Dick Wittman

2014 Direct Seed & Oilseed

Cropping Systems Conference

Taking Ownership of

Sustainable Farm Practices–

Can’t Sit On Our Laurels

Agenda

Overview of our farm operation

PNDSA journey from inception to today Our Mission & Vision

How DS has enhanced economic viability and environmental sustainability

Challenges ahead

Wittman Farms - Overview

Diversified grain, cattle, timber, and wildlife – farming in Nez Perce & Lewis Co

Elevation range – 1,200 to 4,300 feet

In “transition process” for 34 years

Family in transition

Farming practices in transition

Experimenting with NoTill/Direct Seeding since early 1980’s

Crop diversity designed to match

diverse soils, elevations

Wheat – soft white winter/spring; hard red

winter/spring; hard white spring; durum

Barley – feed barley; malt barley

Pulses – peas, lentils, chickpeas/garbanzos

Oilseeds – canola/rapeseed; mustard; safflower,

linola/flax

Perennial Seed Crops – grass seed

Hay – alfalfa and grass

Typical Rotation: WW, SW, Pulse, WW, Oilseed

Baby Steps Experimented with numerous drills and techniques

Haybuster, Palouse Zero Till, AgPro, JD, IH SDX

Tried trash cleaners, narrow & wide row spacing, etc.

Strategic alliances, equipment trades with neighbors

Lengthened and diversified rotations…critical step!

Transitioned GRADUALLY

Old way: plowing chisel/disking in early 1980’s

Early ‘90s three pass system: chisel Quad5 pre-

plant fertilize double disk “Great Pains” drill

By 1999 100% DS: one pass system – 4 products;

heavy harrow or Schulte mower to manage residue

2008 DS Conference -

Dick Wittman

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Technology and

Precision Farming Path

Sprayer Transitions Combine sprayer with DickeyJohn computer – early 1980s

Air sprayers since 1992; 2007 - GVM 90’ Trident boom

Today: guidance, autoboom, autosteer standard on all units

Harvest Data - Field Mapping since 2003

New Flexicoil 5000 Hoe Drill/3450 Cart – 2006 4 products – seed, dry starter; NH3 & P/S

Exactrix system for improved accuracy of placement

Autosteer, variable rate fertilizer application

New JD 1895 Disk Drill – 2012 Diversified our drill types

Variable Rate capable – fertilizer and seed inputs

Look how far we have come…

2008 DS Conference -

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Mounted Exactrix 2KC Mass Flow NH3 System

on Flexicoil 5000 45’ tool with 3450 Cart

Spring 2006 – Total Investment $37,600

2008 DS Conference -

Dick Wittman

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Mounted 750g NH3

bottle on rear of tank.

2” fill line required to feed

Exactrix pump

Liquid solution pump

mounted under NH3 tank

4 products run with

Legacy 6000 (Midtech)

controller

Non-Traditional Succession

Arrangements 10

Old Guard 33’ Flexicoil

33’ 9” spacing Hoe

Newest drill

45’ Flexicoil 12” spacing Hoe

HOW PNDSA HELPED

GET US HERE

STEEP evolution, PNDSA creation, Deliverables

Let’s take a trip down

memory lane

Birth of PNDSA

Evaluation session with STEEP

Advisory Committee - 1997

Call for leadership to make direct

seeding/NoTill work

Need entity to coordinate research

priorities in PNW related to conservation

STEEP team rose to the challenge!

1st DS Conferences - 1997-99

Brought in world class speakers

Pasco - 800 attendees

Momentum continued-Spokane,

Pendleton

Pendleton Beer Fest… “time to get

serious”

Message: “…if you build it, they will

come”

Organizational Process

Pullman Symposium – Dwayne Beck,

Jim Cook

1st Steering Committee - “12 Apostles”

PNDSA mission, vision and plan of

action created

PNDSA

Commodity

Groups

Washington Idaho Oregon

Educational

Institutions

Chem/Fert/Equip

Companies

Environmental

Groups

Public Agencies

Conservation

Organizations

Partners

STEEP III

Policymakers

Global Based

Conservation

Tillage Groups

Collaborators

… through research

coordination, funding,

and information

exchange.

