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[00:00:07] The Dirt PodKast:
Welcome to The Dirt, an eKonomics podcast bringing you the down and dirty agronomic science behind growing better crops and bigger returns. Backed by nutrien-ekonomics.com, we break down the latest research, news, and insights to help farmers make better business decisions. Let’s dig in.
[00:00:32] Amy Crozier:
Hello, and welcome back to the Dirt Podcast. Thank you for tuning in this week. I am your host, Amy Crozier, senior marketing representative with Nutrien. I am excited to dive into today’s episode on business risk management. We are going beyond basic crop insurance to whole farm management. Joining me today is Mathieu Lipari. He is program manager and national risk management lead with Farm Management Canada. Thank you, Mathieu, so much for joining us. We’re really excited to have you here today. Why don’t you just start out by telling us who you are, where you’re from, and what you do?
[00:01:07] Mathieu Lipari:
Sure. Thanks, Amy. I work for a company called Farm Management Canada. It’s a small not-for-profit company in Canada that has a focus on business management for agriculture. We don’t really focus on the agrology side of things, but more on the business management side of things. That’s everything, like financial management, strategic and business planning, marketing, HR management, farm transition, health environment, and of course, risk management, which is what I focus on. I’m their risk management lead. We worked nationally in French and English, and we try to develop tools and resources that will help farmers to deal with their business management challenges and help them to become better business managers. Essentially, Farm Management Canada came out of the farm financial crisis that happened in 1980s. Shortly after that, the government of Canada decided to create entities like Farm Management Canada, and that’s where we appeared.
[00:02:02] Mathieu Lipari:
And our role was really to focus down on the business side of things, which is a part of farming, I think, that a lot of producers maybe enjoy a little bit less. They don’t really like hanging out behind the desk and working on the computer and doing planning and strategy, and things like that. That’s not necessarily the focus of their attention or necessarily what they really enjoy about farming, but it’s a necessary part of it now. And farming is big business so we try to help in that respect. I’ve been very much focused on the risk management side of things. I started working here 15 years ago, did a short stint with MNP as well, where I worked on their agri-risk management resources team. I’ve been dealing with the BRM programs and with comprehensive risk for a long time in agriculture.
[00:02:45] Amy Crozier:
When we talk about business risk management, it seems complicated. We’re used to crop insurance and basic programs like that, that we’re all familiar with. They’re right out in front of us. We spend all winter planning for them. What is business risk management to farmers and what should they be looking out for in today’s times?
[00:03:01] Mathieu Lipari:
That’s a great question. And often when we talk about business risk management, I think the term has been taken over, at least in Canada, I’m not sure in the US, but it’s been taken over by insurance and BRM, and the BRM programs that are run by the Canadian government, by provincial governments as well. We’re talking about agri-stability, agri-insurance, or crop insurance or production insurance in certain provinces, agri-invest, and then even the risk management framework, which is agri-recovery. That’s essentially, when we talk about BRM, that’s what we’re talking about. In fact, if I think back on some of the focus groups we’ve had in the past to talk about risk management, when we invited people to say we were talking about business risk management, the first thing they would ask us is, “Which program are you talking about?” Or, “Which insurance are you talking about?”
[00:03:46] Mathieu Lipari:
There’s a bit of a misnomer there, I guess. When we talk about business risk management, what we’re really talking about is everything you can do to manage risk on your farm. And that includes the insurance programs. It includes the business risk management programs that exist, but it also includes some proactive approaches that you can apply on your farm, and practices that you can have on your farm that will help you to reduce your risk before they even happen, or to manage those risks or even to take calculated risks to maybe increase your farm’s profitability or your farm success. It’s a very wide range of approaches that can be applied within a strategy.
[00:04:24] Mathieu Lipari:
We’re really talking about a strategic approach to the actions you take to manage your risk on your farm, which includes the reactive side, which is the insurance and BRM programs, and the proactive side, which is everything you can do on your farm before that, like farm diversification, getting off-farm income to manage your risk, changing your agronomic practices to improve your soil health or improving the way that you manage your humidity levels in the soil. It could be how you manage pests, how you manage diseases, et cetera, et cetera. All these things that you can do proactively to minimize those risks before they actually happen, and then combine that with the other side of things, which is the insurance that’s there to repair any damages that you might incur if something happens that you either couldn’t avoid or couldn’t foresee.
