12NOV18

Greetings from Baker Heritage Farms;

Yesterday, David and Donald worked on the Turkey run, installing a wire along the bottom of the fence to keep animals out. Once the wire is fully installed, we will be placing rocks along the outside of the bottom of the fence to further discourage animals from accessing the pen. We will also be placing a wire at the bottom of the chicken coop fence but will using the rocks as the chickens will be in the hen house at night.

If you have been following our blogs, you know that we have been looking at winter cover crops to increase Nitrogen levels in the production fields. You may also notice that we are writing a series of Farm Risk Management articles designed to assist backyard and small acreage farmers in controlling their risks with the goal of decreasing expenses and increasing profits.

While it may seem strange that we have mixed the two (researching cover crops and risk management), they actually go hand-in-hand. Risk management is not just about insurance. It is about looking at every aspect of your farm operation to determine whether the cost is worth the risk. This principle may have saved Baker Heritage Farms several hundred dollars.

We were planning on planting winter ryegrass in all three production fields, along with Hairy Vetch or Crimson Clover, to increase Nitrogen levels for next years crops (if you remember, our soil samples indicated a need for Nitrogen). As we are "all-natural" (organic), we had to ensure that all seed and inoculates were certified organic. When we started pricing seed, we determined the following costs would be associated with purchasing the seed (not including delivery costs):

• Winter Rye - Requires 60-120 pounds (organic) per acre. We planned to put down rye in all three production fields (.5 acres each times 3 fields) for a total need of approximately 90 pounds (at the low end). While non-organic seed was $1.19 per pound (and only required an application rate of 25 - 35 pounds per acre), certified organic seed was $5.15 per pound, for an approximate cost of $463.00.
• Hairy Vetch - Requires 30-40 pounds (organic) per acre. We planned to put down Hairy Vetch on two production fields (.5 acres each times 2 fields) for a total need of approximately 45 pounds (we would have applied this seed to fields one and three due to the cost being less than that of Crimson Clover seed). The cost of the raw seed was $3.39 per pound for an approximate cost of $152.00 (not including inoculate, which would be required).
• Crimson Clover - Requires 20 - 25 pounds per acre. We planned to put down Crimson Clover on one production field (.5 acres) for a total need of approximately 25 pounds. The cost of the raw seed was $12.55 per pound for an approximate cost of $313.00 (not including inoculate, which would be required).

Total seed costs would have been approximately $928.00 plus the cost of the inoculate and shipping.

This is where the correlation between planting winter cover crops this year and risk management comes into play. We are at the end of the planting season for winter cover crops (seed should be down no later than November 18th on average) and we would have been further delayed by delivery time and potential weather issues. There was still a chance that the seed would germinate and the crops would grow; however, there would have been no guarantee. From a risk management aspect, this would mean that Baker Heritage Farms would pay close to $1,000 to take a chance on having the winter cover crop grow and accomplish our goal, and the chance was decreasing daily.

In looking at other alternatives, we researched alternative methods of getting Nitrogen into the soil and maintaining our all-natural (organic) standards. David and Donald finally decided that they would go ahead and apply an certified organic fertilizer this year. While we are trying to avoid application of even certified organic products, basic risk management principles lead us to make this decision.

We were able to find a product, HFPC Hydrolyzed Fish Powder, which has several benefits. It will provide approximately 10% N (Nitrogen) to the soil and will also boost Microbial activity, providing immediate benefits. The cost of a 40-pound bag of powder is $129.00 (plus shipping). The downside is that it must be mixed with water (20 pounds per 100 gallons of water per acre, for a total need of 30 pounds per 150 gallons of water). We realized that we did not want to apply the solution with hand sprayers (they only handle 4 gallons of solution) and that we would need a tow-behind sprayer.

In researching tow-behind sprayers, we found that we could purchase an Agri-Fab 25 Gallon tow sprayer from Home Depot (where we now have an account that includes our Agriculture Tax Exemption) for $369.00 and free shipping (online exclusive). Total cost for the powder and sprayer - $498.00 plus shipping (for the powder) and water. A cost savings of approximately $500 from planting winter cover crops.

Agri-Fab 25 Gallon Tow Sprayer

More importantly then the direct savings in costs, is that we know the Nitrogen will be there when we plant, and we are no longer under time constraints as we can apply the Fish Powder in early spring as we prepare the soil.

This process, in reality, is part of the risk management process. Will it work? While we cannot guarantee either method, our financial loss is less with the Fish Powder then the cover crop seed. Normally, we would not be faced with these potential loss factors; however, we are still trying to play catch-up with our planting schedule, which shows how important pre-planning is, even in farming.

With the "new" economy, fewer jobs, lower income, higher expenses, and more government intervention into business, the use of risk management techniques in every aspect of small farming operations becomes a high priority. Small (backyard and small acreage) farms are already following good risk management techniques as they are able to diversify their crop and livestock selections and, subsequently, spreading the risk. If one crop fails, the chances are very good that the other crops will not (with proper management).

