Gregory Heckman, who joined Bunge’s board late last year and took on the CEO role in January, told Reuters in an interview on Tuesday improving risk management at the 200-year-old company is a key focus as he oversees a portfolio review that is expected to last through the middle of 2020.

As the trade war enters its second year with no sign of a resolution, White Plains, N.Y.-based Bunge and other grain traders are also navigating weather-reduced crops in the U.S., a herd-culling hog disease in China that has slashed demand for soybeans and currency gyrations that have fueled uncertainty in top soymeal exporter Argentina and elsewhere.

Bunge’s surprise loss in last year’s second quarter, when bets on a quick trade war resolution turned sour, and another loss-triggering bet in the fourth quarter as trade tensions eased is something Heckman is determined to avoid.

“We want to avoid any surprises from stroke-of-the-pen risk,” Heckman said, referring to unforeseen risks such as abrupt government policy shifts or tweets by U.S. President Donald Trump.

Investors last year pointed to a culture at Bunge where traders took on more risk compared with rival trading houses as contributing to the loss.

“While we have to make certain decisions to manage the inherent risks and protect the margins in our crushing and our distribution and milling assets, we try to absolutely stay out of the way of any big changes that can happen,” Heckman said.

The company is improving co-ordination between its risk management and commercial teams and doing more scenario analysis to make sure that any bets are appropriately weighed against earnings prospects, he said.

Grain merchants like Bunge and rivals Archer Daniels Midland, Cargill and Louis Dreyfus, known as the ABCD quartet of global grain trading giants, have already been restructuring their businesses and cutting costs after a years-long crop supply glut that thinned margins and sapped profits.

Heckman joined Bunge’s board as part of a deal to ease activist investor pressure on the company following a string of weak results that made it vulnerable to takeover attempts by ADM and global commodities trader Glencore.

Heckman, a founding partner of private investment firm Flatwater Partners and the former CEO of grains trader Gavilon Group, declined to comment on whether the company was currently in takeover talks.

Rising market uncertainty has stiffened near term earnings headwinds for Bunge since it reported better-than-expected second-quarter earnings last month, Heckman said.

Bunge left its full-year 2019 earnings guidance unchanged when it announced second-quarter results on July 31, but warned that uncertainty from African swine fever and the trade war meant more of the profit for the second half of 2019 would come in the fourth quarter.

“We thought that our (second-half 2019) earnings would be largely weighted to Q4. It’s probably even more so now,” Heckman said.

The company, whose Canadian businesses include oilseed crushing and processing and a joint stake in Prairie grain handler G3 Canada, is looking to streamline operations and maximize profit as part of its ongoing portfolio optimization program.

Bunge unveiled a new global operating model in May and announced last week that its headquarters would move to St. Louis from the New York suburb of White Plains.

The effort has also found a new home for Bunge’s sugar business, long a drag on earnings, in a Brazilian bioenergy joint venture with BP.

The company is actively working on “a number of other projects” that will be announced as they are completed, Heckman said. He declined to elaborate on which businesses would be impacted.

“We’ve given ourselves an internal deadline to have the majority of the portfolio transformation and optimization work completed by the end of Q2 2020,” he said.

— Karl Plume reports on agriculture and ag commodity markets for Reuters from Chicago.

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That’s what the Canadian Federation of Agriculture (CFA) wants to learn from a survey of farmers as it prepares for the next federal-provincial-territorial farm program starting April 1, 2018, replacing Growing Forward 2.

“We want to make sure we are ready and as informed as we can be early in the process because negotiations and discussions around the frameworks start quite early,” Scott Ross, CFA’s director of Business Risk Management and Farm Policy said in an interview from his Ottawa office Aug. 25, 2015.

CFA has set out in broad terms policies it wants the next federal government to implement on behalf of farmers, but more work needs to be done with officials on the details.

“This is where we feel the survey will feed into it — getting those details and making sure that we have the most accurate picture we can of how producers use the program and how they want to use the program and the challenges they face with it right now.”

AgriInvest evolved from the defunct Net Income Savings Account (NISA). Under AgriInvest, farmers can deposit 100 per cent of their allowable net sales annually into a savings account with up to one per cent of their deposit, to a maximum of up to $15,000, matched by the federal and provincial governments. (Governments in the past matched 1.5 per cent of allowable net sales.)