[00:05:12] Amy Crozier:
Sounds like there’s a lot of different risks that farmers really need to be tuning into and looking at managing. Right now, what would you say are the number one things that farmers should really be prioritizing and tuning into have on their radar? Can you run through some examples and some things that are happening real time right now that farmers should be listening to and worrying about managing?
[00:05:33] Mathieu Lipari:
I think when you look at the farmer sentiment indexes in the US and in Canada, some of the things that people are focusing on are things like input costs right now that are going up, that’s a risk for farming. Some of the risks that we’re seeing outside of that, of course, as we’ve seen recently, there were some trade disputes with China, between Canada and the US, and things like that have caused a certain level of risk as well. There’s some geopolitical risk happening that we can’t really control either, if we’re talking about wars and things like that. Those all have an impact on farms and we have to think about those things and how we can manage them ourselves and how the programs are going to help us to deal with those as well. There’s other risks, I think, that are more predominant these days, where we’re talking about an aging population in agriculture. That translates to a high level of farm transfer or farm succession, which is not necessarily being dealt with very well either.
[00:06:28] Mathieu Lipari:
I think about 12% of farms currently have a farm transition plan. There’s that aspect of things as well to deal with. We’re talking about lots of climate risk as well that I don’t want to neglect, out West. We’re talking a lot about reduced humidity levels, both from rainfall and in the groundwater as well, which is causing more frequent droughts, and that’s causing issues as well. And then on the flip side, we have in some of the eastern provinces, we have increased flooding and some extreme weather events. Wildfires have been an issue in the past few years. There’s a lot of different risks that are increasing with time. And I think agriculture is really feeling the pinch at this point, where we have a combination of things happening at the same time that’s increasing risk in agriculture, which was already pretty high, to be fair. We’re one of the riskiest industries when compared across the board to other sectors or other industries. We’re up there in the riskiest, and the least prepared for risk as well.
[00:07:27] Amy Crozier:
How do you prepare for something? I don’t know if there’s going to be tariffs or geopolitical events happen, you can’t control the weather. How does farmers even start to go around and prepare for something like this, and start managing those risks? I think sometimes it feels overwhelming. I think there is a little bit of fear that happens. We think we’re going to get through this year and we are hoping we’re hedging market prices. How, going forward, do you start to even have a business risk management plan and foresee and plan for some of these things that really are a lot of the times out of farmers’ control?
[00:08:01] Mathieu Lipari:
Well, I think you just touched it there. Planning is the key. And how do you build a plan to face all of these different risks, even the ones you may not be thinking about? You have to go through a risk management process, which starts off, really, in order to build your plan, you have to start by identifying the risks that you’re facing. You might need some help with that. There are tools and resources available to help you identify the risks that are out there, but certainly, looking through all the different risks that you can potentially face on your farm. And farmers are aware of what’s going on in their environment. They’re well aware if they’re in an area where there’s a propensity for drought or flooding or something like that. They’re aware of diseases and pests they have to deal with on a regular basis.
[00:08:43] Mathieu Lipari:
Some new ones will crop up from time to time, but you have to start by being very aware of what you’re facing on your farm, and examining a list of risks as well that you can qualify at that point. You can assess and figure out which ones are more important for you and which ones are less important for you, which ones are more likely, which ones are less likely, what’s less frequent, and then which ones will have the most impact on your farm. And once you’ve established that list and you’ve assessed them, you could start prioritizing which risks you really want to deal with right away. And then we fall into the category of what you just said, which is to say, “Well, what do I do about these risks?” And there’s a number of different practices that you could apply, depending on the situation that you’re in, to then address those risks.
