Shepherd's Grain

A brand New Year is once again being written on all documents (and checks) and hopefully only a few times as 2011. Once you put the month ahead of the year you are quickly reminded to write it correctly. I, like so many, have set some objectives I would like to accomplish this year. I do not count them as “resolutions” but more along the line of “hopeful achievements”. Much of my thinking is how will I get these multiple goals done as well as simply maintain my current list of still hopeful achievements. Then it became clear as I was preparing a new Julian date calendar to put in the back of my working journal. I get one more day this year to “get er done”. It is a Leap year which provides one more day in February. Have you made plans for what you are going to do with this extra day? We have become accustomed to the one hour that we lose in the spring and the one we gain back in the fall but that occurs in the middle of the night so generally only affects our sleep. Only once every four years are we allowed to gain a day and so far we never have to give it back.
This year February 29th is on a Wednesday so it truly is an extra day to aid all who are falling behind in their tasks or who are well planned and can create something new. I am currently planning on creating something new. We have an opportunity to work with some potential producers of Shepherd’s Grain products from a different region and I am planning on meeting with them around this date. This is one of the hopeful achievements we in Shepherd’s Grain are hoping to create. We are still very focused on our current customers and presenting them new ideas in marketing Shepherd’s Grain. We expect to launch a new web site later this spring which is expected to aid us in showcasing our programs as well as the many customers that support our family of producers. We are studying a further expansion of our marketing area, still within the focus of the Western United States. We are steadfastly planting the seed of why a baker or chef should be using Shepherd’s Grain flour products because for many it takes a bit of time for that seed to grow into a real purchase.
We do not plan on getting this all done on the 29th but it will certainly be a day we utilize to enhance the Shepherd’s Grain brand. Life is short and when we get an extra day we definitely need to spend it doing what we love. Working to expand the goals of Shepherd’s Grain is just that.

As always, thank you for your support of Shepherd’s Grain and our family of Producers.

I am going to tackle an issue that has needed attention for some time. I have not been ducking the need, just haven’t had the right mindset to delve into it. The issue is pricing of Shepherd’s Grain products, the how and why, and because of our commitment to transparency even the makeup of our price.

Let me begin with the how and why as this certainly is an important piece to the makeup of the price. As I have mentioned many times the whole idea of Shepherd’s Grain is built on some pretty simple ideas and this is one of them. In order to be truly sustainable you must cover your cost of production and the commodity market does not recognize this need. This can be further described as a de-commodification of our price. The only answer can be a true cost of production price for the wheat which gets back to the farmer’s hands to ensure not only their operation now but also the next generation. Shepherd’s Grain producers have already made the distinction of environmental stewardship to ensure the next generations success. Therefore, we calculate our true cost of production per bushel across our now 43 producers and take an average of them, add the cost of transportation to the mill, a margin for Shepherd’s Grain to manage the program and that sets the price of wheat being sold to the mill. Within this total cost of production we subtract any direct payments from the USDA since you as a taxpayer already participated in this subsidization to the producer.

The makeup of the cost of production is a very comprehensive model. The author stated he had never developed one so complete and did so only because our producers were going from being a price taker to a price maker. He stated he could not create this in a commodity system because farmers would rarely achieve these numbers and wonder why they are still farming. The general percentage makeup of our producers cost of production is split out this way. The variable costs are the most significant at an average 60% of the total. The fixed costs including value of their shops, office, machine sheds and replacement cost of these is 6%. The capital expenditures include machinery, machinery repairs, machinery replacement, and return to capital amounted to 26%. This next cost includes a contribution to both medical and retirement which combined created another 3% cost to the total. The final number is a return to management which constitutes another 5%. This review does not provide for return to land as this particular example is based on sharing revenue (a lease) with the landowner who is not the actual producer. After these costs are calculated, we then subtract the income per bushel derived through the US Department of Agriculture in the form of a subsidy payment. This represents an approximately 3% reduction in the price of grain sold to the mill.

The last significant component is these costs are fixed for the year since the grain is in the bin and all costs have been incurred. We also provide this approximate cost of grain converted to flour six months in advance of its’ implementation.

As always, thank you all who support the SG producers through your purchase of the fairly priced de-commodified grains and flour.

Respectfully, The Shepherd’s Grain family of producers Happy Thanksgiving.