Promoting economically viable

and environmentally sustainable

direct seed cropping systems…

Energy

Companies

Pacific Northwest Direct Seed Association

PNDSA Focus Areas –

Our Deliverables

Information Transfer

Policy Development

Research Coordination

Funding Support & Membership

Education/Outreach

Website – information exchange medium

Newsletter – monthly highlights, partner featuring, educational content

Quality of Life Brochures – key reference to promote Direct Seed Benefits

Videos – Direct Seed, Other Topics

Critical Info X-Chg Tools

Annual Direct Seed Conferences

Local Breakfast Groups great peer group education vehicle

Now replicated many locations in PNW

Thank You–Dave Barton, Dennis Roe, Hans Kok

Field Tours & Demonstration Projects Cunningham & Kambitsch Research Farms

Grower field tours special tours for USDA policymakers, environmental groups, media

Policy Formulation - Highlights

Advisory Roles – EQIP, Local Working groups,

state NRCS Technical Advisory Committees

Conservation Standards – major input at state &

national levels

CSP implementation –

key influence in design of program

Growers now collecting “dividends” of PNDSA input

Crop Insurance –

significant engagement in adapting

Challenges: managing abuse in dryland areas; keeping

RMA honest as cropping systems evolve

Policy Hot Button – Climate

Change

Why PNDSA drug into this fight?

Poster children for “sustainable farmers”

International debate on “regulating” vs

“incentivising” sustainable farming

Cupid sought us ought… EDF

Opportunities for DS innovators

Education about soil health

Monetary incentives to improve soil

Climate Concerns Increasing temperatures; lower

humidity

Forests burning up

Declining fisheries

Ecosystem not sustainable without major changes

Carbon Contract-1st dividend

30,000 tons of CO2 for $75,000

Entergy of Louisiana Contracted with PNDSA

77 growers committed to DS for 10 years

First payments to Growers mailed on 12-9-02

Entergy also got credit for Emission Reductions

(ERUs) derived from DS practices

Research Focus

PNW voice for “systems” based

conservation research

Input/direction to regional and national

research programs –

STEEP, Land Grants research programs

Commodity and private industry efforts

(See results posted on www.directseed.org)

Delivering on a Promise …

Is Direct Seeding more

economically sustainable?

Pioneers - Management Accounting Standards

Clearwater Direct Seeders

RME Grant (’02-03) Test Drive:

30 growers info exchange

group following similar practices

Goals:

Learn MA concepts/benefits

Design MA system to fit how

business is managed

Identify cost of production

Build benchmarking model

Optimize strategic decisions

We learn by doing.

Expected OUTCOMES – Direct Seeding

Reduced operating costs

Increased operating margins

Improved environmental quality

Improved capital asset use efficiency—less capital required per acre

Ultimate Target: Higher ROE

Key Questions: 1. Can we measure impact of strategic decisions? 2. Are we making progress?

Be careful how you draw conclusions

Operating Plan- “What We Do”

Strategic Plan “How we do it”

