Agricultural Tile Drainage and Storage Study Presentation to Algoma - - PowerPoint PPT Presentation

Agricultural Tile Drainage and Storage Study Presentation to Algoma Farmers Bruce Station Hall – November 26, 2013

Agricultural Tile Drainage and Storage Study

• 1. Study Purpose
• 2. District Overview
• 3. Survey Distribution/Results
• 4. Drainage Infrastructure Options/Considerations
• 5. Crop Storage Advantages/Costs
• 6. Return on Investment
• 7. Past/Current Funding Opportunities
• 8. Job Creation Potential
• 9. Proposed Funding Considerations

Agricultural Tile Drainage and Storage Study Study Purpose

Insufficient investment in drainage/storage infrastructure is a major impediment to agricultural expansion and diversification within Algoma

• Identify agricultural lands that would benefit from tile installation using GIS
• Provide an economic costs and benefit assessment associated with tile drainage
• Provide options for reducing the costs of tile installation
• A description of current funding programs and opportunities to finance tile drainage

installations and drainage outlets for producers

Purpose: Strengthen the local agricultural infrastructure and economy and support the greater mission of becoming a sustainable Algoma.

District Overview - Geography

• Thin overburden deposits over

Precambrian bedrock

• Majority of the farmlands are

located along the southern limit of the Algoma District, predominantly in outwash plains along the TransCanada Highway 17 corridor, adjacent to the North Shore, and tributary rivers

District Overview – Existing Farmland

• Algoma District has approximately 32,782 hectares of existing available farmland
• Majority of lands is located along the lower lands (minimal-to-no drainage relief)
• Based on a population of 115,870 and an annual food consumption of approx. 3,800

calories/person/day [equivalent to 0.4 hectares (1 acre) per person] = Algoma Population x Area/Person = 115,870 x 0.4 ha = 46,348 hectares (greater than the available farmland)

• In summary, the existing farmland within the District is insufficient to support the

District’s population

GOAL: Maximize the growth potential of existing farmland by improving drainage infrastructure and additional clearing as a means of supporting the local food and cash crop initiatives, while also helping Algoma to become self-sufficient and sustainable

District Overview - Climate

Average Frost-Free Period in Climatic Zones of Ontario (1976-2005)

Zone Frost-Free Period Avg Date of Last Spring Frost Avg. Date of First Fall Frost (Avg. in Days)

A 170-190 April 25 October 20 B 160-170 April 30 October 13 C 150-170 May 3 October 8 D 130-165 May 11 October 1 E* 125-145 May 17 September 26 F* 115-125 May 24 September 22 G* 100-115 May 27 September 17 H 100-110 June 3 September 16

Note: * Denotes zones within Algoma District.

State of emergency declared in Johnson, Plummer Township State of local emergency called in Huron Shores Storm information meetings east of the city

District Overview - Challenges for Northern Farmers

• Competition
• Harsher climates
• Distance to markets
• Shorter growing season
• Transportation challenges
• Access to licensed contractors
• Smaller available acreages/farms
• Access to supplies and equipment
• Absence of custom operations

District Overview - History

Ontario Ministry of Agriculture and Farm Census Statistics (Algoma District) 1966 - 650 census farms 1981 - 490 census farms 2011 - 317 census farms

• Many of the former agricultural lands currently used as farms have been

incorporated into larger farms or are unattended and/or abandoned.

• The migration of new farmers to Algoma in the early 2000s has resulted in some of

the traditional local agricultural land becoming attended and revived.

• Farmland within Algoma goes for $800 to $1,600/acre compared to Southern

Ontario which is $10,000 to $18,000

Survey Compilation

Survey questionnaire: Drainage Information Name and contact information (address, phone, etc.) Number of properties owned and/or leased Location of property parcel (i.e., address, GPS coordinates, nearest intersection) Area of total and farmed land Area of land with existing tile drainage Area of land requiring drainage improvements Discharge location (road ditch, municipal drain, or waterway) Storage Information Assessment of current crop storage capacity and farmer needs: Existing in-barn, grain bins, silos and their capacities Existing drying capacity and cold storage Adequacy of storage and storage needs

