
requested consideration be given
to increasing the grant.
the farm is planned ahead of time
and progress marked along the
way.
• Who Needs Cash Flow Plann
ing?
Any business which handles the
amount of money that a farm does,
must plan their moves carefully.
Whether you are a dairy producer
receiving regular income or a cash
crop producer, the time you spend
preparing a cash flow is time well
spent.
For the producer who has
reached a high level of equity, cash
flow management is the key to
timing buying and selling deci
sions to squeeze the most profit
from his investment.
For a younger farmer, sound
cash flow management is even
more critical. Wise allocation of a
limited amount of credit in the face
of soaringcapital requirements
will speed your growth into a more
stable productive operation.
• What Can a Cash Flow Tell
You?
Lenders use the cash flow to time
debt payments, determine the
feasibility of your farm plan for the
coming year and calculate the level
of operating credit required.
For the producer, they will be
able to time when seed, fertilizer,
and sprays, land rent can be paid,
along with payables, and when
cattle or hog purchases should be
made. The cash flow also allows
you to better plan your sales of
grain.
One of the biggest advantages of
the cash flow, is for the farmer to
forsee problems or opportunities
developing early. To check pro
gress, farmers should compare the
actual income and expenses at the
end of each month with their
projections. Ask yourself “if in
come or expenses are lower or
higher thanexpected, how can I
make adjustments?” Perhaps in
ventories can be adjusted
eliminate potential financial
stress. Another alternative for the
distressed operator, is in rearrang
ing existing debt and schedule
debt repayment to coincide with
later sales. This gives the lender
the peace of mind of knowing the
farmer is operating in a business
like way and avoids surprises for
the farmer at year end.
With the cash flow, producers
can look and gain some insight into
the causes of changes in produc
tion. The same with dairy farmers -
on the first of the month, they can
look at their net profits and see
what happens when the price of
protein goes up.
FARM MANAGEMENT
ANALYSIS PROJECT
Farming is a changing scene.
New crop varieties, advanced
production practices, new technol
ogies, changing markets are a
challenge to your farm operation.
In the 1980’s farmers are feeling
the strain of a faultering economy
that has resulted in higher input
costs, volatile prices for your
product, higher interest rates,
stabilized or declining farm values.
Farmers are adjusting to this
challenge by keeping accurate
farm records and using these in
planning ahead in making import
ant decisions on the farm.
A nu mber of farmers from across
Ontario have been taking advant
age of the Ontario Farm Manage
ment Analysis Project carried out
by the Ontario Ministry of Agricul
ture and Food.
The project provides an indivi
dual analysis of farm records to a
farmer. Theanalysisthefarmer
to receives is a useful tool in
managing his business affairs.
Along with an individual farm
analysis, the farmer also receives a
summary report for farms across
Ontario with a similar main
enterprise (example, dairy, cash
crop, farrow to finish).
Copies of the 1984 report are
available from the Agricultural
Office on request. As an example of
the type of information provided in
1985, Dennis Martin summarized
records of dairy farmers in Huron
County. Thefinancial summary
was an opportunity for dairy
producers to identify strengths and
weaknesses within their operation.
Since purchased feeds can be
influenced so much by the quality
and quantity of homegrown feeds,
the major emphasis of the summ
ary was placed on the expense. The
cost of purchased protein per cow
varied from $138 for dairy produc
ers on a hay, haylage and corn
silage program to $173 per cow for
producers on a hay and corn silage
program. The results also showed
that most herds were over fed
protein, however, it was also clear
that it did pay to feed for high
production.
Similarly, with other types of
enterprisesproducerscan com
pare their farms to others but more
importantly can look at the
strengths of their business and
areas where the business can be
strengthened.
DISPLAYS
1986 EVERYONE WELCOME
Crop Information
Meeting
Thursday, March 20 ’86
Brindley Auction Centre
(% ml L of Dungannon)
DOORS OPEN AT 1030 aun.
W.G.T.
BROKERAGE
GUEST SPEAKERS
11:30 A.M. - FARM INCOME STABILIZATION - How’s It work?
Brian Hall OMAF
12:00 P.M. MARKET UPDATE-
Corn, Soys - Norma Vlasshaert
White & Coloured Beans - Doug Hope
LUNCH
2:00 P.M. - CORN MOULD PROBLEMS IN 1985
John Heard - Solis & Crops specialist
2:30 P.M. - HYLAND SEEDS - What’s New for 1986?
Don Littlejohns - Director of Research, Hyland Seeds
3:00 P.M. <* SPILLS BILL - What It means to the Ontario Farmer?
Bruce Lobb. Ministry of Environment
3:30 P.M. - ROSS DAILY - HOST OF CFPL-TV’S
“This Business of Farming”
RSVP WEDNESDAY, MARCH 19
So arrangements can be made for
lunch and seating
REPRESENTATIVES OF MAJOR
CHEMICAL COMPANIES; CIBA
GEIGY; MONSANTO; CHIPMAN;
PFIZER; HOECHST; VELSICOL;BASF;
CHEMAGRO; ELANCO; UNIROYAL ;
NITRAGIN; C.I.L.; DUPONT
CYNAMIDE
• O.M.A.F.
•MAITLAND VALLEY
CONSERVATION AUTHORITY
•HYLAND SEEDS
•MINISTRY OF ENVIRONMENT
PORT ALBERT 529-7901