Production

Marketing Financing

Capital Plan

Growth

Succession Planning

Value- Added

Strategic Alliances

Tillage System

Diversification

Crop Rotation

Business Structure

Environmental Stewardship

WF Version-Mike Boehlje Strategic Thinking Model

Vision

Long Range Objectives

Short-term Goals

Action Plans KRAs

Evaluate

Budget

Mission Quality of Life

Technology Adoption

Numerous Strategic Shifts

Genetics

In-source

Out-source

Cost of production

Less trips over the ground means less money spent on fuel

and equipment…and more profit

Not counting gains from increases in soil productivity

Operation Cost/Acre

Fall Plow $11.00

Spring Harrow 3.50

Spring Cultivate 5.00

Cultivate/Spray Incorporate 5.00

2nd Incorporation-Cultivator 5.00

Seed-Conventional Drill 10.00

Harrow 3.50

Roller/Packer 3.00

Total Costs Per Acre $45.50

Operation Cost/Acre

Fall Heavy Harrow $4.00

Fall Roundup-Green Bridge 7.00

Custom Hire-Direct Seed Drill 17.00

Harrow 3.00

Roller/Packer 3.00

Total Costs Per Acre $35.50

Other Qualitative Factors: less water

loss, less compaction, less erosion risk

Profit Center - Managerial Report FormatTotal $ $/Acre $/Bushel

1 Commodity Revenue

2 Production Costs-Direct

Seed

Fertilizer

Chemicals

Crop Insurance

3 Production Costs-Indirect

Fuel

Repairs

Depreciation-Equipment

Gains/Losses on Equipment Sales

Custom Hire

Hired Labor and Benefits

Rent/Lease payments

Supplies

Utilities

4 Total Dir & Ind Production Costs

5 Production Margin (Line 1-4)

Sales, General & Administrative Expense

Storage

Marketing Costs

Freight

Management Labor & Benefits

Liability Insurance

Office Expense & Professional Services

6 Total Sales, General & Admin Exp

Other Expenses & Income

Finance Expense

Operating Interest

Term & R.E. Interest

Govt Payments-non commodity linked

Losses (Gains) on R.E. Sales

7 Other Expenses (Income)

8 Total Oth Expenses & Income

9 Total Costs ( Line 4+6+7)

10 Operating Margin (Line 1 - 8)

Step 1 Re-think how we organize data Standardized Profit Center format to organize data

Recommended by Farm Financial Standards Council

1996-98 1999 2000 2001

Direct Production Costs $93.03 $82.21 $98.88 $107.84

$1.29 $1.14 $1.11 $1.20

Indirect Production Costs $92.74 $85.12 $97.48 $96.78

$1.28 $1.18 $1.10 $1.08

Sales, General & Admin Costs $39.61 $21.83 $30.84 $25.42

$0.54 $0.30 $0.35 $0.28

Finance Costs $15.93 $10.12 $9.06 $6.36

$0.22 $0.14 $0.10 $0.07

Total Costs $241.31 $199.28 $236.26 $236.40

$3.31 $2.77 $2.65 $2.63

Yield (bu/acre) 73.6 72.0 88.1 90.0

Total Costs dropped $.68/bu –21%

Production Costs dropped $.29/bu – 12%

SG & A Costs dropped $.26/bu – 48%

Finance Costs dropped $.15/bu – 68%

SIMPLIFIED DU PONT FINANCIAL ANALYSIS MODEL

Developed by Ag Education & Consulting

multiplied by

Return on average

farm equity

-7.8%

Spread betw een ROA

and Interest cost

-7.2%

Average debt/equity

ratio

1.15

Return on average

farm assets

0.5%

multiplied

byplus

Average cost of

liabilities

7.6%

minus

Average debt/equity

ratio

Average farm

liabilities

$1,062,576

divided by

Operating profit

margin

1.6%

Average farm assets

$1,983,454

Gross revenues divided into

$576,068$9,386

Net farm income from

operations (NFIFO) +

Interest - Withdraw als

Average farm equity

Return on average

farm assets

0.5%

1.15

$920,878

Average asset

turnover

29.0%

divided by

Operating

Margin

ROE

Asset

Turnover

Debt/

Equity

Every strategic decision impacts financial performance…

A Tale of Two Tillage Systems

Conventional Direct Seed / NT

ATR .50 : 1 1.05 : 1

OPM 12.8% 16.3%

ROA 6.47% 17.14%

ROE 3.88%

Which set of strategies is more likely to survive?

22.61%

Cost Sharing/Value Added $

Played Key Roles

Cost sharing tools

EQIP, conservation district funding

Low interest rate loan programs

Value Added Premiums from DS

Food Alliance certification

Monetizing value of carbon sequestration

through carbon credits

Shepherds Grain – Food Alliance

Value added premiums

for wheat sourced under

DS cropping system

Food Alliance certified

Certification Costs

S. T. Periodic Audits

$.60/bu premium 1,200

ac wheat @80 bu/ac =

$72,000 bonus

Process Improvement-

Wittman Consulting 2013

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Benefits of Direct Seeding

Improved economic and

environmental sustainability:

Sequesters CO2 .5T/acre/yr

Organic matter – surface layer

Improved air & water quality

Improved wildlife habitat

Lower fossil fuel use

↓ 3.5gal/acre per USDA

Increases economic viability

This slide says it all!

Challenges Ahead…

Information X-Change & Outreach

Research

Policy

Technology Support

Administrative Leadership

Challenges ahead…

Information X-chg & Outreach

Great strides newsletters, conferences,

tours, breakfast groups, etc.

Are we engaging:

“non-traditional” partners, consumers,

environmental groups

policymakers back east?

New farm bill, conservation titles, CSP, etc.

Challenges ahead…

Research

Soil Quality changes

Can we prove soil quality is better?

Organic matter, compaction, soil pH

REACCH project

are you plugged in?

lessons for direct seeders?

