This business plan outlines a proposed organic farm called Freedom Farm. The goals are to establish organic farming practices within 3 years, sell fully organic within 4 years, increase cash flow over 7 years, and replace machinery within 10 years. The plan discusses the organic industry outlook, the farm location and capital expenses. It proposes a crop rotation, outlines labor needs, and identifies processing and retail customers. Financial projections estimate increasing revenues and profits over 10 years, with an IRR of 12.2%. The plan also addresses challenges around certification, costs, competition and market forces.

1. Organic Farming
Freedom Farm
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.

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.

4. Outline…
• 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

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

7. Saskatchewan...
• 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
KIPLING

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

10. Capital Outlay
2002 2005 2006 2008 2009 2011
Land (1680 acres) 432,177 - - - -
Buildings:
Shop - 34,239 - - -
Grain Storage 26,000 - - - - -
Powered Equipment 136,000 30,000 - 50,000 - 50,000
Non-Powered Equipment 29,350 - 15,000 - 15,000 -
Total Capital Outlay 623,527 30,000 49,239 50,000 15,000 50,000

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

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

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

15. Product/Service Features
• 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

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

18. Strengths
• 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

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

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

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

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

24. Financial Plan
2002 2004 2005 2006 2010 2011
Total Revenue 155,341 124,467 296,805 302,741 327,697 334,251
Total Expenses 139,527 103,489 113,855 113,263 109,160 107,617
Net Income 15,814 20,978 182,950 189,478 218,537 226,634

25. Financial Analysis
400
350
Dollars (thousands)
300
250
200
150
100
50
0
-50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Year
Total Revenue Total Expenses Net Income

26. IRR and NPV
Base Case
Net Present Value of Equity Investment (72,049)
Internal Rate of Return on Equity Investment 12.2%
Without 2% growth in price:
Net Present Value of Equity Investment (114,221)
Internal Rate of Return on Equity Investment 10.4%

27. Yield and Price
Fluctuations
Yield (% of Expected Average)
60% 75% 90% 100% 110% 125%
40% -100% -100% -100% -100% -100% -10
60% -100% -100% -100% -4.3% -1.2% 3.
80% -100% -4.3% 1.7% 5.1% 8.2% 12.
Organic Price
100% -4.3% 3.0% 8.9% 12.2% 15.2% 19.
Percent of
Expected
120% 1.7% 8.9% 14.6% 17.9% 20.8% 24.
140% 6.7% 13.8% 19.4% 22.6% 25.5% 29.

28. Conclusion and Summary

29. Any Questions?