Survey Distribution

• Municipalities, townships, First Nations were first contacted
• Ontario Federation of Agriculture (OFA)/Christian Federation of Farmers of Ontario

(CFFO) mail out lists

• Farmland owners registered with MPAC under the farmland tax (FT) category
• Ontario Soil and Crop, Cattlemen’s, and Pasture Association
• Township press releases on websites and/or newsletters
• Reminder/contact information posters were distributed throughout the North Shore
• Farmers listed within the Buy Algoma.Buy Fresh. directory were contacted
• RAIN’s and OMAF’s Northern regional representative email distribution lists

Survey Respondents

• 84 of 317 registered farmers returned surveys (25 percent return)

Reasons for not returning forms:

• Insufficient funds to install tile drains
• Adequate drainage/no need for tile drainage
• Other expenses take priority (i.e., tractor)
• Retiring/leaving the farming business
• Lack of time/interest in submitting
• Family emergency

Survey Results – Farm Sizes

Farm Sizes within Algoma

Size of Farm (acres)

• No. of Farms

Under 30 15 30 to 60 15 60 to 100 40 100 to 150 27 150 to 200 54 200 to 300 7 Over 300 9 Total 167

• Of the 84 farmers, a total area of 8,323 ha (20,567 acres) was identified
• Of the total area, approx. 4,661 ha (11,518 acres) was farmable (50 percent)

Survey Results – Owned vs Rented Land

• Of the 212 total properties (167 properties and 45 unidentified properties),

145 identified properties are owned and 67 properties are rented

• Rented lands are generally not tended as well as owned lands, which are

fertilized and seeded with crop rotations to maintain healthy soil conditions.

• With some exceptions, rented lands are in continuous hay production, and

without fertilization, this will lead to depletion of soil nutrients and invasion by undesirable species.

• The provision for drainage improvements on rental lands will invariably

require long term lease arrangements to be made between landowners and farmers to ensure the farmland is farmed to obtain the tax credit.

Survey Respondents – Tiled Lands

• 42 farms representing 637 hectares (1,574 acres) of the total farmable area of 4,661

hectares (11,518 acres), which represents approximately 15 percent, were already either partially or completely tile drained. Note: Tiled land in Southern Ontario is closer to 50 percent

• 33 farms were tiled systematically and 9 farms were tiled randomly
• 22 properties requested tile and/or interspacial upgrading (50 percent)
• 34 properties were tiled professionally by a licensed drainage contractor (Tait Bros.

Contracting of Grand Valley, Ontario)

• 8 tiled properties were either done by an unidentified contractor or the landowner

Tiled land percentage within Algoma is comparable to other Northern Ontario districts due to similar challenges (lack of drainage contractors, high cost of tiling, and adverse weather, distant to markets, etc.)

Survey Results – Request for Tile Drainage

90 properties 2,017 ha (4,983 acres) requested tile drainage

• Based on 25 survey return rate, actual amount of land requiring tiling could

be up to 8,000 ha (20,000 acres) of total existing farmable land area

• 26 properties (29 percent) of the properties representing 507 ha (1,253 acres)
• f the total drainage request (25 percent) are owned by religious orders

Drainage Demand by Township

Desbarats – Johnson 27 Huron Shores – Thessalon, Bright, Day 19 Bruce Mines – Plummer Additional 12 Desbarats – Tarbutt 9

• St. Joseph Island

9 Laird 7 MacDonald, Meredith, Aberdeen Add’l 7 Total Properties Requiring Drainage 90

Survey Results – Storage Requirements

Crop Storage Survey Storage Type

• No. of Existing
• No. Requested

Grain Bins 36 11 Silos 5 1 Dry Storage - Barns 25 2 Cold Storage 9 3 Grain Dryers 7 5 Grain Sorter/Cleaning 1 Freezer/Flash Freezer 1

Importance of Drainage

Excessive soil water will:

• Restricts aeration of the soil
• Limits growing season and workability of soils
• Slows the rise in soil temperature in spring
• Lowers the bearing capacity of the soil
• Damages seeds and seedlings
• Limits depth of root penetration
• Reduced plant survival rate during droughts