I know I have discussed the following before but sometimes thoughts bear repeating. I did not spend time going through the archive to see when I discussed the thought of how “team” has had such an influence on Shepherd’s Grain but it certainly seems appropriate to be repetitive.
From the beginning Fred and I have reminded ourselves of our history with the team concept and the success we achieved. The reminder is seeing how much of that influence is reflected in the culture and success we enjoy today. Fred and I both came from small rural schools in Eastern Washington with a classification of under 150 students in the top three grades. My school only had a little over 100 in the top four grades. Both of us played sports as we were growing up so the idea of team over self was imprinted on us very early. We were also very lucky to have some very strong leadership from the coaching level at the same time we reached our high school years and both achieved state championships during that time period. This was only achieved because we adhered to the team aspect and when you are successful at something it becomes a long fiber of your future.
The genesis and short history of Shepherd’s Grain has the team concept imprinted on it wherever you look. The idea of horizontal integration is all about finding people and ideas that have a like need or goal which is the basis of all our partnerships in production, processing, and delivering a quality product to our customers. We have had the question of why not develop your own mill and distribution system and the answer is simple, utilize those around you (team) who are good at what they do and share in the success. The value of finding chefs, bakers, restaurateurs, mix manufactures, and retailers who have that desire to be involved in a team of producers, processors and distributors is the only way that makes sense to Fred and I. The emotional connection within a team no matter the level of your success creates a sustainable business atmosphere. That same emotion allows for positive negotiations as we seek to enter into projects that go beyond the building block of Shepherd’s Grain which is the wholesale market to our base of chefs and bakers.
Since the beginning when it was just Fred and I to now, when the “management team” has grown to 5, we operate as not individuals but a collection of different talents that can generate much more as a team than the same group acting individually. We expect the respect for each other’s talent, we enjoy the success each has in fulfilling their roles in the team, and we seek to push each other to be better. All this is to be personified in our deliverables to our partners and customers.
As I conclude this newsletter the idea of a new “tag line” that embodies who we are is “become a part of the Shepherd’s Grain team”. Enjoy each other’s talent, enjoy the success each has in fulfilling their roles on the team, and do seek to push each other to be more successful. Together the idea of a sustainable regional food system can become a reality as a “team” much sooner than acting individually.
As always, thank you for your support and participation as part of the Shepherd’s Grain team.

The Shepherd’s Grain family of food producers.

Transparency, trust, truthfulness are three cornerstones of Shepherd’s Grain. I was introduced to a new term that may encompass them all and it is authenticity. The word came in conjunction with an invite to a conference titled: “Authenticity—Building trust through Sustainable Business.” I will discuss this later but wanted to focus on the use of one word to portray those three SG cornerstones. The dictionary has many definitions of “authentic” including genuine and bona fide as well as the following; “stresses fidelity to actuality and fact and may imply authority or trustworthiness in determining this relationship.” Relationships are essential in our effort to reconnect the producer to the consumer and a fidelity to that actuality is further confirmed by our use of Food Alliance. They verify our producers are in fact using the direct seed production system we use in our marketing effort. We hope that our brand Shepherd’s Grain has gained your trust in our accuracy of details not only because of our third party verification but our consistent statements of facts surrounding Shepherd’s Grain.

As we grow, and I imagine with any small businesses, the need and ability to protect the authenticity of your brand is more challenging every year. As you grow your management team, there are more people projecting your brand and culture so it takes time to ensure all are strong in their beliefs of your company. In our case, the further growth of our producer base and customer base demands a stronger commitment to communication to retain that authenticity or to authenticate your brand. In a recent book I read titled “All Hands on Deck” by Joe Tye he states “It’s what we call ‘failing your way forward to success.’ During my career, I’ve seen very few brilliant ideas that came out of the shell that way, but I’ve seen a lot of mediocre ideas that became brilliant because someone was inspired enough to keep working at the idea until it worked.” We certainly can fall under the ‘not brilliant out of the shell’ and ‘commitment to working until it worked’ aspect of this quote. As we plan for our future we need to “stress the fidelity to actuality” even while failing our way forward.

