Management Report to Members 1.0

In this issue:

President’s Report
Vice President Government Relations
National Service Manager
Senior Member Service Manager
Human Resources
Supplier Reports

President’s Report

James Mann

James Mann, CEO Farmers of North AmericaI’ve initiated this reporting because Farmers of North America is literally your single-purpose Management Team, and that single purpose is to maximize your farm profitability. There is no other entity, business or institution that provides this kind of functionality for farmers. All corporations, including farm input suppliers, have extensive management teams committed to increasing the profit their shareholders achieve from the value of your crops. FNA is unique in being that kind of management team for farmers.

Sometimes it has been difficult for industry, government and even some farmers to appreciate this core characteristic of FNA as the corporate management team for its Members. This is not an abstract notion or merely a way of describing things. It is an organizational fact of the farm business alliance. Having a corporate management team mandated to maximize your profitability is the entire point of FNA.

The output of that management team sometimes gets blurred with the management itself.

For example, ProjectN is not FNA. ProjectN is its own independent legal partnership, owned by the farmers who have put up the risk capital to get it going. It is not controlled by FNA and it does not control FNA. Genesis Grain and Fertilizer is an entirely independent limited partnership owned by those farmers who invested in partnership units. AgraCity Crop & Nutrition is a completely separate business that was created to establish a competitor in the major farm inputs sector that would sign on to the FNA mission — through fair pricing rather than what the market will bear. AgraCity Crop & Nutrition is not FNA and FNA does not control it. In fact, when there is a conflict between the interests of any other entity and the interests of FNA Members’ farm profitability, FNA’s role is to be on the side of the Member. [Go To Top Index]

Genesis & ProjectN

In the case of Genesis and ProjectN, FNA’s role has also been to provide communications and management support and to ensure the ownership structure has farmers in the strongest equity position. Some have commented that FNA should not be building the fertilizer sales and distribution business before the manufacturing facility. Aside from the fact that the sales and distribution is needed not just by ProjectN, but by Members who use more than nitrogen, I am comfortable that our track record shows FNA can walk and chew gum at the same time.

It is true that we have invested enormous time, energy and money to create these opportunities for you to own a piece of the supply chain and in doing so create a permanent and dramatic lift to your farm profitability. We do these things not to so that FNA can become the management team of fertilizer businesses or input suppliers. We will not.

We are and will remain your management team and no one else’s. [Go To Top Index]

Big Data

With changing technology and legal culture, having a corporate management team bigger than the borders of one farm is ever more important. Over the coming months FNA management will be deepening the consideration of “big data” that has been part of our Farm Information Strategy, and consulting Members about the risks posed to your farm’s ownership and control interests. There are many entities in the process of establishing claims to own the data generated by equipment you buy and operate on your own land. That has very serious implications.

Of course your FNA Managers continue to focus on the immediate business concerns of input costs. Obtaining preferential terms for FNA farmers has always been a core responsibility for the team.

Part of that responsibility is to monitor supplier performance. Many Members participated in our performance consultation some months ago. As a result of that exercise we dropped several suppliers who were not meeting your expectations and have added some in which Members indicated a strong interest. We will continue to add or drop suppliers based on their contribution to the mission of maximizing your farm profitability.

We have made significant progress in that mission. Genesis and ProjectN are of course the most significant, but we will never stop building new opportunities nor fail to tend to the basics of better pricing on all your farm inputs.

You can review FNA’s priorities at here.  We will chart our progress on those priorities each month so you have direct insight into our performance on your behalf. [Go To Top Index]

New Initiatives

In the immediate future, possibly days, you will be advised of a rejuvenated MarketPower Assurance Program that provides an unprecedented risk management to all sectors of agriculture, allowing you to secure 90% payment on any sale of farm products you make.

We also recently added MacJaw, a leading supplier of industrial and agricultural LED lighting solutions. During Farm Progress Show MacJaw gave FNA Members discounts as deep as 40% — a great start out of the gate.

And just this month Cherry Insurance has come on board to provide not only better prices on insurance premiums, but the strongest reliability available through a diversified underwriting structure, really a syndicate of major insurers like Lloyds of London.

Of course there are serious challenges.

Growing the farm business alliance is crucial to growing your market power and your farm profitability. But unlike you, we face a persistent issue with some farmers, including some of your neighbours, who feel that when farm revenues are strong they do not need the farm business alliance because, well things are good. Then when things turn down the same farmers feel they can’t afford to be part of the farm business alliance because farm revenues may be tight. I encourage you to help your neighbours and other farmers to understand that it is always the right time to work with you through membership in FNA. Doing so will drive down costs, increase efficiencies and grow your market power.

I strongly encourage you to contact us with your suggestions for matters you would like to see reported (see the form to the right). You may also reply to any of these reports with questions you have for management and you will get answers. The plan is to produce a Management Report to Members approximately once a month.

[Go To Top Index]

Vice President Government Relations

Bob Friesen

Farmers of North America Government AffairsWe are currently working on two issues respecting government and regulatory affairs that have significant implications for farm profitability.