[00:09:25] Mathieu Lipari:
But starting a little bit at a time. How to eat an elephant in just one bite at a time? You really have to start thinking about, “Well, what are the overall risks? What are the ones that I need to deal with right away?” And there’ll always be some unforeseen ones. Fortunately, we do have some risk management programs that are there to help with that kind of thing. Agri-recovery, for example, that has helped to address some of the big risks that have affected a lot of farms, that were not really planned for in the rest of the BRM suite. And then you have other insurance programs that are there to help with the issues that might crop up and affect the farm in a negative fashion, and help you to at least get through that year, get through that tough time. But as you start planning ahead and start saying, “Okay, these types of risks are likely to occur. I’m going to start putting in place some measures to reduce those risks as I go along.”
[00:10:15] Mathieu Lipari:
Some of them are easy to foresee, like, you’re going to have a farm transition at some point on your farm. You can’t ignore that, you have to know about that. You have to start working on that as soon as you can and start figuring out how you’re going to transition that farm to the next generation. Who’s going to be involved, what’s fair versus equal, all of those considerations, and how you’re going to leave that legacy to the next generation. These are things you know about, you know it’s going to happen, and yet we have about 12% of farms in Canada that have a farm transition plan. That’s what I mean by, start building that plan. Start working on the things that you know about and that you know are going to happen on your farm and that you need to deal with and that may not be covered by any of the BRM programs. There’s other risks as well. Like, if we’re talking about drought in the West, we know these are going to happen.
[00:11:05] Mathieu Lipari:
We know that there are areas in Western Canada where there’s recurring drought year after year. It’s not going to be enough to just have a BRM program to help you out when that happens, because with time, those are not going to be able to cover you as well as they are right now. As the droughts continue, they’re trying to adapt, but at some point you can’t just keep paying insurance to a farm that’s having drought after drought after drought. They need to be able to either have some different crops that are in the ground that are going to survive that kind of event, or they need to have better ways of keeping moisture in the ground, better ways of managing their soil, better ways of managing things like irrigation, and things like that. There are approaches you’re going to have to adopt with time to be able to manage some of these recurring risks, and risks that you’re aware of, and that will have a big impact on your farm.
[00:11:54] Mathieu Lipari:
And as for those that you may not be aware of, well, the ones that are unforeseen, the unknown unknowns, well, the first thing is to start looking at lists of different risks that maybe you didn’t think of. There’s some tools and resources that we have at Farm Management Canada that could help you to do that. But basically, just looking through the list and saying, “Have I thought about these risks on my farm?” will already help you to predict some of the risks that might occur, that maybe you haven’t thought about until now. And the ones that fall out of the sky, that none of us saw coming, well, hopefully we have programs that are there to help us out to get through those events. But the more you plan, the more you’re strategic about your risks and the more you apply the general risk management techniques, then the better off you’ll be in the long run.
[00:12:39] Mathieu Lipari:
And that includes things like being good with your finances. There’s a lack of knowledge and acumen when it comes to farm financials on some farms. I mean, some are very comfortable with them and we see them performing very well. But if you know your numbers, you know how to use those numbers, you know your financials, and you’re able to monitor and manage those as you go along, just having that in place will already help you to manage a lot of the risks that may not be covered by BRM programs. And it’ll help you to get through some tougher times as well, because you’ll have that kind of security behind you to help you to get through some tough times. All of that, there’s some general practices that you could apply. The most general one is have your written plans in place, talk to your teams, look at those risks, examine those risks and assess them, and get through that process so that you could then take action and start managing those risks.
[00:13:32] Mathieu Lipari:
And again, you want that combination of things that you’re doing yourself on the farm to help to manage risks and other programs and insurance that can help you if some of those risks still affect the farm.
[00:13:44] Amy Crozier:
You mentioned 12%, which is a staggering number when we think about passing down a business. And it really is a business, but there’s a lot of heart that’s in there and a lot of history when we’re talking about succession planning. And then we talk about how dynamic, really, the system is with the geopolitical weather, everything that’s combined. What happens if we don’t start looking at a whole management approach on the farm, what’s the impact? What’s the impact on the farm if we don’t start looking at that? What have you seen in your practice?