AgriInvest is a self-managed producer-government savings account that allows producers to set money aside so it can be used to recover from a small drop in income, or to make investments to reduce on-farm risks, Agriculture and Agri-Food Canada says on its AgriInvest website.

It’s up to farmers if they want to withdraw money from the AgriInvest account. When they do they must withdraw the government contribution first and it’s taxable.

CFA is proposing the following changes to the program:

• Increase the maximum matched producer contribution rate to 4.5 per cent of allowable net sales.
• Set the maximum allowable matching contribution to $100,000.
• Encourage investments into a set of pre-approved, proactive risk mitigation and income generation investment opportunities by allowing producers to access their own AgriInvest contributions without triggering taxable government funds.

“We see at CFA a strong role to increase the value of what AgriInvest offers to producers in terms of an investment tool that helps them manage a whole wide array of different issues that are coming up in terms of on-farm costs,” Ross said.

“But we wanted to get a better understanding of what kind of assets and investments they are making right now with the program to see how it has been used to date, and also get some insights as to whether the current amounts are sufficient to really meet the goals.”

Farmers are busy with harvest now, but the web-based survey, which can be done on a mobile device as well as a computer, takes just three to five minutes to complete, Ross said.

CFA’s Manitoba affiliate, Keystone Agricultural Producers, has used social media to inform its members of the survey, which can be found on the home page of CFA’s website or at this Google Doc ‘CFA Survey on AgriInvest.’

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Rancher’s Risk and Return is an Excel spreadsheet calculator that takes an innovative approach to assessing the market price risk that cow-calf and feedlot producers continually face.

“This is really a useful thing and should be in the hands of farmers,” says Peter Papez, risk analyst with AFSC.

“The new calculator takes traditional cost of production calculations through to the assessment of financial risk and risk mitigation,” says Bruce Viney, risk management specialist with Alberta Agriculture and Rural Development. “The calculator estimates the financial risk effects from leverage, and measures the risk protection offered through livestock price insurance strategies. Rancher’s Risk and Return will be an important tool as producers consider new ways to manage downside threats while staying in position to take advantage of the exiting new upside market opportunities appearing on the horizon.”

Rancher’s Risk and Return also helps producers calculate useful information when they are considering making structural changes to their operations or when they are considering the financial return impacts of different borrowing levels. The calculator can easily show how sensitive an operation’s bottom line is to different selling prices and cattle price insurance coverage levels and these results are shown in easy-to-read tables and graphs.

“Rancher’s Risk and Return assists in estimating the costs of home-raising replacement heifers and other activities from backgrounding to yearling grazing and through to various finishing scenarios,” says Viney. “The calculator is an easy-to-use enterprise analysis tool that is designed in two parts and is specific to cow-calf and feedlot enterprises. It has a great deal of flexibility to quickly provide valuable information using familiar cow-calf budgets and traditional feedlot profit projections.

“The big advancement from traditional models is the ability to quickly assess financial risk and calculate the costs and benefits of cattle price insurance strategies specific to your own farm or cattle-feeding venture. While the Rancher’s Risk and Return modelling tool can get down into some detailed calculations, it still allows for easy what-if analyses and scenario comparisons.”

Rancher’s Risk and Return is available for free download from the Alberta Agriculture and Rural Development website.

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“It just seemed from our experience there was a disproportionate amount of land coming into our program in wet years than there was in dry years,” David Van Deynze, the Manitoba Agricultural Services Corporation’s (MASC) manager of claim services told the Keystone Agricultural Producers’ general council meeting April 18. “That’s the reason for our caution there.”

The deadline for selecting the EMI Reduced Deductible Option and EMI Higher Dollar Value Options will be Nov. 30 of the previous crop year starting this year for the 2014 crop, MASC announced earlier this year.

Also effective for 2014, land must be added to a crop insurance contract by March 31 to be eligible for EMI coverage in that year. Land added after March 31 will continue to be eligible for coverage for seeded crops and hail, but not for EMI.