We were successful, some time ago, working with farm organizations in showing the federal government the futility of the hundreds of millions of dollars of costs they were imposing by requiring regulatory efficacy testing requirements on fertilizer. That was a success. We believe that truth in marketing and labeling rules, coupled with farmers’ own business acumen and ability to source information is adequate for them to make informed decisions. After that the market will take care of it.

But now we are facing the prospect of the largest players in the industry trying to get the government to sanction a new regime of efficacy testing that would be controlled by “the industry.” Whether it is the intended result or not, the effect of such action will be to create new barriers to entry, meaning even less competition and more upward pressure on fertilizer prices. This is not acceptable.

The case I made on your behalf in the first instance holds for an industry regime equally as for a government one: Farmers are not stupid. If a company produces fertilizer that is not efficacious farmers won’t buy it. Unknown product from unknown suppliers may be used on a handful of acres if farmers see a legitimate reason to try it, but if the results are not there, that company will not be in the ag sector very long.

So, having rid ourselves of one government cost burden we now have to fend off industry sponsored cost burdens.This is nothing but a competition issue, preventing smaller companies, new entrants, and a farmers’ business alliance such as FNA, from getting a leg up in the industry, I will keep you updated on this file.

Another issue that bears monitoring is the generic registration regulation managed by the Pest Management Regulatory Agency (PMRA). You know that we have pressured the PMRA tirelessly to make changes to the regulation so that it is less onerous to register generic crop protection products. Canada still remains one of the most difficult countries in the world in which to register a generic crop protection product. That has led to you paying far more for pesticides than farmers in the U.S. The price of Folicur for example, is 6 times higher in Canada than in the U.S.

The PMRA finally responded to pressure from us and the Health minister’s office, and said they will make some changes, which will greatly improve things. However, that is almost a year ago and so far nothing has happened. If we don’t constantly badger them, they appear to “fall asleep”. We are committed to be relentless in our push for changes so that FNA Members can access even more lower cost products to our members.

Going Forward

  • we will of course maintain pressure on the PMRA to make necessary policy changes to facilitate a more competitive crop protection industry and subsequent farmer savings
  • we will continue to implore both levels of government to change AgriInvest so that farmers can withdraw their own non-taxable money, without touching the taxable government contributions, if they use that money to invest in eligible projects intended to maximize future revenue
  • we will continue to represent our accounts receivable insurance program, MPA, to the Federal government and the CGC as a far superior and lower cost program than anything the CGC has to offer re revenue assurance and stability
  • [Go To Top Index]

National Service Manager

Allan Beaton

Farmers of North America National Service ManagerYour Member Service Manager is your most direct voice in the business alliance. Each of them has the ability to bring any Member concerns, questions or recommendations to the full management team. So do not view your participation as a one-way street, where you only receive information. Be ready to provide information back that can improve your experience within FNA or, and perhaps most importantly, when suppliers or FNA fails to meet your expectations.

There are some things you can actively do to increase the dollar value returned through your membership. For example, despite having paid out over $1.5 Million in MPower Cash back to Members, it is disappointing that most Members will see little or no MPower cash this year. A big factor in that is beyond control due to the abrupt decline in the value of the Canadian dollar. But there are things that we can control.

For example, an area where a group of Members order their Aurora (Clodinafop) at the same time, might make it possible to ship 10 totes direct from the factory to their farms. The logistics savings would be significant and this translates into MPower cash back. If you can get your neighbours to sign on to the farm business alliance and make common ordering decisions from suppliers, you can have a direct and very positive impact in earning real money back.

But we need critical mass concentrations of Members and we need active common buying patterns. I strongly urge you to talk to your farmer connections, have them give us a call or visit the web site. There is virtually no challenge to your farm profitability that cannot be overcome with sufficient market power through a growing membership base.

In the coming month I will be leading FNA’s effort first to expand farmer participation in this business alliance and second I will be working with all Member Service Managers to expand Members’ participation in Genesis. [Go To Top Index]

Senior Member Service Manager

Shannon (Nauss) Liebreich

The primary role of Member Service Managers can be summed up in two things:

  1. Connect Members to value
  2. Connect Members to the farm business alliance

Farmers of North America Member ServiceIn most cases connecting Members to value generally consists of ensuring you are aware of opportunities to save money or make money. In the past month, I and other Member Service Managers have spent an enormous amount of time trying to talk to each of our Members about crop protection value, hail insurance and most vitally Genesis Grain & Fertilizer. Next month you can expect us to be presenting more on Genesis but also on opportunities that might apply before or after harvest.

