Planning Ahead for 2009: Productivity Is Key

Toby Keith, the popular American country singer has a song, which resonates with many of us.  It’s called “As Good As I Once Was.”  The song is a story of an old friend of mine who meets up with a couple of cowgirls in an Omaha bar looking for a rodeo, or something like that.  At the end of the day my friend through Toby admits he not as good as he once was.

I certainly count myself in that designation.  However, I’m older and smarter and my productivity is more efficient every day.  Like others in the farming community, I substitute my capital for labour.  At the end of the day it continues the vicious cycle of productivity and efficiency on Canadian farms.

Let me give you an example.  A few years ago I hired a young 20-year-old lad to work on my farm.  In a nutshell one morning I needed to move an auger from A to B.  I mentioned this in passing and before I knew it, he had grabbed the auger and with all his might, he had moved it into place across the yard.  I was incredulous because that’s a job I reserve for a small tractor.  Needless to say, I knew at that point there was no substitute for youth and strength.  If I could get ten guys like him, I’d take over the world.

Within Canadian agriculture, it’s a vicious cycle, that old auger is a symbol of how fast things move.  50 years ago the idea of an auger was a non-starter.  We had elevators, but augers turned out to be more efficient.  They still are everywhere in agriculture, but today are being replaced by belts, air suction and who knows what.  The drive to get more and more efficient is always in the wind.

If you doubt that, let me ask you how you are going to successfully produce corn next year at $5/bushel?  A couple of years ago that question would be right out of Second City. (For my American readers, a famous Canadian comedy club)  However, in many ways $5 corn in 2008 is more like $2.50 corn in 2006.  Many of you are saying “the market is going to have to go up ” in order to get those 2009 acres.”  I’ve heard many Canadian corn growers say they need $6 or higher just to get started on 2009 corn planting.  However, I’m not so sure.  What about if the corn market doesn’t change and next spring new crop corn is $4.XX?

That surely would cause some gnashing of teeth among some Canadian producers.  We’ll see what the USDA September 12 crop production report says.  The untold story though is there are many corn producers in North America who can produce corn that cheap.  Some maybe are in Ontario, but most likely there are a lot more in places like Illinois, Iowa and Indiana.  Whoever gets 250 bushels/acre first, wins.

It wasn’t supposed to be this way.  $5 corn was something dreams were made of.  However, at the end of the day, it’s going back to those dog days when it was $2.50.  We need something to make that work and getting more efficient and being more productive is the only answer, short of a good Canadian agricultural safety net.

Economists call that a shift of a firm’s average cost curves.  Farmers call it shifting to newer technologies to try and make a buck at the end of the day.  That’s why we have eight stacked hybrids, 528 hp Lexion combines like I saw last week at the Woodstock Ontario farm show and GPS technologies coming out of the woodwork.  At the end of the day farmers are chasing those technologies to meet our new cost and price horizons.

Still, nobody wants to hear about “sharpening the pencil.” That talk sounds too much like the 1980’s when interest rates spiked and prices tanked.  However, that might be our reality.  As Toby infers, being as good as you once were, won’t cut it moving forward with farm planning into 2009.

What’s that mean for Canadian producers with no semblance of an agricultural safety net outside of Quebec?  It means the buzzwords efficiency and productivity must again come to the fore.  That means scale that means new technologies and the ability to separate gizmo technologies from technologies that really make you money.

A few years ago I shut off all the lights on my tractor at night and at least for a few hundred feet sprayed soybeans without any lights except for my GPS guidance.  I found myself pushing across the field, spraying my soybeans in total darkness and doing a good job to boot.  At the time I felt I was “jumping over a technological chasm”, just like my grandfather did when the first tractor reached the farm.  In my career, I’ve never had such a pioneering moment.

Along with increased productivity, a few more of those moments might be in order for the rest of us.  Looking ahead into 2009 will surely be challenging.  However don’t depend on the market to bail us out.  At the end of the day, it’s up to us.