In reference to the conference and its’ title of “Building Trust through Sustainable Business,” this truly does mean in my opinion a need for authenticity throughout the chain of custody. In Shepherd’s Grain taking the raw product from the producer, shipping it to the processor, transforming it into flour separate from others, and maintaining that quality through to the baker at a responsible cost must take authenticity at all levels. Sustainable businesses need to be profitable, they need to be true to their brands, and they need to trust all who are connected along the value chain of the market. My hope and belief for the future of Shepherd’s Grain is you will always think of us as the “authentic” marketer of grain and flour products to the marketplace.

As always, thank you for your continued support and friendship to Shepherd’s Grain and our family of food producers.

The Shepherd’s Grain Producers

The difficulty in taking a month off from writing a newsletter is you either (a) forgot how to, or (b) have too many ideas to choose just one. I will let you decide which dilemma I am suffering from.
After a very late spring and very mild summer our family of producers are now doing what every farmer loves to hate. The reaping of what they have sown is now in progress or in our farmer speak, harvest is under way. I said they love to hate it only in the fact that it creates very long days, too much stress, and you are always looking out your window at the weather conditions. This particular harvest is full of good stories so far as yields are excellent in most areas. The environment has been very good in growing and maturing the crop with little or no stress and the plants have responded. Plentiful rain and cool days pampered the crop to, for some, all time high yields. That same plentiful rain and cool days delayed harvest by nearly three weeks across our producing region. We have had excellent harvest weather so far (warm and dry) and our southern growing area is near the end of their harvest. Our northern area is just getting a good start and they have some additional stress as they have a short window of good harvest weather under normal conditions. This delay will test the resolve of all to be safe and yet push to get the crop in the bin.
From the marketing side of our business we have seen some excellent growth over the past few months and hope the momentum will continue into the new crop year. Anticipating that, we will be bringing on an additional marketing associate to aid Debbie Danekas in the Seattle corridor market. Debbie has been intensely involved in this market area now for 27 months representing Shepherd’s Grain. This is the first time we have had our product marketed in one area with this amount of time and commitment. The outcome has shown us a very positive impact and we are trying to build on that momentum for the first half of this marketing year and then explore other areas within our marketing region that may benefit from a full time marketing associate. I will take this time to introduce Kelly Blume as our new marketing associate and looking forward to her meeting with our customers and understanding the dynamics of marketing Shepherd’s Grain flour products.
Also within our marketing program we are working on a new website that will have more capacity for pages we think are important. We will have pages dedicated to showcasing and linking our customer base where you can get products made with SG flour as well as retail outlets for either bulk or packaged product. We want to make the site more interesting to the consumer so they can further support our customers who use our flour for their products. We hope to provide even more information on our family of producers and how they work on their farms. We aspire to gain more interaction with our spotlight page so our customers can display whose wheat was processed into that bag of flour and partnered with the baker or chef to create the product you are tasting. We hope to launch this new site in September and I will post a note to all when that is going to happen.
For now I will as always, thank you for your support of Shepherd’s Grain and our family of producers. Hope you have had a good summer and let’s all pray for good harvest weather.

The Shepherd’s Grain food producers.

This is a short statement to notify you of a temporary change in our Food Alliance status. Due to an increase in the demand for Shepherd’s Grain hi-gluten and Whole Wheat flours combined with a delayed harvest we need to blend some commodity wheat with our Shepherd’s Grain wheat to complete this crop year’s flour needs.
Our harvest is nearly three weeks late because of cool wet weather throughout the spring and early summer. This delay has been a significant part in the need to supplement our current remaining bushels of Shepherd’s Grain DNS with common high protein wheat purchased from the mill.
We do not expect this to create a significant difference in the performance of the flour although it may not contain the same excellent flavor profile. We hope to have the new crop inventory on hand in less than a month.
The blended product is in bags dated 1-203 or higher. You will note a sticker on these bags stating the temporary non qualification for Food Alliance on the finished product. Our Shepherd’s Grain producers are still all Food Alliance certified and this does not change that status at all.
Once the sticker is no longer visible on the bags you will know it is 100% SG wheat converted into the excellent flour you expect.
Thank you for your continued support of Shepherd’s Grain and our family of producers.