Connecting Members to the farm business alliance includes providing critical support when things are not going well. For example, in May and the first half of June I have had to personally intervene on behalf of Members who were experiencing delivery issues with a supplier. Whether the supplier was created specifically for FNA Members or was a pre-existing supplier doesn’t matter. My role and the role of all MSMs is to be on the “buy side” of the equation, with the Member. So when a supplier has not delivered a herbicide when promised or a load of oil, my first step is to try to deal with the supplier personally. But if I am not able to get a reasonable solution, my next stop is to bring the full weight of the farm business alliance to bear and that doesn’t stop at the National Service Manager’s desk but straight to the CEO who has and will take aggressive measures to ensure FNA Members get the service and value to which they are entitled.

We also connect Members more strongly to the farm business alliance when calling to get your renewal. Often these calls turn into strong consulting sessions during which we are able to review savings opportunities and other programs you may have missed or which you can maximize through increased participation. I get a stronger understanding of your operation and am therefore better equipped to know which opportunities are a good fit for you. Of course, even for Members who don’t require a call because they simply renew on their own, I still try to have a real consultation call at least once a year.

All Member Service Managers have also started writing a regular Update to their Members that can include some thought provoking content such as the over one thousand percent total shareholder return earned by one fertilizer company. Member response has been very positive so this is a practice we will continue, aiming for an update about once a week but often pausing if there is a lot of other communications going out to you. [Go To Top Index]

Human Resources

Kelly Bradford

As FNA’s business development team finds ways to add value to Members in HR challenges on the farm (such as the FNA Temporary Foreign Worker Program) I confront a similar challenge finding the best people to build your FNA Management Team. From senior executives and Member Service Managers, to Membership Development Representatives and support staff, it is a priority to recruit talent who understands farming and who is genuinely committed to adding value to your farm.

It is important for Members to recommend or refer people who they know can do an outstanding job in any FNA position because it is good people working on your management team that creates continuing opportunities to maximize your farm profitability. Even while the focus is to build and grow a management team capable of delivering the value you earn, we must ensure we remain a farmer-centric organization with a farmer-centric management team. The best way I know to do that is to hire the sons and daughters of farmers or at minimum people who come highly recommended by farmers.

I encourage you to check out the Careers page of the FNA web site periodically and send us your best. [Go To Top Index]

Supplier Reports

In this section we will periodically invite suppliers to FNA Members to report to you on their activity with or on behalf of FNA Members.

ProjectN
Terry Drabiuk

We continue to receive interest in ProjectN from strategic investors, Engineering Procurement and Construction firms (EPCs), Technology Providers, top tier North American Off-takers, and Farmer/Members in both Canada and the USA (i.e. stakeholders). The Belle Plaine location is in a very strategic area that will provide the highest netbacks (i.e. returns to investors) in nitrogen production on the continent. As we continue discussions and negotiations with the various ProjectN stakeholders we need to ensure we have a successful close of Genesis. Though two distinctly separate projects they depend on each other to ensure farmers participate up and down the complete fertilizer value chain.

As you receive fairly extensive reporting on ProjectN in separate communications, I will use the Management Report to Members to only highlight very significant items.

Genesis
Terry Drabiuk
Members know that herculean efforts were made to bring the assets of the CWB under farmer ownership. The fact is that grain farmers still have no solution in sight for the extremely wide margins be taken off the top of the value of their crops.

We do have an exciting project to start building that solution by first building the fertilizer distribution and marketing business, Genesis Grain and Fertilizer. You will have received several updates on that project also, so I will not repeat them here. Suffice it to say that the land is in place, construction tenders are in hand, and changes have been made to allow farmers to extend the period over which they can make their investments. [Go To Top Index]

AgraCity Crop & Nutrition – Crop Protection
A Great Five Years
Darren Palendat

A great five years quickly passed and AgraCity Crop & Nutrition has added a dozen new off-patent products to FNA Members. The result has been up to a 60% drop in the cost of these product to growers. The best examples that come to mind are the introduction of Aurora (generic Horizon) and Kamikaze (generic Pursuit). The competition created has brought the price of Group 1 wild oat herbicides down from the $16-18 per acre range to the $7-8 per acre range. The introduction of Kamikaze has resulted in Pursuit dropping by over 60%, as well as a significant drop in the price of Odyssey. These lower prices have created a huge win for FNA Members.

The Challenge
The competition we create forces large multinationals to lower their prices to compete and in the process saves members thousands every year. The challenge is that as the brand name products come down to AgraCity’s price we find many members drift back to the multinationals who have been charging exorbitant prices in the past on these same products. Not continuing to support the AgraCity products that created the lower pricing in the market severely inhibits AgraCity’s ability to fund new product registrations for off-patent products. The question to ask yourself is — do you want competition on one or two key products or do you want competition and lower prices on all crop protection products.

The Opportunity
Continued support for AgraCity’s existing products, even when the competition comes down to our price, enables us to develop a broader portfolio which includes generic versions of Helix, Prosper, Folicur, Tilt, Raxil, Lontrel, OcTTain, and many more. We have made several technical and end-use product registration submissions over the last several months and look forward to new product launches in 2016. Please consider before you make your purchase decision that AgraCity has a long-term commitment to decreasing your crop protection expenses. [Go To Top Index]

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