(The deadline for selecting EMI options in 2013 remained March 31 with land added until June 30 continuing to qualify for EMI.)

Rob Brunel, a District 11 delegate and farmer at Ste. Rose du Lac, said he was disappointed with the changes.

“I don’t buy extra health insurance unless I know I’ll be travelling,” he said.

MASC thought carefully because changing deadlines adds complexity to administering the program, but in the end decided it was necessary, Van Deynze said.

“We hope people select insurance because it’s a good idea to always have higher insurance coverage or always have 50 per cent coverage, not necessarily look out your window and say ‘this is what I need this year,’” he said. “It’s kind of like buying insurance for your house when it’s on fire. We don’t want to have that situation.”

Brunel said a farmer could have EMI coverage on March 31 but then decide to rent the land to a neighour April 1 and the renter wouldn’t have coverage.

“In wet years we find acres in our program that aren’t normally there and that’s, in my mind, a bigger risk than the March 31 change in selection date,” Van Deynze said in response. “There’s lots of guys who don’t insure and then all of a sudden they’re insured under someone else’s contract when it can’t be seeded (because it’s too wet). That’s a real big concern for us.”

MASC is also experimenting with insuring later-maturing crops such as corn, soybeans and edible beans, throughout agro-Manitoba. Future coverage depends on the experiment’s results, Van Deynze said. For example, MASC might decide farmers in shorter growing season areas can only insure earlier-maturing varieties.

The experiment removes borders that irked farmers. Until now a farmer might be allowed to insure corn on one side of the road, but not the other.

Meanwhile, the Manitoba Corn Growers Association is trying to determine whether the experiment is a good or bad idea, said association secretary-manager Theresa Bergsma.

“We figure they (MASC) must have done some sort of risk analysis and decided the risk wasn’t high or they wouldn’t have done it,” Bergsma said in an interview. “But where are those numbers? And if the risk is so low, is it the program we need?

“We’re really upset they did it without consultation.”

The late spring is a concern to all farmers, but especially corn growers who need a long growing season. So long as farmers can seed corn before the middle of May it should be all right, Bergsma said.

“We’re not afraid of guys trying to push the envelope,” she said. “Farmers know corn is too risky to do that with.”

Bergsma said she hopes new corn farmers are equally cautious and not emboldened by crop insurance being available in areas that traditionally haven’t grown corn.

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What is risk?

For us, risk is not standard deviation, volatility or even losing some money. The definition of risk that most connects with clients is the consequence of not meeting your objectives. We like to work with clients to define internal benchmarks and levels that take into account their exposure, revenues, costs, break-even and even their worst-case scenario.

Risk, like energy, cannot be destroyed but it can be altered, redirected or transferred. Risk management is not about not losing any money, it’s about balancing risks and balancing gains and losses.

Risk management doesn’t just necessarily manage the risks of the markets; it manages the risk of the behaviour of the individuals who make up the markets. This gets into the realm of psychology, or the new fancy term “behavioural economics,” also known as human nature.

What is risk management?

We are all learning every day in the markets and we want clients to learn more about their money so they can earn more on their money. A risk-management strategy needs to start with learning and education. Once you are comfortable and confident with the basics, a proactive, disciplined, straightforward risk-management strategy can be developed.

•  Proactive: As Benjamin Franklin said: “By failing to prepare, you are preparing to fail.” We want to plan ahead while remaining flexible, ready to act and adjust strategies over time as markets develop and opportunities present themselves.
•  Disciplined: I find the best methods don’t attempt to guess where prices are going but rather consistently apply predefined risk-management techniques. The aim is not that it works perfectly every time, but rather consistently over time.
•  Straightforward: Simple, straightforward strategies provide the greatest results since you are more likely to use them. There’s no point building a more complex mousetrap if no one is going to use it.

Protecting the downside

A protective put option strategy is very straightforward. It’s just like buying price insurance on future production or grain sitting in the bin. It is simple but can be costly because of the premium you pay, but there can be good reasons for this type of approach when prices are high.