[00:14:14] Mathieu Lipari:
I would compare our top 25%. Those that are actually really familiar with their farm financials and that are very comfortable with them, that are writing down plans, working with teams, using advisory support as well, using peer groups, using all the tools they have to manage their farm, manage their risk and plan ahead and build their strategies. When we look at that group, the top 25% are performing much better as far as profitability and returns versus others, and in managing the risk as well. The downside of that, if you’re in the bottom 25%, well, obviously the potential outcomes could be quite disastrous for a farm, and we don’t want to see that happening on a lot of farms. As risk increases and diversifies and changes with time, as the markets are getting a little tougher, as interest rates are going up and input costs are going up and all, the management side of things becomes more and more important.
[00:15:08] Mathieu Lipari:
The consequences of a poorly planned farm transition, for example, could be quite bad. It could mean there’s basically no legacy. You had to sell off the farm, or the farm was split off into three different people who inherited the farm. They didn’t get a farm transition, they just had an inheritance for the farm and now there’s no way for all of them to be involved. They either have to sell parts of the farm to each other, which doesn’t usually work because you don’t have that kind of capital available. What happens is, the farm gets sold off and it’s no longer in the family. We don’t want to see those types of things happen. But the consequences could be quite bad, and these are complex issues that need to be dealt with and planned ahead for. I would say, the more you plan ahead and work on learning about your business management, learning about your risk management and starting to apply some of those practices, the better off you’ll be in the long run. Not just for surviving but also thriving, really actually getting more profitability out of it.
[00:16:04] Mathieu Lipari:
If you know your cost of production, you know your numbers, you know where you’re going, you know what your objectives are with your farm, you know where you’re going to be in five years and 10 years, that’s increasing your chances of success. It’s increasing your opportunities as well, and your ability to seize those opportunities. That’s the recipe for success and that’s what we like to see on farms. On the flip side, those that don’t plan and those that don’t have these kinds of measures in place also suffer from more stress and more mental fatigue, because they’re dealing with issues that are perceived as uncontrollable. There’s a lot of uncertainty. We have 75% of farms in Canada that report that they have a chronic stress related to uncertainty, related to the uncertainty of the sector, related to not really knowing what’s going to happen for them. And planning helps a lot.
[00:16:58] Mathieu Lipari:
Risk management planning really helps a lot in reducing that burden on farmers because you have the big picture, you know where you’re going, you know how you’re dealing with things, and that already helps from that perspective as well. There are effects both from a profitability side of things, from mental health side of things, and just overall capacity to make good decisions. That all depends on how well you’re building your strategy, you’re building your risk management plans and you’re building your business essentially.
[00:17:29] Amy Crozier:
I love that, what you said there, Mathieu, of going from surviving to thriving. I think there’s such a big difference between those. And on the farms there is a lot of stress. We’ve touched on a lot of them today, and the mental health part is huge. And you mentioned when we started chatting, Farm Management Canada started in 1980, it’s a nonprofit, and it’s continuously developing new resources for farmers to help plan and help start taking those steps to go from surviving to thriving. Why don’t you tell our listeners a little bit about what the tools that you currently are working on, and your teams are working on, that can really help farmers start with that planning process and start managing their risk a little bit?
[00:18:06] Mathieu Lipari:
Over the years, we developed quite a few different resources for farmers to help them to deal with risk and risk management. We started off with a guide that’s probably a little bit outdated now, but it’s still pretty good. That’s available online. It was called The Comprehensive Guide to Managing Risk and Agriculture, and it’s still available. But from there, we went and developed a tool called AgriShield, which is an online platform that guides you through a process of identifying all your risks, assessing those risks, and then prioritizing them. And then building your action plan to know exactly what you want to do, and then looking at the resources that are available to help you to do that. That’s a very comprehensive tool that’s available online.
[00:18:46] Mathieu Lipari:
But since then, we also wanted to make it a bit easier to farmers, and we recognize that sitting down and taking the time to go through a risk management plan and asking yourself all these questions and going through these assessments, it could be a lengthy process, and maybe a little bit of encouragement, a little bit of help along the way could help to get through that process a little easier. So we made, with Farm Credit Canada, we created a risk management resource bundle, which is a simplified way of going through a process like the one that we have in AgriShield. With that one, you have a spreadsheet where you just identify some risks and score them. Then, you write those in, and a little chart pops up in the same spreadsheet. This keeps all your risks in one place so you know exactly which ones are your priorities. And then you’re able to start building some actions you’d like to take to be able to do that.
