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Archive for the ‘Financial Management’ Category

Established in 2014, the Food Donation Tax Credit for Farmers, gives farmers a tax credit valued at 25 per cent of the fair market value of the agricultural products they donate. Community food programs, like the student nutrition program, also benefit by receiving more fresh local food for distribution to Ontario families.

This credit helps to ensure that more locally grown food ends up on people’s plates, and that includes the people who need it most in our communities.

To get the credit, you must:

  • be a resident of Ontario
  • have a farming business in Ontario
  • have donated agricultural products to an eligible community food program in Ontario.

Eligible products include:

  • meat and meat by-products
  • eggs and dairy products
  • fish
  • fruits and vegetables
  • grains and pulses
  • herbs, honey, maple syrup and mushrooms

To receive the donation, community food programs must:

  • be registered as a charity under the Income Tax Act (Canada)
  • be able to issue receipts for the fair market value of food donated by farmers

More details on the tax credit are available by visiting: ontario.ca/fooddonation

If you are a farmer, reach out to your local community organizations and see how you can work together to bring more fresh, local food to people in need.

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So, you’ve decided you want to become a farmer.

There are many things you need to think about when starting a farm. Some of these things are what do you want to produce, where are you going to produce it, how are you going to gain the skills to do so, and how are you going to finance this initiative?

Very few people who are starting a farm from scratch have the disposable income to get an operation up and running, and keep it going all on their own. So where do you find financing?

Aside from friends and family, the obvious choice would be your financial institution. Most banks and credit unions have agricultural specialists that deal with just this sort of thing. They have the knowledge, and expertise to help guide you through the process of securing the necessary funds to match your business needs.

In addition to the traditional banks, there are also lending institutions that specifically focus on the agricultural community. These funding sources tend to offer more specialized financial services to their clients. A couple of examples would be Farm Credit Canada and the Agricultural Credit Corporation (specific to operating costs), both prominent lenders to farm and farm-related businesses in the country.

Depending on where you are at in your business’s lifecycle, you may also be eligible for funding through various government programs. While the government is generally not in the business of providing funding for farming start-ups, there are a number of cost-share programs that support new initiatives that focus on job creation, innovation and economic development. Some examples of these programs are the Jobs and Prosperity Fund, Growing Forward 2 and various grants offered by the Ontario Trillium Foundation.

Another source of funding that is growing in popularity is crowdfunding. This method relies on donations or offering rewards. The rewards would most likely be directly related to the product or service your farming venture would produce. While this method may seem like a means of getting “free money”, it is considered taxable income, and does require a significant amount of project management to get your funding campaign off the ground, promoting it, and delivering on commitments after your campaign is complete. Additional information on the legalities of crowdfunding for a business, especially when it comes to equity crowdfunding, is available through the National Crowdfunding Association of Canada.

Whatever source of funding you decide to pursue for your new farming business venture, always make sure you do your homework and are aware of the risks involved. Having a solid business plan is the best place to start to ensure you are prepared for what you want to do, and how you’re going to do it when it comes to starting your farm business.

 

Visit Ontario.ca/agbusiness for more information.

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Windbreaks can increase crop yields up to 15 per cent, more than making up for the amount of land they use. How? Windbreaks improve a field’s microclimate by reducing wind speeds, increasing temperatures and reducing the amount of moisture loss.

Have you considered planting a windbreak? Windbreaks can also:

  • reduce soil erosion
  • decrease odour and spray drift
  • offer alternative income options
  • save you up to 30 per cent in heating and energy costs
  • shelter livestock from the wind and sun

windbreaks

Graph: Each bar represents yield average, as studied by the University of Guelph Ridgetown Campus. Yields increased on the downwind side of the windbreak over distances of up to 12 times the height of the windbreak.  Crop yield increases vary by crop type. Taken from Establishing Tree Cover.

 What are the costs associated with planting windbreaks?

There are costs when planting a windbreak, such as site preparation, purchasing the trees and planting. Some conservation authorities in Ontario have cost-share programs that can help you with these costs. Contact your local conservation authority to see how they can help you plan and plant a windbreak.

What type of windbreak should you plant?

The type of windbreak you plant and how you plant it depends on the purpose for the windbreak.