Here’s a recent example of a producer north of Winnipeg who wants to hedge his new-crop soybeans for October/November delivery. He is very profitable above $12/bushel so with November soybeans currently at $12.65, we decided to buy November $12.40 put options. In other words, he can sell a futures contract at $12.40 even if the market has dropped below that level. The options cost $0.60, which means he’s established a floor price of $11.80. The main benefits of this approach are downside protection with upside potential.

Three scenarios

From now until November, soybeans can move either up, down or sideways. Let’s look at each scenario:

•  Up: Soybeans reach $15 for Oct./Nov. Since that is above $12.40, the put options expire with no value, but the farmer can sell grain into the cash market at $15. He’s lost the put cost of $0.60, but still nets $14.40, less local basis.
•  Down: Soybeans drop to $10 for Oct./Nov. The options purchased at $0.60 are now worth $2.40 — the difference between the $12.40 put strike price and the current price of November soybeans at $10 — for a net gain of $1.80. The farmer sells into the cash market at $10, or a net price of $11.80 minus the basis.  
•  Sideways: Soybeans are at $12.65 for Oct./Nov. The $0.60 options expire with no value, but the farmer sells in the cash market at $12.65 for a net of $12.05 minus the basis.

Summary

This protective put strategy offers:

•  Downside protection below $11.80/bu. less basis. (Put strike price of $12.40 minus premium of $0.60 = $11.80.)
•  Upside potential above $11.80/bu. (Put strike price of $12.40 minus premium of $0.60 = $11.80.)

Overall, for the cost of the insurance premium to protect the downside, you can also participate in upside of higher prices.

The bottom line, like everything in the markets, is that you have to balance risk and reward. Some strategies cost very little so offer less protection and with little upside. Others are more expensive but give full protection and more upside.

It’s important to remember that this is just one of many strategies. You shouldn’t hedge everything with one strategy at one time. Instead give yourself some flexibility to diversify your hedges. While you won’t be right every time with your market direction or strategy, what is plausible is a consistent, disciplined approach year in, year out to help you manage your risks before they manage you.

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The professorship was made possible through a gift of $750,000 from Guy Carpenter & Company, a global leader in risk management and reinsurance intermediary services.

The research conducted by the Guy Carpenter Professorship is expected to support the development of “sound and innovative risk management policy, as well as new private-sector risk management and insurance initiatives,” a University of Manitoba release says.

Porth was awarded her doctorate in 2011 from the University of Manitoba and the Warren Centre for Actuarial Studies and Research in the Asper School of Business. She holds an MBA with a thesis option in management science and a bachelor of commerce (Hons.) in financial and actuarial studies from the Asper School of Business. Since August 2011, she has been an assistant professor in the department of statistics and actuarial science at the University of Waterloo.

Federal Agriculture Minister Gerry Ritz and Manitoba Minister Ron Kostyshyn were on hand March 18 to welcome the new program.

Manitoba Beef Producers also welcomed the appointment. “Beef producers face considerable risks that are not covered by current risk management programs. The development of new, innovative risk management tools will help bring greater stability and opportunity for growth to the beef sector,” an association release says.

India trade policies slammed

washington / reuters U.S. industry groups want Washington to pressure India on reforming high-tech, agricultural and pharmaceutical policies they said block U.S. exports and damage patent rights.

India gets a special deal on trade from the U.S., as it falls under the Generalized System of Preferences program, which waives duties on thousands of goods from developing countries to help them create jobs. It is the largest recipient of benefits under the GSP program — exporting $3.7 billion worth of goods to the U.S. under it in 2011. But the current arrangement expires on July 31.

If the deal is to be extended, American industry wants India to lower regulatory barriers and tariffs, including steep tariffs on U.S. farm goods.

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Farms nowadays can be complex, highly industrialized businesses with product to develop and markets to access. But I know you know that already.

What you might not know is how important communication is in this new world of complex, production agriculture.

When working with producers on developing written health and safety plans, I always tell them that safety policies, standard operating procedures, and other critical workplace safety documents are not worth the paper they are written on if they aren’t communicated effectively to employees and contractors.

It seems sensible but it’s harder said than done.

The best bet for achieving outstanding communication is to start off on the right foot. Stress that employees are valued and their health and safety is a priority. Ensure they understand the importance of working safely. Ask them about their previous work experience. Did they receive any training? Remember to get copies of any certifications or accreditations they may have for your records. If they are a new hire, check their references to ensure they have a positive safety record.