Karl

As we approach the Day of Independence for the United States I am reminded of the independence Shepherd’s Grain has in pricing our farmer’s wheat crop. For many outside of agriculture the idea of not being able to match up your cost of production to your marketable price is very foreign. The fact is wheat producers in this region and many throughout the world are tied to the commodity market primarily for export trade. Our Shepherd’s Grain producers have been involved in that commodity trading market for their entire farming careers. In fact when we set the pricing program of Shepherd’s Grain to be a true and transparent cost of production model it has even taken many of our producer’s time to become comfortable with the concept. In truth, the commodity market is and must be the pricing program when dealing with international trade. The differing currency values, the differing political scenarios, and different trade programs need a program like the commodity market. Shepherd’s Grain beginning gave us a chance to change the way we marketed our wheat and we took that opportunity to become independent of that commodity market approach. The concept was simple, to be sustainable you must at least cover your cost of production and the commodity market did not give us any assurance that would happen. This idea was also supported by the thought you cannot “do the same thing and expect different results”. Sustainability is a complex thought that many have difficulty in wrapping their arms around. Once you embrace the thought the execution is much simpler than you imagined. This was in part the basis of this break from the normal pricing to an independent transparent cost of production model. As I am sure during the turmoil surrounding our country’s Independence, our Nations citizens must have had questions if this endeavor would work. It is the same with some surrounding Fred and I in our early days of development. In fact, we even had those thoughts. The SG pricing of cost of production is such a radical departure from our historical way of pricing that questions are still out there. We have “tested” this theory for over 9 years now and it appears it may be one of the primary reasons customers switch to Shepherd’s Grain and certainly a solid reason to “sustain” that relationship. No matter the concerns or pressures, we are committed to retaining our independence from the tyranny of “taking what we can get and be happy” thought. Our pricing program ensures an economically sustainable return for the farmer and a stable cost to the buyer. You will note that this newsletter is dated as a June/July newsletter. Summer is a time for vacations and family outings so to reduce the flow of information you receive I will resist another newsletter until August. Our producers are gearing up for their harvests and looking forward to a great return on all the hard work they have put in over the development period of this crop. The difficulties with the cold and wet spring will hopefully now result in a great crop. As always we thank you for your support of Shepherd’s Grain and our family of producers. Have a great and safe 4th of July week-end and a great summer.
The Shepherd’s Grain Producers

For all those residing within the Pacific Northwest, you are familiar with the weather pattern that has kept the area in a near winter wonderland through April with some significant snowfall in the northern Spokane region just last week. The majority of our production region has been able to complete their planting intentions albeit later than normal. The extra rainfall is creating difficulties now but in July we will be very thankful for those extra drinks Mother Nature provided. Wheat is a very forgiving plant and generally has the capacity to adjust to the varying environmental conditions. I was just talking with one producer this morning and he said this late start to growth will mean the plant will just grow less stalk and put more energy into making the kernel. In a traditional tillage based system this would be of no concern. It really isn’t a major concern for our producers for the plant to be shorter but the stalk or residue is what will feed the microbial population over the next year.
There is a very valid quote from one of my mentors, Carlos C. Crovetto, when he said “The grain is for the farmer, the residue is for the land”. In his most recent book he opens with acknowledgements and I want to recite from one of those paragraphs. “I thank my land for its endless benevolence and I beg forgiveness for not understanding it promptly. I thank its daily teaching and the motivations it strongly imprinted on me to overcome pressures from my peers. I fully recognize the wisdom of the land that allows me, without wavering, to continue the way it outlined for me”. This wisdom from the land, though not thought of daily, is a motivation to change when you assess your commitment to no-till. The economics of wheat production do center around the plentiful bounty annually of the kernels produced but the long term or sustainable future centers around the bounty of residue and the health of the soil biota. That is part of the motivation from the land that Carlos speaks of.
All the Shepherd’s Grain producers enjoy being a part of this change and the joy we all get when either we taste the product our grain is in or have the opportunity to host a baker or chef on our farms. When Carlos spoke of “without wavering” it is part of the transition in thinking that takes place for all those no-tilling and it is the relationship created through the market that provides the incentive to stay the course. This is why I end these newsletters with the phrase “Thank you for your support” because, that support creates the connection of the land reminding us daily of its’ wisdom and the pressures of the economics of farming.