  • One to three rows of trees are most often planted to protect field crops from the wind and to reduce soil erosion. Multiple row windbreaks often include at least one row of conifers.
  • Think about planting at least one row of hardwood trees for future alternative income sources, such as wood for fence posts, fuel and lumber.
  • Plant a shelterbelt (more than three rows of trees) around your home and farm buildings to save on energy costs.
  • Plant a conifer windbreak to provide livestock with wind and sun protection.
  • Windbreaks deflect odours upward if properly situated to the barn.
  • The taller the windbreak, the greater the area it protects. Consider the maximum height of the tree species you choose and determine if it will provide you with the protection you need.
  • Keep in mind the crops that you plan to plant beside the windbreak, and the winter hardiness and typical lifespan of the selected tree species.
  • Some trees may be better suited for areas with tile drains than others, an important, and potentially money-saving, consideration.

The type of soil of your land and the region of the province you’re in will also affect the type of trees you can plant. Trees can thrive and provide maximum protection when they’re matched with the right soils. Visit the Ministry of the Environment and Climate Change’s Tree Atlas to determine the best trees for your situation.

Need help?

For help with planning and planting a windbreak, contact your local conservation authority. They may be able to visit your planned windbreak site and help you with your planting plan, site preparation, choices of tree species, and appropriate spacing and planting, as well as windbreak maintenance.

The Ministry of Agriculture, Food and Rural Affairs (OMAFRA) has many resources to help you with windbreak planning. Visit our website to watch four windbreak videos on planning, planting, maintenance and farmer windbreak success stories. Our free Best Management Practices book, “Establishing Tree Cover,” provides a step-by-step guide for planning and planting a windbreak and includes maintenance tips. Contact OMAFRA’s Agricultural Information Contact Centre at 1-877-424-1300 or ag.info.omafra@ontario.ca for more information.

 

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June 15th is the deadline for the self-employed to file income taxes. As the date rapidly approaches, many people are starting to head to their friendly accountant, shoebox in hand. One of the first questions the friendly accountant may ask is, ‘what type of work are you looking for?’ and will you be able to answer that question?

Professional accountants refer to the work they perform for a specific client as an engagement. It is helpful to understand the options available when asking an accountant to prepare financial statements and perform an engagement. Clients can select from a number of different engagements and the accountant will often help determine which one best suits their specific needs.

There are three different engagements associated with the financial statements of a business:

  1. Audit Engagements
  2. Review Engagements
  3. Compilation Engagements

 

Audit Engagements

The objective on an audit engagement is to enable independent professional public accountants to render an opinion on the fairness of the client’s financial statements.

Audited financial statements are the accepted means which many business corporations report to shareholders, to bankers, to creditors and to government. Federal and provincial legislation in Canada generally requires a limited company (corporations) to prepare annual financial statements for audit by qualified independent auditors.

The financial statements subject to audit are the responsibility of the company’s management. The auditors’ responsibility is to express an opinion on those financial statements. The auditors must plan the audit to obtain reasonable assurance that the financial statements are free of material misstatement. Through the study and evaluation of the company’s system of internal control, and by inspection of documents, observation of assets, making enquires within and outside the company, and by other generally accepted auditing procedures, the auditors will gather evidence necessary to determine whether the financial statements present a fair picture of the company’s financial position and its activity during the period being audited.

Review Engagements

The objective of a review engagement is to prepare and review financial statements to ascertain whether they are plausible, that is, worthy of belief. If, after reviewing the financial statements the accountants are satisfied that the financial statements are not misleading, the accountants’ standard report will preface the financial statements.

Where an audit is not required or the shareholders have waived the appointment of an auditor, financial statements may be prepared on a review basis. Reviews provide limited assurance that the financial information confirms to generally accepted accounting principles.

In performing a review the accountants would must be independent from the clients and have sufficient knowledge of the industry which the business operates. They would acquire sufficient knowledge of the client’s business to make intelligent enquiry and assessment of the information obtained, with the limited objective of determining the plausibility of the information reported on. The review should entail enquiries, analytical procedures and discussion with responsible client officials.

This degree of assurance is less than that resulting from an audit and is expressed as either:

  • The negative assurance that nothing has come to the accountants’ attention that would indicate the financial information is not presented in accordance with generally accepted accounting principles, or
  • A reservation together with appropriate disclosure and explanation of the reservation.

Compilation Engagements

The objective of a compilation engagement is to compile unaudited financial information into financial statements, schedules or reports based on information supplied by the client.