Until next week,

Blessings from Baker Heritage Farms

And God said, "Behold, I have given you every plant yielding seed that is on the face of all the earth, and every tree with seed in its fruit. You shall have then for food." Genesis 1:29

Farm Risk Management - Part One

Risk management is the identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks. An organization may use risk assumption, risk avoidance, risk retention, risk transfer, or any other strategy (or combination of strategies) in proper management of future events.

Over the next several months, Baker Heritage Farms will be providing a series of articles related to farm risk management and safety to improve the viability of the family, backyard, or small acreage farm.

Farm risk management is just as important to the financial success of a backyard or small acreage farm as it is to a large farm.

The risk management process includes:

• Identifying hazards;
• Assessing and prioritizing risks;
• Choosing control measures;
• Implementing controls; and
• Monitoring and reviewing results.

General areas of concern include:

• Loss prevention;
• Insurance;
• Clams management;
• Health & safety;
• Records management; and
• Regulatory compliance.

When people think of risk management, they normally think of those risks associated with insurance, such as real property (buildings, structures, etc.) and personal property (household furnishings and equipment) damage (fire, flood, earthquake, theft, etc.), liability claims (slip and falls, damage to the property of others, etc.), and employment liability claims (workers' compensation, discrimination, etc.). While these are important, farmers, both big and small, have additional risks that must be managed, including:

• Equipment (tractors, implements, ATV's, mowers, etc.);
• Crop loss (insurable by large farmers, but not usually insurable by small farmers); and
• General liability claims (e.g. food borne illness claims).

The primary concerns of the backyard or small acreage farmers include protecting from losses associated with:

• Real property damage - including barns, outbuildings, fencing, etc. This damage may come from fire, wind, hail, weight of snow and ice, and other types of losses. These risks are normally insurable, and many times coverage can be extended from the homeowners policy (check your local area to see if you can obtain a farm and ranch homeowners policy);
• Personal property damage - including hand tools, small equipment such as trimmers, small powered mowers, etc.
• Automobile damage - both physical and liability damage. While automobile liability coverage is mandatory in most states now, it is just as important to consider physical damage coverage, particularly if you are using the vehicle for farming operations and need the vehicle to sustain your operation.
• Mobile Equipment damage - including tractors, implements, ATV's, etc. In the case of small garden or lawn tractors, coverage can usually be extended from your homeowners policy (see above). Your homeowners policy may even extend coverage to ATV's, depending on use. However, most homeowners policy's will not cover farm tractors (including compact, utility, and larger) or their implements. In addition, these are high target items in many areas. A Mobile Equipment policy (or possibly a rider to your homeowners policy) is worth the small premium charged for such coverage.
• Workers' compensation - this coverage is required if you hire any employees for your farm, even on a temporary basis or just for day work. If a temporary worker is injured while performing work on your farm, you are liable, whether you are negligent or not.
• Liability claims - including products and completed operations. While we are all familiar with slip and fall claims, there are other liability risks that backyard farmers and small acreage farmers need to be aware of. If you are selling food products (meat, eggs, produce, etc.) you will need coverage that will provide you with defense costs as well as claim settlement costs if you are faced with a food-borne illness claim. There are many other forms of liability that a farmer can run into that require more discussion in the future.

This is just a short list of concerns that backyard or small acreage farms should address as they begin farming and grow their farming enterprise.

Having a strong, written safety program in place will help reduce the risk of injury or property damage to you and others (highly recommended if you have any employees). If you are selling food products, even if it is just a few baskets of tomatoes, corn, cucumbers, or a few dozen eggs, it is important that you have at least a basic Good Agricultural Practices (GAP) manual prepared and follow it. This is recommended even if you give away your produce. If you are selling meat products, your GAP handbook should be more complete and may need to include a Hazard Analysis & Critical Control Points management system.

Loss prevention (or loss control) includes ensuring that you have taken, and are taking, the necessary steps to protect your property (such as locking up equipment) from loss and protecting your neighbors, visitors, and farm customers from injury (such as having safety procedures in place).

Maintaining current records of your operations will not only help you in case of a claim, but it is good practice to ensure that your farm operation is successful (and profitable). These records can also be an excellent marketing tool if you plan to sell organic products (records are required if you intend to become certified organic).

Work with your insurance agent to ensure that you have the insurance coverage you need and that your agent (or his/her office) will assist in claims management should you have a claim.

The purpose of a risk management program is to reduce expenses related to risks associated with your operation, thereby increasing your profits. Do not depend on insurance for your risk management program. When you decided to become a backyard or small acreage farmer, you decided to enter the world of business. A well thought out risk management program will help you maintain low cost insurance coverage, and, without a proactive risk management program, you will be doing yourself and your customers and vendors a disservice.

Baker Heritage Farms

Don Baker has been providing insurance and risk management consulting services for over 30 years and has been a Risk Management Consultant for the past 8 years.