Set a positive example

Make sure your safety policy is communicated to new hires and is posted openly for everyone else to see too. As a farm owner, you set an example for health and safety on the farm. So be clear about your responsibilities and live up to them.

Safety is a two-way street though.

Workers will invest in a safe workplace if they feel comfortable raising questions, contributing to safety solutions, participating in safety inspections, and openly discussing safety concerns, incidents and near misses. If you make pre-operational checks on tools, machines, and equipment non-negotiable, and insist on providing your workers with adequate safety education and training, safety will become a part of your everyday workplace culture.

In the event of a near miss, don’t forget, reflect.

Conduct an investigation and ask your workers several questions: Who was involved? Where did the incident happen? When did it happen? What were the immediate causes? Why did the incident happen? And how can a similar incident be prevented?

Everyone has a role to play in ensuring the safety of your farm, so cultivate an open, positive working relationship with your employees based on communication and trust.

For more information on communicating farm safety information or developing your own written health and safety plan, visit www.agsafety week.ca.

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Looking back, it’s not so much that I was a rebel without a cause, as much as I just didn’t realize that I was putting myself in harm’s way.

For producers, farming is a way of life. When you live, work and play on your farm, certain activities become second nature. You don’t even think about it, and neither does anyone else.

When I work with producers to implement written health and safety plans, one of the biggest challenges, and rewards, is helping farmers and farm workers retrain their brains to recognize hazards.

A key activity involved in developing a health and safety plan includes conducting on-farm inspections. These reviews should be conducted regularly by those most familiar with the overall operation of the farm.

Hazards are defined as anything that may cause injuries or negatively impact your health. Hazards can take many forms, including stress (lifestyle); pesticides, fertilizers, and disinfectants (chemical); repetitive strain injuries (ergonomic); gases from manure pits, dust from grain and feed, and animal-borne illnesses (biological); and machinery, livestock and extreme weather (physical).

When assessing the degree of risk, inspectors should take into consideration the likelihood or potential of the hazard to cause harm to people or property, as well as the impact of the harm. The more likely, and the more significant the impact of the hazard, the higher the risk and the more urgent the need to address it.

When assessing risk, I tell producers to ask themselves a series of questions. Under what conditions is harm likely to occur? How quickly could that unsafe condition arise? How many workers could get hurt? How badly would they be hurt? When it comes to a specific operation or task, it may be necessary to outline the degree of hazards associated with each step of a work process. Can a body part get caught in or between objects? Can the worker slip, trip or fall? Is there a danger from falling objects? Is the lighting adequate? Is contact possible with hot, toxic or caustic substances? Is the worker entering a confined space? Is this individual working alone?

Take a step back and look at your entire operation. Do you see any potential hazards? What about on your neighbour’s farm? Now do you see any hazards there? You eat, sleep and live your farm, but it’s really important to look at your farm with an outside perspective when identifying hazards. The deeper you probe in identifying hazards on your farm, the safer your farm will be.

For more information on identifying hazards or developing your own written health and safety plans, visit www.agsafety week.ca.

The post We’re all recovering safety offenders: Recognizing hazards on the farm appeared first on Manitoba Co-operator.

Farmers write policies all the time, in employee handbooks, or other policy documents, as a way to communicate responsibilities to their employees. And in fact, employees need to understand their roles and what is expected of them before they step into a tractor or enter the machine shed.

But when it comes to health and safety policy statements, it’s a two-way street. Employees need to know that they have a responsibility to conduct themselves in a safe manner, and employers also have a responsibility to communicate their commitment to safety to those who work for them.

Unreported

If you don’t make an effort to see what’s behind door No. 2, you are creating a situation where hazards might go unreported, possibly out of fear on the part of the employee that feedback on safe work practices won’t be taken kindly. This could put everyone who works or lives on the farm at risk.

So when developing safety policies, here’s what you need to do.

Start with a general health and safety policy statement. This statement should outline your health and safety philosophy and the objectives of your safety plan. It should also state that you have made a commitment to preventing injuries and illnesses, and that workers are also responsible for their own health and safety, as well as the health and safety of anyone else who works on the farm.