A compilation engagement is appropriate only where the client and other users do not need financial information that conforms in all respects to generally accepted accounting principles and audit or review assurance is not required, and where the client understands that the statements may not be appropriate for general purpose use.

The procedures performed are not designed to enable accountants to provide any assurance on the reliability of the compiled information. To warn readers of this lack of assurance, accountants attach a “Notice To Reader” that states that no review was performed on the information (as above) and that the information may not be appropriate for use by the reader. If accountants know, or have reason to believe financial statements are misleading or incorrect, they must not associate with this information. A compilation may be applicable where financial statements are prepared for the exclusive use of the company’s management or for income tax purposes.

 

Financial Management:

http://www.omafra.gov.on.ca/english/busdev/finance.html

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Defining Sustainability

Sustainability is a holistic, long-term approach to business.  It maximizes the economic and environmental stability, equity, and health of the farm, business, and family.

A sustainable approach to farming is more than talking about environmental actions or maximizing profits.

Sustainability focusses on business processes and practices, rather than a specific food, fibre, or feed output.  It integrates economic, environmental and societal values to create a Triple Bottom Line (i.e. understanding and accounting for three “bottom lines”: economic, social, and enviornment, instead of simply looking at a cash flow analysis for actions in your operations).  This is very different from a purely profit-driven approach, where businesses benefit economically, but often at the expense of the environment and society.

Agricultural Context

Sustainable Agriculture is…

“the efficient production of safe, high quality agricultural product, in a way that protects and improves the natural environment, the social and economic conditions of the farmers, their employees and local communities, and safeguards the health and welfare of all farmed species.” (Sustainable Agricultural Initiative Platform, 2010)

There is a growing global demand to increase sustainability in agriculture.  What this means on-farm differs depending on where the farm is (the Place), what the farm produces (the Product), and where the product is sold and for what price (the Price). Regardless of what is purchased, grown, or sold, there are broad perspectives that can increase the sustainability of every agri-business by addressing the TBL of economic profitability, environmental stewardship and social responsibility.

Consumers are increasingly concerned with how their food is grown and processed.  The single largest share of impact within the supply chain is the food production itself. Food processors and retailers need long-term and ever-increasing supplies of quality raw materials. Unpredictable weather extremes and global water scarcity make agricultural production and food processing more volatile.  Sustainable practices help ensure businesses along the entire supply chain have reliable sources of product.  At the same time, reliability creates new opportunities for enhanced branding to meet consumer demand.  Sustainable sourcing is a point of differentiation in the marketplace.

While these components are discussed separately below, their goals overlap; impacting and influencing each other.  For example, economic decisions will impact the environmental and social components; the environmental actions taken will impact the economic output and social well-being.

Economic Profitability

To be sustainable, a farm must be economically viable.  While the environmental and social pillars of sustainability may not always translate into immediate economic profit, sustainable practices will have a positive economic impact on the farm.

For example, the diversification of crops can help reduce financial risk.  Over time, diversification of crops can reduce financial risk while improving water quality and increasing other environmental benefits that raise the value of the farm itself.

These factors must be taken into consideration when managing a farm business.

Production and machinery costs are directly affected by sustainable practices.  Fertilizer and pesticide applications can be applied responsibly and, in some cases reduced, based on crop rotation, variety selection or market availability for end-product.  Sometime overall yield may decrease, but differences between production cost and revenue can be improved, leading to increased profitability for the farm.  Likewise, management, marketing skills, and experience of decision-makers will have direct economic effects on the business.

Indicators of your farm’s economic profitability may include:

  • increasing net worth or savings,
  • debt is consistently decreasing, and/or,
  • farm is consistently profitable year after year.

Environmental Stewardship

Stewardship is a familiar concept to farmers.  For many, this is what comes to mind when they think of sustainable agriculture.  Environmental stewardship uses ecologically-sound practices that have a neutral or positive impact on the natural resources and non-renewable resources used on-farm.  It can mean reversing damage that has already occurred, like soil erosion or draining of wetlands.  It can also be enhanced by taking steps to prevent the future degradation of land and water resources through conservation practices, like:

  • naturalizing riparian zones,
  • using smart cattle watering practices,
  • establishing proper cover crops.

These are factors that have direct impacts on your cost of production and economic profitability components of sustainability.

Another key to successful environmental stewardship lies in soil health.  Maintaining adequate soil organic matter, biological activity and nutrient balance are essential to feed crops in the long-term production of the business.