Types of Drainage

Surface Drainage

• 1. Slope Topography
• 2. Ditches

Sub-Surface Drainage

• 1. Mole Drains
• 2. Tile Drains
• 3. Dewatering Wells

Principals of Tile Drainage

Benefits of Tile Drainage

Advantages of tile drainage:

• extended growing season
• better working conditions at both seeding and harvest
• reduced soil erosion and minimized maintenance
• increased return on investment and greater economic growth
• decreased farmer frustration/aggravation/stress and overall

improved health/outlook (attraction to new farmers)

Tile Drainage Installation Requirements

Step 1: Field Survey & Feasibility Study Step 2: Drainage Layout Design Systematic/Random, Filter/Non-Filter, Spacing, etc. Step 3: Permits Municipal drain, road/utility crossing, etc. Step 4: Installation Growing crop interference, weather dependence

Tile Drain Considerations

In assessing tile drainage, farmers should consider the following:

• Yield return
• Root growth
• Drainage outlet
• Installation costs
• Soil erosion potential
• Contractor availability
• Nutrient management
• Maintenance considerations
• Crop risk reduction/insurance
• Property improvement/taxation

Tile Drainage - Yield Returns

• OMAF’s Crop Insurance program recognizes an average crop yield increase of 20 to 40 percent

for tiled fields

• General consensus among the farming industry, which includes farmers, property assessors,

financial institutions, and agricultural advisors, is that tile drainage yield returns are typically in the

• rder of 20 to 50 percent range
• Specific applications have even showed a distinct advantage of up to 500 percent yield increase

depending on type of crop (i.e., Holland Marsh)

Crops Susceptible to Water Damage Land Potential Crops Very High All agricultural and horticultural crops High Root crops, cereals, legumes Medium Cereals, legumes Low Grass Very Low Limited to extensive grazing

Tile Drainage – Root Growth

• Tile drainage keeps soil voids free of excess water
• Permits air flow within soils
• Allows important biological processes to take place
• Provides a stable controllable water table for healthy plant growth
• Crops are more drought-resistant as it creates deeper roots

Tile Drainage – Nutrient Management

• Farms are considered non-point sources in source water

protection, which pose a potential threat to water quality

• Current perception that tile drainage creates a release of

phosphorus and nutrients

• Farms are not ‘leak-proof’. Nutrients flow over land and below

ground depending on the soil type

• Greater nutrient uptake is strongly affected by plants with greater

root masses

• Nutrient management plans will greatly assist the reduction of

nutrient release (i.e., fertilizer/manure applications, timing, application rates, tillage practices)

Tile Drainage – Nutrient Management

Drainage water management is the practice of using a water control structure to vary the depth of the drainage outlet to prevent water/nutrients from discharging

Tile Drainage – Maintenance Considerations

• Increased wear and tear/damage on farm machinery such as tractors and

combines due to wet (undrained) farms

• Tile-blowouts due to improper tile installations
• Heavy machinery can crush tile particularly in wet field conditions.
• Requires periodic inspection but little servicing
• Crop roots can eventually render the tile drains useless over time.
• Tile drains are generally expected to serve from approximately 25 to

40+ years depending on soil type

• Grates over tile outlets to prevent rodents/burrowing animals from

building nests.

Tile Drainage – Property Tax Implications

2012 MPAC Assessed Land Values Class 1 Prime/tiled farm land $900 Class 2 Secondary land $600-700 Class 3 Un-tiled farm land $400 Class 4 Pasture (hay) land $250 Class 5 Bushland $150 Tile installation by a licensed contractor increases the value of the property.

Crop Storage Advantages

Advantages of Farm Storage:

• Avoids selling grain when prices are at a seasonal low (i.e., harvest)
• Avoids waiting lines at the local elevator
• Helps manage income for tax purposes
• Allows more control over harvest operations

Limitations of Farm Storage:

• Extra grain handling is required when storing on the farm
• There is increased risk when storing grain: spoilage, theft, fire, etc
• Limits the ability to lock in a price by phone and deliver to a buyer for payment
• There is a fixed cost, over and above interest costs, to farm storage whether facilities are

used or not

• Difficult weather (i.e., excessive snow/rain) may prevent immediate delivery

Tile Drainage – Cost Savings Opportunities

1.