New Look for Shepherd's Grain logo

Within the last month our Federal government was describing a potential shutdown and stating that “non-essential” employees would be the first affected.  That of course brought forward the thought; if they are non-essential then why are they employed in the first place.  Not getting involved politically, I do understand what that meant but it did make me think about who is non-essential and who is essential in any business or project.   I have always believed that there is someone out there just as good or better as I in any thing I do and realize that I am always replaceable.  When one thinks they are not then in my belief, trouble looms.  Yes this is more significant in your thinking when older age is considered and that is where I am today. 

The future of Shepherd’s Grain has become more predominant in the thinking of our producers and producer/owners and that is a compliment to our current level of success.  Fortunately we are undertaking steps to consider succession and stability in management over the next few years.  It is important but it wasn’t until I was speaking with a current customer the other day that I realized it was important for others to know as well.  We have been spending time working with and informing our farmer base about the intentions and effort to create programs and policies to prepare a stable platform for the future but I had not thought of its’ importance to our customer.  The producer is concerned that he or she is making considerable changes and costs in their operations to find ways to utilize the Shepherd’s Grain marketing program and to make sure there is a long term future for those investments to pay off.  Conversely, the customer too has made changes to their production systems as well as marketing and promotional efforts to take advantage of their decisions.  So I am here to say that the current management team has and continues to make sure that all programs and policies can proceed through changes if and when they happen.  Our logistics are understood by our trucking company as well as the miller.  Our accounting is known and could be administered by our accounting firm.  Our marketing and promotion is backed by cross training within the management team.  All this has been written down so it is more than just in our minds and actions.  The last point of importance is to wrap up all the little loose ends that are always out there in any business before growth and expansion really develop.  This was suggested by our attorney and it is very clear he was correct.

We are excited to now take this stability in assessing and managing our future and allow it to aid us in growth.  We have been tweaking our message to convey our story better, creating new tag lines, making a small change to the logo, and creating new marketing materials to aid our customers in extending the story of Shepherd’s Grain.  We have been working on developing a new line of flour to add to our inventory, a Hard White Whole Wheat that will be available this fall.  All this to convey to you that Shepherd’s Grain is here for the long term providing you a quality product from regional production.

As always, thank you for your support.  The Shepherd’s Grain Producers

As farmers we fall in love with (or not) and respect Mother Nature especially when you are a dryland producer. One thing that you quickly learn is it can have some powerful forces and we just witnessed one in Japan. The impacts of this type of catastrophe are unimaginable to those involved and can be far reaching. We, too, are experiencing some of that today as the investment markets as well as the commodity markets are not confident in their future.
This is and was to me the most difficult part of farming, the negative impacts of Mother Nature and in this case the market fallout. So many times it would kick you in the teeth by completely countering your choice of work based on your expected environmental outcome. Then if that was not enough, you get a huge drop in the price of your commodity based on something you have absolutely no control over. It is that 30 years of negative experiences that formed many of the policies within Shepherd’s Grain. The use of direct seeding reduces the negative impacts Mother Nature can throw at you and in part because you are farming more in harmony with nature. The elimination of loosening the top soil and adding the practice of protecting the valuable microbial population creates a soil profile and soil health that can withstand environmental harshness from nature. Combining that with the pricing strategy of a transparent cost plus model reduces the impact of the global commodity market so that these situations have much less impact on the producer and the buyer.
On a positive note, we continue to see society seek knowledge of where their food comes from, to seek safety in more regional food production, and be knowledgeable about the relation of nutrition and health. Shepherd’s Grain continues to invest in research to both qualify and eventually quantify nutritional density in the grains we produce. We have many new accounts utilizing Shepherd’s Grain flour in their baking. You can check out our Facebook page as well as follow the twitter page to see some of these new customers. We are also adding additional producers to our family to deal with increased demand and the expansion of our product lines.
One last note and this may seem a bit of a stretch coming from a couple farmers but if you can download the Harvard Business Review January-February 2011 issue, read the article titled “The Big Idea”. It talks about Creating Shared Value—How to reinvent capitalism and unleash a wave of innovation and growth. I think it is an interesting view and I believe we are well within that mindset of a shared food value chain that seeks innovation and creativity to ensure that a safe, stable and sustainable food supply is available to our regional community.
As always we thank you for your support of Shepherd’s Grain, our producers, their families and our values.

Respectfully, The Shepherd’s Grain Food Producers