There are many ways to enhance soil fertility and improve soil health, such as including legumes in crop rotation, using manure or compost instead of and /or in complement to synthetic fertilizers, and maintaining a working knowledge of the fertility of the fields so as to properly manage them.

Other stewardship concepts include:

  • protecting water quality,
  • year-round soil cover (residue or cover crop),
  • integrating crop and animal systems to maximize efficiencies, nutrients and energy,
  • controlling invasive plants.

Some traditional practices conflict with sustainable practices, because they severely damage the soil structure and resiliency of a field to adapt to extreme weather events, climate change, and the stresses of intensive crop production.

All practices, new and traditional, must be considered when implementing sustainable farming practices.

Social Responsibility

Social responsibility relates to the quality of life for everyone who interacts with the business: employees, customers, neighbours, local community members, and the farmer.  The most prominent examples of this in rural Ontario are agricultural cooperatives, farmers’ markets, on-farm events and twilight tours.  Other examples occur within the business itself, like fair treatment of workers and good business practices.

Some indicators of social responsibility include:

  • support for other local businesses and families within the community, circulating money within the local as well as the global economy,
  • the rural community population is stable or increasing,
  • post-secondary school graduates return to the community after graduation, to succeed on family farms or with associated businesses.

Summary

Sustainable agriculture is defined by three interactive components: economic profitability, environmental stewardship, and social responsibility.  It is important that sustainability is embraced at all levels; farm practices can have compound impacts across the entire supply chain in very complex ways.

Sustainability is a goal. However, a farm should never expect to “achieve sustainability”.  As farm practices become more sustainable, farmers gain a deeper understanding of the natural resources they steward and how this affects their business.

A competent working knowledge of sustainability creates further opportunities for new sustainability practices.  This in turn increases the farmer’s ability to respond to market pressures and environmental conditions, and help develop a robust and resilient business. The profit in sustainable practices is both tangible and intangible. It includes economic gain, environmental stability and social benefit.

Sustainability, like our seasons, is a never-ending journey, which is why it is so important to continue to work towards this goal.

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The Ontario Office of the Fire Marshal and Emergency Management estimates that barn fires cost Ontario farmers more than $25 million per year (2012-2014 average)

Do you know what to do in the event of a farm emergency? Do you know what to do if you have deadstock to manage?

Barn fires, natural disasters, equipment failures and diseases are devastating events for farmers, their families and workers, and the neighbouring community. Planning ahead to reduce risks, and preventing accidents with a safe operation will help to protect employees, family members and animals.

Emergency events can cause substantial loss to a farm operation and create unique challenges for farmers, including disposing of large volumes of deadstock. The Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) has a regulation that gives you options for deadstock management. These options help to protect water quality, reduce environmental impacts and minimize biosecurity hazards, such as scavenging.

Collection of deadstock by a licensed collector is recognized as the most effective and sustainable disposal method.

In emergency situations, you can apply to OMAFRA for an Emergency Authorization for the storage, disposal or transportation of deadstock. These authorizations can be used when emergency conditions exist that make it difficult for you to dispose of deadstock according to the regulation.

OMAFRA works with the province’s farmers, commodity groups, insurance companies, municipalities and trucking companies to ensure that deadstock is disposed of as soon as possible. In granting an exemption, OMAFRA considers the various factors of the situation, such as:

  • the urgency of the situation
  • the number of animals to be disposed
  • biosecurity risks
  • time of year
  • the condition of the deadstock
  • site conditions, including proximity to tile drains, location of surface water and wells, and depth to groundwater

Planning ahead can help alleviate some of the stress during an emergency. Our web page found at ontario.ca/farmsafety has useful resources for farm owners, including information on preventative maintenance for farm buildings and our book, “Reducing the Risk of Fire on Your Farm.” We encourage you to develop a contingency plan for emergency situations. Visit ontario.ca/deadstock for information on contingency deadstock planning and the regulation.

For help with managing deadstock in an emergency situation, you can contact an OMAFRA environmental specialist or engineer in your region, or the Agricultural Information Contact Centre at 1-877-424-1300 or ag.info.omafra@ontario.ca.

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Pricing Corn Silage In 2014

“What’s corn silage going to be worth this year?” Corn development is delayed for a significant portion of the crop and could be at risk of frost. Farmers may be looking at salvaging frost damaged corn that… – See more at:  Crop Talk

 

field corn

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