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

2. 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 conventional market until OCIA certification. To have all land in organic production within four years and sell on the organic market by the fourth year. 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 conventional market until OCIA certification. To have all land in organic production within four years and sell on the organic market by the fourth year.

3. 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. 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.

4. Outline… Industry overview Operations Human Resources Marketing Financial Feasibility Analysis Industry overview Operations Human Resources Marketing Financial Feasibility Analysis

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

6. 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 $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

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

8. About Kipling: LLD – SE 5-8-3 W2 Precipitation (427mm) Temperature (GDD) 1600 > 5 C Soil Classification Black soil Frost Free Days 120 LLD – SE 5-8-3 W2 Precipitation (427mm) Temperature (GDD) 1600 > 5 C Soil Classification Black soil Frost Free Days 120 KIPLING

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

10. Capital Outlay

11. 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 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

12. Rotation order PeaBarleyC/flaxFallowAOat+AWheat 7 BarleyC/flaxFallowAOat+AWheatPea 6 C/flaxFallowAOat+AWheatPeaWheat 5 FallowAOat+AWheatPeaCanolaFlax 4 AOat+AWheatPeaBarleyFlax 3 Oat+AWheatPeaBarleyC/flaxFallowCanola 2 WheatPeaBarleyFlax FallowAlfalfaOat+A 1 Block 1 2 3 4 5 6 7 Year

13. 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

14. Human Resources cont.. Position #2 - Seasonal Labor (seeding- harvest) knowledge of farm equipment mechanical knowledge Wages: $9.52/hour Position #2 - Seasonal Labor (seeding- harvest) knowledge of farm equipment mechanical knowledge Wages: $9.52/hour

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

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

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

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

19. 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 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

20. 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 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

21. 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 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

22. 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 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

23. 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 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

24. Financial Plan

25. Financial Analysis

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

27. Yield and Price Fluctuations

28. Conclusion and Summary

29. Any Questions?