Where does animal ag fit in DS system?

Do we need vertical tillage or not?

Is this improving soil quality?

Can oilseeds & cover crops fix compaction?

… or do we just miss “recreational tillage”?

Challenges ahead…

Research (cont’d)

Variety research adapted to DS systems

Expanding Precision Ag beyond NH3

How apply VRA to seed rates, other inputs

Adapting soil tests to DS soil environment

Cover Crops – not if, but how?

Proven cropping systems practice elsewhere

How adapt to PNW micro-climates?

Do we need different Soil Test approach?

Challenges ahead…

Policy

Definition of “sustainable” up for grabs

Are we at the table helping to define and measure this?

Walmart – Sustainability Index…How do we score?

Universal Principles of Conservation Agriculture

World Congress of Conservation Agriculture

permanent soil cover

direct seeding

planting with minimum soil disturbance

multi-annual crop rotation

integrated nutrient and pest management

biodiversity on the landscape

Carbon Trading Overview

©Wittman Consulting

2008

46

Challenges ahead…

Climate Change Policy Debate

Battle not over

Are we “passing bar bill to our grandkids”?

Engage on legislative and regulatory fronts

Support education and lobbying efforts of

commodity and conservation groups

Study resources on Carbon Issues

Working group www.agcarbonmarkets.com

Challenges ahead…

Conservation Program Policy

Who speaks for us at state & nat’l level

Conservation Standards, Farm Bill-conservation

title, CRP, CSP, etc.

Networking with other US & Int’l NT org’s

CASA Group – Karen Scanlon, CTIC

Mandak, NT on the Plains, Chesapeake Grp

Internat’l Conservation Congress – CA ’14

Your voice needs to be heard in DC!

Challenges ahead…

Economic Viability

Not done with “economic proof”

Lots of data on cost efficiency

Need updated conclusions to backup DS claims

Commodity market decline presents new

opportunity to expand DS

Renewed interest on understanding cost of

production

PNDSA needs to dust off Management Accounting

lessons & strategies for survival

2006 2005 2004

Drovers Journal Dec 2006

Original Cost = $60k + $90k

Replacmt Cost=$300+$250k

$1.08 $1.44

$1.89 $2.09

$2.47

$3.63

$1.84

$2.58

$3.24 $3.55

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Pri

ce/G

al

Year

Diesel Price Trends

$0.18 $0.21 $0.26 $0.25

$0.29

0.45

$0.60

$0.21

$0.46 $0.47 $0.51

$0.03$0.06$0.09$0.12$0.15$0.18$0.21$0.24$0.27$0.30$0.33$0.36$0.39$0.42$0.45$0.48$0.51$0.54$0.57$0.60$0.63

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

NH3 Fertilizer - Price/ # N

Aug ‘13

$121.46

Challenges ahead…

Economics (cont’d)

Certification program – great potential

Need to expand access to PNW

Not “bureaucracy”…valuable by-product of

Process Improvement efforts

Cover Crops

Need “cropping system” budgets and simulations

showing affects of putting these into rotations

What is projected economic benefit?

Crop Insurance implications?

Challenges ahead…

Technology

“Technology support train” needs to catch up with

“equipment sales train”

Issues

Compatibility/Portability between systems

In-field operations – trouble shooting

Devoting company resources to grower training and support

Integrated Management Information System

Can we ever get to the Holy Grail?

Agronomy planning work order execution recording &

analyzing financial/accounting

Challenges ahead…

Administrative Leadership

Kudos to re-establishing

“Administrative home” with competent

executive director who shares

passions of membership

Active board

Great opportunity to serve industry

Tremendous personal growth opportunity

WANTED!!! NEW BLOOD!!!!

Food for Thought…

Have we completed our mission?

Parallel with ACTS/ARTI & FarmTech

– Alberta Conservation Tillage Society

& Alberta Reduced Tillage Initiative

ARTI & ACTS gone…but FarmTech

Cropping Systems Conference viable

as ever.

“Systems” is where the puck is going!

Summary

Looking back…lots of be proud of

Owe BIG thanks to board, Kay, and industry

supporters who put train back on the tracks

Can’t rest on our laurels…lots to do

Information exchange

Research

Policy Development

Funding & Membership Support

Thank You – PNDSA for getting us HERE and

for keeping the vision alive!