Contractor procurement process – reduced mob/demob, savings to combine acreages over areas

2.

Joint projects – sole sourcing contractor (s)

3.

Tile procurement – 3 to 7 percent discount on bulk purchases

4.

Off-peak time installation – mid-season – summer?

5.

Tile spacing consideration – greater spacing allowing interstitial spacing

6.

Self installation – limitations (design, quality, return on sale)

Return on Investment – Tile Drainage

Return on Investment – Cash Crop Rotation Scenerio 1

A producer wants to put in 100 acres of tile drainage and is presented with a few options. The producer joined a consortium of other producers and was able to get a cost per acre of $1100. The producer plans to plant a rotation of cash crops: canola, wheat, soybeans and grain corn.

No interest loan

At 0% interest, the tile drainage investment would be $99,000 for 100 acres. After putting down $11,000, the investment’s payback period would be 8 years if yields had a 20% increase (internal rate

• f return – 11%). If yields had a 30% increase, the investment’s payback period would be 6 years

(IRR – 19%). Under the existing program at 6% interest, the tile drainage investment would be $134,509 for 100

• acres. After putting down $14946, the investment’s payback period would be 11 years if yields had a

20% increase (IRR – 3%). If yields had a 30% increase, the investment’s payback period would 9 years (IRR – 9%). Loan at 3% interest and partial forgiveness of loan at 3% that can be forgiven in 5 years At 3% interest, the tile drainage investment would be $128,954 for 100 acres. This scenario would assume that at year five the forgivable loan would take place, which would total $29,529. The investment’s payback period would be 8 years at an IRR of 9% if yields had a 20% increase. If yields had a 30% increase, the investment’s payback period would be 7 years at an IRR of 14%.

Return on Investment – Cash Crop

Return on Investment – Mixed Crops Scenerio 2

A producer wants to put in 100 acres of tile drainage and is presented with a few options. The producer joined a consortium of other producers and was able to get a cost per acre of $1100. The producer plans to plant a rotation that consists of oats, alfalfa, canola, wheat, soybeans and grain corn. No interest loan and 10 % Down At 0% interest, the tile drainage investment would be $99,000 for 100 acres. After putting down $11,000, the investment’s payback period would be 8 years if yields had a 20% increase (IRR, 11%). If yields had a 30% increase, the investment’s payback period would be 7 years (IRR, 18%). Under the existing program at 6% interest, there would be a payback period of 11 years if yields showed a 20% increase. At a 30% increase in yields, the payback period would be 9 years at an IRR of 9%. Loan at 3% interest and partial forgiveness of loan at 3% that can be forgiven in 5 years At 3% interest, the tile drainage investment would be $128,954 for 100 acres. This scenario would assume that at year five the forgivable loan would take place, which would total $29,529. The investment’s payback period would be 8 years at an IRR of 11% if yields had a 20% increase. If yields had a 30% increase, the investment’s payback period would be 6 years at an IRR of 17%.

Return on Investment – Mixed Crop Rotation

Crop Storage Investment Costs

• Grain bins/dryers have been

known to provide a typical 5 year return

• n

investment, which depends on type of crop stored

• Considering

grain commodity prices fluctuate up to 25 percent annually from peak to low seasons, the return on investment for a grain bin can be expedited with effective market timing

Various Funding Opportunities

Banks and Farm Credit Corporation

• Funds for financing farm drainage is available thru any financial

institution (i.e., chartered banks and/or credit unions) including the Farm Credit Corporation (FCC)

• Interest rates vary over time and depend on the individual

farmer’s financial situation (i.e., financial statement for previous years, Revenue Canada statements, credit standing, and collateral)

• The Canadian Agricultural Loans Act (CALA) is a financial loan

guarantee program that provides farmers easier access to credit providing loans up a maximum of $500,000

Other Funding Jurisdictions

Tile Loan Program

• Provides farmers with access to loans through their municipality

for tile drainage systems

• It’s currently a 10 year term with a fixed 6 percent rate of which

up to 75% of the cost of the work to a maximum of $50,000

• Program is currently being under-utilized

Past NOHFC Funding – Tile Drainage

• Tile drain loans ran in three programs: mid/late 1990s/mid-2000s for 3-

year periods

• Approx. $1 million/yr was allocated towards agricultural improvements
• Farmers had to provide financial documents showing their increased

revenue for three years after the installation of tile. Loans were forgiven after the third year, if criteria was met.