This should be supported by more specific operational policies, which cover standard operating practices, training requirements and records, emergency plans, first aid records, working-alone procedures, and incident investigation processes and followups.

Keep it simple

In working with farmers on policy development, I encourage them to keep it simple. If it isn’t simple, it won’t be implemented. Also, don’t overpromise. Your health and safety policies need to be sustainable to be effective.

Lastly, I come across the fear that employees might abuse the very policies put in place to protect them. If you make health and safety policy development a group activity, all your workers will be invested in its success. This will help weed out unreasonable claims while keeping everyone on the farm protected.

While the task of developing policies and documentation might seem huge, there is a lot of overlap between farm safety plans and on-farm food safety and quality assurance programs, so where relevant, cross-reference.

Stick to the essentials and you could be setting your operation on course towards a safe and productive future that will improve morale, position yourself as a preferred employer, and protect against the risks of injury. For more information on health and safety policies or developing your own written health and safety plan, visit www.agsafetyweek.ca.

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In Alberta 16 people were killed in farm accidents in 2011 and three of them were under 18. Just as a comparison, among all the workers covered by Workers Compensation in Alberta, 43 people died in workplace accidents in 2010, the most recent year with figures available.

The Canadian Agricultural Safety Association (CASA) took new approaches and looked at new issues at their annual conference this month. Around 70 farmers, safety professionals, trainers, manufacturers and researchers participated.

CASA is a non-profit association dedicated to improving the health and safety of farmers, their families and workers across the country. It works with provincial groups and others, in some ways acting as an umbrella group for other agencies with an interest in farm safety. It also has the FarmSafe Foundation, a new charity arm to help finance new and ongoing farm safety activities.

Emerging farm safety issues were one part of the conference, including autonomous equipment such as auto-steer and driverless vehicles, and nanotechnology, which may be great advances for agriculture, but may also bring new hazards.

“We need to make sure that we understand the safety implications of these new technologies so we can control the hazards along the way,” said Marcel Hacault, executive director of CASA. “This conference is a great way for participants to get a snapshot of the future through the lens of a safety-first attitude.”

Nanotechnology concerns

Nanotechnology involves using microscopic particles for a huge variety of uses from stain-resistant clothes, to antimicrobial socks and tightly targeted anti-cancer therapies and pesticides. Over 1,000 nanotech products are already on the market and the number is expected to be four times that very soon.

Conference participants got a first look at the potential hazards of using some of these products. The fact that asbestos fibres, the cause of mesothelioma, a particularly nasty lung cancer, are considered nano-particles is a grim reminder that the new technology might come at a high cost unless their risk is managed.

The keynote speaker at the CASA conference was John McNamara, from the Irish Health and Safety Authority. In joining the European Union, Ireland has accepted regulations that apply to all workers, including prohibition of children under 16 operating or riding on farm equipment. “It was difficult for people to accept at first,” says McNamara. “But, we have made huge progress, the number of children who die in farm accidents is now very low. We’ve also seen a reduction in accidents among younger farmers, those under 55. But a rise among those over 55.”

National strategy

The conference also gave the farm safety community its first look at CASA’s new National Farm Safety Strategy. The document starts with goals and mission statements then identifies key priority areas for improving farm safety across Canada.

The strategic plan aims to change the culture of farm safety, the way farmers plan their operations and the way they act when something unexpected happens. “Our goal is farms that are safe places to work and to live,” says Hacault. “We want to help farmers see the risks in their operations and manage that risk so that no one in Canada is hurt farming.”

The plan is based on the notion that linking safety risks to other farm risks is part and parcel of managing the overall business risk of the agricultural operation.

The strategy proposes that a farm must manage safety risks like any other business, but with the added challenge of recognizing that for those living on a farm, they are in a workplace as soon as they step outside.

“We need a culture shift, a change in behaviour, but in thinking as well,” says Hacault.

McNamara agrees. “A safe farm is one where work is well organized,” he says. “Accidents are a failure of planning. When something goes wrong, farmers, who are used to being in charge, tend to act impulsively — and that’s when things can really go wrong.”

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