Hebert Grain Ventures might just be the closest thing to pandemic-proof a farm can be.
“From a pandemic standpoint, the farm really hasn’t felt it. It’s kind of business as usual,” said Evan Shout, chief financial officer of the 22,000-acre grain operation in southern Saskatchewan.
“We probably came out of this a little bit better than we thought we would.”
The key was having a management plan in place, which the management team used to draw up a list of issues they might encounter.
“We run 24-hour shifts during seeding, so for us, making sure we had enough people in place was a big must,” said Shout. “Before the pandemic hit, we were tight (on employee numbers), but once we had a few people come to search us out because they were without a job, it definitely helped us a lot.
“Everything leads back to people. We could have all the big data and technology we want, but without having good people to run it, it just doesn’t work.”
They also took advantage of some unexpected upsides.
“Some of the things that have shaken out because of the pandemic have actually probably bolstered our bottom line for the current year,” said Shout.
“We’re in some negative times here, but there’s a lot of ways farms can utilize this current environment and actually turn it into a positive.”
For example, when fuel prices fell because of reduced demand, Hebert Grain saw it as more than an opportunity to fill up its fuel tanks.
“Don’t get me wrong — we filled our tanks, but then we went out and hedged the fuel price,” said Shout. “We didn’t have to outlay any cash, and we got to take advantage of the low fuel costs.”
Another “huge one” was the drop in interest rates.
“We changed our whole debt structure this spring and took advantage of interest rates,” said Shout. “When the interest rate started dropping, all you had to do was ask the banks, and they were just happy you were even interested in making a repayment, so they were willing to work with you on interest rates and other items.
“If a farm hasn’t restructured their debt or at least gone to their bank to make changes to their interest, I’d say they’ve fallen behind.”
They’ve also made changes to their marketing plans to reduce risk.
“We were a little more risk averse because obviously we don’t know the impacts it’s going to have,” he said. “Right now, the stock market goes up and down without any rhyme or reason, so when it comes to commodity prices, we’re probably a little more sold this year than we have been in the past just to secure that profit margin.”
Their thinking about crop insurance changed somewhat, too.
“We probably made a little more decisions toward an insurance product that covered both market and yield just because we weren’t sure what the markets were going to do,” said Shout.
“Don’t get me wrong, I like having yield coverage, but in a year with a pandemic, I don’t know the market, and I don’t think anybody really has an idea of where we’re heading. We wanted to make sure we were at least insured against a massive adjustment to our margins.”
Many farmers know Hebert Grain Ventures because of the speaking sideline of managing partner Kristjan Hebert, who is an advocate of the five per cent rule — targeting a five per cent increase in production and income for each bushel produced, while trimming costs by five per cent.
The operation cut inputs costs by buying them early this spring (with plans to buy next year’s fertilizer this summer if prices stay low). But they didn’t cut back on the inputs themselves, Shout emphasized.
“A lot of guys, in a year where they’re fearful, will really pull back, but the first place they go is to inputs. But that has the biggest detriment to your gross revenues. The last place you want to slow down is on inputs.
“That’s been our belief right from the start — if we’re going to cost cut, it’s definitely not going to be on inputs.”
Rather, the key is having a solid plan, he said.
“I know some big farms that don’t have a management plan in place and some small farms that do, and it definitely shows, especially in a year where you have this kind of issue,” said Shout.
“By having a sound management plan in place, you can roll with the punches a little easier.”
New technology has made it easier to find savings, he added, but the best route to higher profits is having a team of skilled advisers.
“To get a sound management plan in place, you’re not going to be able to do it by yourself,” said Shout. “In agriculture, we’re really rugged individuals — everybody wants to run their own ship, and they think they can either succeed or fail by themselves.
“But this is a big industry and we have a lot of risk — weather, markets, pandemics — so make sure you’re using the best advisers out there.”
It’s simply a matter of trying to be prepared, he said.
“You’ll find in times of crisis, a lot of people tend to go to the negative, and that’s one thing we don’t do,” said Shout.
“We’d rather find solutions than sit there waiting for government to give us a handout or waiting for the environment to change. We’d rather be out ahead of it.”