Table 16 - Summary of Historic NOHFC Tile Drainage Loans Fiscal Year # of Projects NOHFC Funding Total Algoma-Manitoulin Total Algoma-Manitoulin 97-98 1 $303,997 $0 98-99 5 1 $1,321,170 $292,395 99-00 5 1 $864,781 $84,833 00-01 $0 $0 01-02 7 2 $1,018,134 $170,711 02-03 3 1 $181,702 $27,920 03-04 1 $41,836 $0 04-05 2 1 $75,777 $60,315 TOTAL 24 6 $3,807,398 $636,174

Algoma

• nly tapped

into 17% of available funding at that time.

Recent NOHFC Funding in Agriculture

• NOHFC continues to fund tile drainage, however, on a case by case basis

Summary of NOHFC Funding of Agricultural Projects Year Total AG Funding Algoma District Projects 2013 $103,750 $0 2012 $117,570 $0 2011 $2,350,273 $254,203 3 (1) 2010 $325,950 $0 2009 $1,050,000 $0 2008 $361,845 $0 (1) Funded Projects: McBride Acres, Echo Bay ($222,750); NES Community Mapping, Wawa ($27,500); and Natural Yard Systems, Blind River ($3,953)

$0

Algoma only tapped into 6% of available funding during this period.

Job Creation Potential

• 1. Tile Drainage Contractors – alliance/partnership with existing

contractors

• 2. Land Preparation/Clearing - Logging/bush cutting
• 3. Attracting New Farmers – increasing farm succession
• 4. Secondary Jobs – Processing, Trucking, Storage, Vehicle

maintenance, Marketing, Sales For agriculture growth, increased revenue is a better indicator and measure for economic growth

Proposed Funding Considerations

Storage projects can be implemented quickly. Tile drainage installations require greater time to implement:

• Availability of a licensed contractor
• Gaining access and approvals with impacted utilities (i.e., electrical, natural

gas, bell, cable lines) or transportation (i.e., highway, rail) corridors

• Potential for a municipal drain requirement and drainage engineer review along

with subsequent township/municipality approvals

• Weather restrictions (i.e., soil is frozen, too wet)

An effective funding program should be available for a minimum 5 five year period to allow for farmers to take advantage of the available funding.

Total Financial Requested Expenditure/Investment

The total identified (minimum) financial expenditure requested of farmers for agricultural infrastructure improvements is as follows:

Drainage Infrastructure Improvement: 4,983 acres x $1,100/acre = $5.5 million Land Preparation Improvement (5 percent allowance): = $100,000 Storage Infrastructure Upgrades:

• approx. $900,000

Total Agricultural Financial Investment/Request: approx. $6.5 million

Taking into account an increased crop yield of 20 percent as a result of tile installation, the additional economic return in crop production for these lands represents an additional $275,000 to $440,000 annual economic growth to the District relative to a $5.5 million (approx. total) investment into tile drainage (6 to 9 percent return on investment)

Proposed Potential Funding Options

Option 1: $3.25 million in forgivable loans to provide 50:50 funding over a 3 to 5 year period. Similar to previous NOHFC tile drainage programs, farmers must provide financial records in the following three years to show economic return Option 2: $3.25 million in low-to-no interest 10-year loans available for those who elect to pay for their tile drainage/storage infrastructure improvements over the anticipated average return on

• investment. Note: There may be an option to offset/fund the six

percent interest provided within the existing Tile Loan Program

Proposed Potential Funding Options

$650,000 representing ten (10) percent of the capital funding to utilize a grower consortium (i.e., RAIN) to administer/tender both tile and storage requirements within Algoma over a 3-5 year period $400,000 to conduct an agricultural infrastructure needs study for the remaining northern districts to help identify the Northern Ontario agricultural infrastructure demands required of the Growth Plan for Northern Ontario

Agricultural Tile Drainage and Storage Study Thank you Algoma Farmers! Comments/Questions?