[00:19:36] Mathieu Lipari:
Now, to make it even easier, we recently just launched, well, I’m soft launching it right now, but this is an AI tool that accompanies that risk management resource bundle, and it’s called The Farm Risk Navigator. The Farm Risk Navigator is basically a GPT. It’s available for free as well, and so is the risk management bundle. And this GPT will guide you through some questions to help you sort out your risk management process. It’ll help you to identify your risks. It’ll help you to fill out those forms that we have in the risk management bundle, and go through the guide that we have in there as well. It’ll answer questions for you around that and really guide you through the process. You could take it step by step, you could take it a little bit at a time and it’ll keep that for you. We just would love if people would try that one out. We’re literally, as I speak, putting it available online. It’s still in its early stages. We recognize that it might need a little tweaking here and there. We’d really love if people gave us some feedback about it.
[00:20:35] Mathieu Lipari:
We’re going to make that available online very shortly. It’s through the GPT store. Again, it’s a free resource so you could just go and download it, and there you go, you have your farm risk navigator. And again, that’ll guide you through the risk management bundle, which goes through that whole process, but step by step in little pieces, and could help you to answer some questions along the way as well.
[00:20:54] Amy Crozier:
Mathieu, I want to hit on one thing you said about the AI tool, because something I commonly hear about, especially with different generations on the farm, is being able to access some of these programs and understand how to use them. A lot of them say, “I’m not good at computers.” Why don’t you dive a little bit deeper into that? And then on a second part, maybe just touch… And there is always some nervousness about your information being out there, once you use this tool, is it kept to your farm and to your account?
[00:21:20] Mathieu Lipari:
It’s a GPT. It’s the same thing as anything that you would put on ChatGPT. This is not a tool that should be asking you for financial information or things like that. It’s really more about, what are the risks that your farm is facing. Let’s look through that together. And it’s a simple question/answer type. It’s a dialogue that you’re having with an artificial intelligence, a GPT. You can ask your question. You have an issue that you’re dealing with on the farm and you want to know how to deal with that. You want to start your risk management plan, you want to know how to do that, ask the tool and it goes back and forth with you, tries to help to assess your situation, tries to help to assess your different risks, and prioritize them. As far as ease of use, I don’t think it gets much easier than just having that. It’s like doing a Google search, except you’re having a dialogue now with an AI. And it’s not like you have to have any specific qualifications.
[00:22:16] Mathieu Lipari:
I understand that some people may not be that comfortable with these tools, but once you start using things like ChatGPT, they’re quite easy to use, and to have a dialogue. I think there’s even features where you could voice-to-text. You’re able to actually voice activate what you want to ask and that sort of thing. Lots of options available there, if you want. And again, its purpose is to make it easy. It’s to guide you through that process. It’s really about asking you the right questions. It’s not going to delve into your personal information. We put strict parameters around it to make sure that it’s not offering you advice that it shouldn’t, first of all. This is not an accountant, this is not a professional. What it really is trying to do is guide you through a process. It will guide you through step by step, what you should be doing to build your risk management plan, and should not be delving into personal information that you don’t want to have out there.
[00:23:07] Mathieu Lipari:
You can answer whatever you like, answer whatever you’re comfortable with, keeping in mind that anything that we use on the internet is available, right? It’s something that’s put out there, but hopefully it’s not an impediment to be able to actually go through that kind of dialogue with an AI to get you through that process.
[00:23:24] Amy Crozier:
So really, it’s giving you an outline. It’s directing you in the right spot of where you can go and really helping build that outline and showing where you should be directed, and maybe areas that you want to focus on. It’s not being the expert, it’s giving you the outline and so you can go work and partner with some experts and find those right resources that you need to make it that plan.
