Organic Farming Freedom Farm Commerce 492 Business Plan

Organic Farming Freedom Farm Commerce 492 Business Plan Rosalind Ball Heather Hack Murray Nelson Myles Thorpe

Mission statement Goal: To build a viable organic farm business in ten years • To establish the first three years of organic farming practice while selling on the conventiona market until OCIA certification. • To have all land in organic production within four years and sell on the organic market by the fourth year.

Mission statement • To increase cash flow over the next seven years through organic practice while selling on the organic market. • To replace and improve farm power machinery in ten years. • To maintain soil fertility while maintaining yield productivity and year to year stability.

Outline… • • • Industry overview Operations Human Resources Marketing Financial Feasibility Analysis

Industry Overview • $20 billion US • Majority of industry - Europe, USA and Japan • Increasing health and environmental concerns • Aggressive promotion • Supportive government policies

Canada. . . • $1 billion in annual sales • Annual growth of 20% per year • Predicted increase of 5 to 10% of global market by 2010 • Net exporter of bulk organic grains and oilseeds • Significant production of raw products - 80% store products imported from USA

Saskatchewan. . . • • Over 1000 certified producers 70% of western Canada producers $30 million industry 30 organic processors – flour, flax oil, oatmeal, bread, cereal

About Kipling: • LLD – SE 5 -8 -3 W 2 • Precipitation (427 mm) • Temperature (GDD) 1600 > 5 C • Soil Classification Black soil • Frost Free Days 120 KIPLING

Kipling cont’d • Southeast transportation committee • Transportation: Near Trans Canada Highway # 1

Capital Outlay

Challenges – rotation choice • OCIA Organic Crop Improvement association • 3 years to get organic certification • Crop rotation & tillage for weed control, fertility • DIVERSITY • Seed, fertilizer and variable machinery costs • Are the highest yearly inputs

Rotation order Block Year 1 2 3 4 5 6 7 1 Oat+A Alfalfa Fallow Flax Barley Pea Wheat 2 Canola Fallow C/flax Barley Pea Wheat Oat+A 3 Flax Barley Pea Wheat Oat+A A 4 Flax Canola Pea Wheat Oat+A A Fallow 5 Wheat Pea Wheat Oat+A A Fallow C/flax 6 Pea Wheat Oat+A A Fallow C/flax 7 Wheat Oat+A A Fallow C/flax Barley Pea

Human Resources • Sole Proprietorship • Owner/Operator • farm equipment and mechanical expertise • proven interest in organic food production • management/decision making skills • bookkeeping - overseeing paperwork - accreditation Salary: $40, 000 in year 1, increasing to $50, 000 by year 10

Human Resources cont. . • Position #2 - Seasonal Labor (seedingharvest) • knowledge of farm equipment • mechanical knowledge Wages: $9. 52/hour

Product/Service Features • Product within OCIA regulations – Certified “organic” • “Beneficial Products” • Serving the buyers needs

Competition • Over 1000 certified producers in Sask. – Beneficial globally? – Detrimental locally? • Competition minimal due to infancy of industry

Distribution/Pricing • “Price Taker” – price depends on world markets and demand – price dependent on quality and volume – research different buyers frequently • Distribution cost responsibility of buyer

Strengths • • • Educated farmer/businessman Knowledgeable hired help Production diversity Producing a “Healthy product” Location- soil, climate, moisture

Weaknesses • Marketing – getting the best price at the right time – “Price Taker” • Marketing unfinished product • Starting from scratch – inexperience in the agriculture industry – cost: significant capital needed • Limited database on production practices and outcomes

Opportunities • • • Organic industry 15 -25%/year Emerging markets – Australia, New Zealand Organic processors expanding Premiums for production OCIA most recognized – high visibility products Low land cost and pest populations in Saskatchewan • Health and environmental problems related to pesticides decreased

Threats • • Infancy of the industry Expansion of producers in Sask. - Opportunity? Government regulation Transportation (exporting - union strikes) GMO crops (canola, wheat, etc. ) At the mercy of nature Mining of the soil- minimal nutrient amendment Lack of global quality standardization – NOP - National Organic Program

Processors/Customers • Popowich Milling, Yorkton – Oat processing (oatmeal, flour, etc) • Bioriginal Food & Science Corp, Melville – edible oils and flax seed • CSP Foods - bakery mixes • Proven Organics, Gravelbourg – whole and split peas, flax and hulled barley

Customers – Summary • Grower controls decision to sell • Expect competition from other growers, prefer broad base of supply • QUALITY – and price • Market is growing, buyers have sourcing problems

Financial Plan

Financial Analysis

IRR and NPV Base Case Without 2% growth in price:

Yield and Price Fluctuations

Conclusion and Summary

Any Questions?