[00:23:44] Mathieu Lipari:
Absolutely. If you’re dealing with a complex situation, you’ve identified some risks and now you’re trying to figure out how to deal with them, you’re going to need some expertise. We are very much aware that farmers wear a lot of hats. They have to know a lot of things about a lot of things. We don’t expect every farmer to know… And you shouldn’t have to know everything about everything, but please do go and connect with expert advice, use your peer groups, use your financial advisors, use your accountants, use your bankers, lenders, even equipment providers and input providers, your agrologist, your agronomists, you want to have dialogue with them as well. You can’t do it all on your own, so you want to be able to connect with them, ask the right questions to them. And this tool will help you to do that too. It’ll help you to ask the right questions to a professional who could answer those questions. That’s part of it as well. When it comes to AI, it can guide you through the process.
[00:24:44] Mathieu Lipari:
Essentially, what it’s doing is, it’s bringing you to our risk management resource bundle. And the templates and forms that are in there are the way that you will assess your farm and the way that you will determine which risks are a priority for you, and what you should be doing about them. Those resources, you download to your computer, they’re yours, they’re on your computer. They’re not out there in the cloud. You’re then asking the AI to guide you through that process. And if you have questions along the way, it’ll help you to go through that. It’ll guide you step by step through that process. And eventually, if you come to an outcome where you’re going to need some expert advice, it’ll help you to ask the right questions and know what you’re looking for when you go to those experts, but it’s not going to be the expert for you.
[00:25:26] Amy Crozier:
Well, thanks so much for that, Mathieu. Is there anything that you want to call to action, anything that you want to leave with our listeners about our conversation today?
[00:25:35] Mathieu Lipari:
Well, I think the main takeaways, I’d like to say, really, is farm risk management, it’s a process. It’s a combination of things. It’s not just about insurance. I want to reiterate that. It’s really about taking charge yourself of your risks and acting proactively to manage those risks. And yes, you want to have those government programs and those insurance programs to back you up. They have to be part of that, but you have to take charge of that process yourself, and we hope that people will be doing that. We’re trying to develop tools to help people to do that and we hope people will take advantage of it. It’s an important process that every farm should go through to figure out what they’re dealing with and how they need to deal with it, to position themselves the best they can to be successful. And as we mentioned before, to thrive.
[00:26:23] Mathieu Lipari:
And that’s what we want to see in Canadian agriculture. That’s what we want to see on all our farms, which are a pillar of our communities, which are a pillar of our economy, which are a pillar of Canada. We really do want farmers to be able to thrive within this environment, which is getting really tricky. It’s important to deal with this as soon as you can. And again, step-by-step process, just take it slow and start dealing with the most important risks that you have. But do take charge. You do have the power to take care of some of these things, and other resources are there to back you up as well.
[00:26:54] Amy Crozier:
Well, thank you, Mathieu, so much for coming today. And I’ve really enjoyed the conversation and it’s been very informative. To our listeners out there, thank you for tuning in this week and please come check out more information at nutrien-ekonomics.com.
[00:27:09] The Dirt PodKast:
Farming isn’t farming without questions and now there’s a place to go for answers. At eKonomics, an entire team of agronomists are ready and waiting to help for free. No question is too big or too small. Visit nutrien-ekonomics.com and submit your question with the Ask an Agronomist feature. What is the long-term effect of forage production on soil fertility?
[00:27:36] Karl Wyant:
Forages are unique in the fact that when we’re harvesting silage corn or alfalfa, we’ll just use those two examples. We are removing that entire above ground biomass on all that canopy, all those stems, cobs, what have you. We are removing all of it and taking it off the field. So if you go into our crop nutrient removal calculator and type in one ton an acre of alfalfa or silage corn, you will see that you are now removing a considerable amount of nutrients off the field and into that hay barn or silage pit. One thing to think about when you’re thinking forages is, “I’ve got to put a lot of nutrients back into the soil just to keep up with replacement rates.” So if you don’t match your outputs to your inputs, you will start to have a nutrient issue on your field, especially with phosphorus and potassium, that can cause you some trouble long term if you try to plant behind your forages and you don’t have enough nutrients left in the gas tank to get the job done for the next crop.
[00:28:31] The Dirt PodKast:
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