Agronomy & Farm Business planning
FARM BUSINESS PLANNING
Farm business planning is an integral part of our advisory services, however we will always raise important issues relating to the running of the business if we believe that matters such as key planning or necessary reinvestment is required. We will also refer clients to trusted specialists when we believe that is necessary.
Like any business a farming business should have a business plan. It should include clearly stated goals, farm and infrastructure development plans, enterprise plans, budgets (enterprise gross margins, cash flow, profit & loss, balance sheet) finance arrangements, management strategies for key risks, farm enterprise and financial KPIs, to demonstrate that the farming business the best possible chance of being productive, profitable and resilient.
Farm enterprise selection should be based on realistic expectations. Expected product prices are always key, but planning should focus on many other factors including available expertise / labour, compatibility with other enterprises, available farm machinery (owned / contractors) and infrastructure such as grain storage, stockyards and fencing.
The farm's overhead cost structure should reflect moderation. Farm businesses with high overheads such as wages, interest repayments and excessive machinery investment will invariably underperform over time compared to similar farms with lower overheads.
Farm business risks should be identified in the business plan and strategies put in place to minimize their impact. Drought, increased interest rates, markets fluctuations, excessive stocking rates, weeds, worker / skill deficits and OH&S are some major areas of risk that should be addressed.
Debt servicing & re-investment into farm resources should ensure that the business remains viable and efficient. Debt accumulating over extended periods usually means that essential re-investment into the farm (eg: fertilizer, lime, fencing, livestock handling facilities, irrigation layout) may be overlooked or deliberately delayed causing productivity and efficiency to fall.
Consider also the discussion points below.
INDEPENDENCE & INTEGRITY
Enterprise planning:
The enterprises generate the farm income so they require careful consideration. A single enterprise is unlikely to remain profitable indefinitely, so having more than one enterprise spreads enterprise risks such as market failure, disease or drought. When looking into additional enterprise these points should be considered:
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The capital set-up costs and cash flow required. Each enterprise should have an up to date gross margin budget. Enterprise cash flow and any capital costs should be detailed in the farm business plan.
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Markets: Important factors are reliability, proximity, simplicity & flexibility
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Labor / skill requirements and staff availability
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Suitability of the enterprise to the farm and synergies with other enterprises
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Infrastructure / equipment required for normal and efficient operation of enterprise.
If you are uncertain about the suitability of a new enterprise or whether the skills or labour are available, the best thing to do is grow a small area of the crop or start off with a small number of animals. Take small risks until the necessary skills and confidence are gained.
If you lack experience in managing different livestock enterprises or general farm activities, we can prepare an annual 'Farm management plan', that will include all critical management actions and their timing.
Enterprise planning decisions can be complex. We have broad experience in this area and also have a range of trusted associates to refer you to.
Feed planning:
A major risk on any livestock property is lack of feed supply, commonly due to overstocking or drought. Some basic planning and skills are necessary.
Pasture assessment skills:
Assessing the quantity of pasture dry matter (DM) in paddocks is not difficult but is critically important. It requires simple skills and knowledge which can be achieved through a training course such as PRO-GRAZE or researching and reading various on-line technical publications form sources such as Meat and Livestock Australia (MLA). Calculating 'feed-on-offer' (FOO) in kg/DM/Ha and using simple feed budgets will clarify whether feed grown and/or stored fodder (hay, silage, grain), will meet livestock demand. This takes the guess work out of stocking rate decisions and livestock nutrition generally. Energy, protein and digestibility of the feed are also important in making feed purchase and allocation decisions, but this information is easily sourced.
We can help you to develop the skills and knowledge necessary.
Other important practices & skills:
Know your livestock condition scores (CS) and CS targets:
Consider the following saying; 'The fat on their back is valuable going into a dry spell'. Experienced livestock managers use fat reserves to get through periods of feed deficit. They effectively delay supplementary feeding until the CS falls by several units or even just half a CS unit fall can provide breathing space for big decisions such as stock reduction sales or feed purchases. The critical advice here is to practice and develop the necessary skills in CS assessment. Then, take time to assess CS and compare them to pre-set targets. To adequately feed livestock to properly meet their nutritional needs, feed provided (pasture & other) needs to vary in quality and quantity for the time of year and stage of their breeding cycle. We can help you to find and understand the necessary information, and to develop the skills to get correctly apply these skills.
Know your stocking rates (DSE/Ha):
It is important to understand the DSE concept and keep track of the DSEs that you have on the farm at any time. Paddock under crops or sown to new pastures may provide only limited grazing if any, so feed availability will vary from year to year for that reason. Another important factor to consider is rainfall variability. Simply keeping track of livestock classes, numbers and DSEs carried on a quarterly basis and observing feed in paddocks each season, the available Dry Matter (kg/DM/ha) in paddocks can be compared to previous years. For NSW Tablelands farmers, taking photos plus simply recording of a few notes on feed in paddocks annually (late April/ early May and again in spring, early to mid-October), will allow you to compare seasons and provide you with the confidence that you have the best possible understanding of seasonal feed fluctuations / availability. This monitoring should be done at roughly the same times each year.
Conduct your own market intelligence:
Regular updates of livestock prices movements at regional stock sales is key to successfully planning of your stocking rates. Check livestock numbers at weekly sales and take note of where the animals are from. That can inform you as to whether dry conditions being experienced regionally and along with regional forecasts, what you should expect in your location in the near future. Have in your plans pre-set 'trigger points' for selling less important / more disposable livestock as feed supplies decline. Sometimes it is only a matter of a few days between good and poor prices in the sale-yards or on-line markets, so be informed and prepared, before the markets fall.
Don't underestimate the importance of long-term 'feedbase planning'. By growing the best mix of pastures and grazing crops that is possible on the land that you manage, you will optimize your farms earning capacity over time.
Reach out to us if you need assistance.
Drought planning:
On livestock farms droughts can be managed in a number of ways.
Consider the following ideas as a possible framework for your
'drought plan':
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Accumulating cash reserves in a special 'Drought Account' can
provide critical cash for living expenses in a drought.
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Investment in water supply, drought-lots, fodder and grain
reserves should be considered in preparation for droughts. -
'Always' monitor seasonal conditions carefully and be informed.
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Develop your farms 'Drought Strategy' early; before a drought.
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Aim to sell disposable stock early before markets collapse; 'meat breed' weaners, cull breeders often go first.
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The decision about whether stock will be fed through a drought requires careful thought. Commonly, livestock numbers are reduced to a point where only core breeding stock remain.
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The quality and quantity of grain / fodder stored is key. 'Feed testing' of stored stock feed will allow it to be fed more strategically, potentially getting more feed into less storage space as well as better results from less feed if feed if test values are reasonably high.
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It may be possible to send some core breeders away on agistment to locations less affected by the dry conditions.
Some farmers establish such relationships well before a drought and others even provide reciprocal give and take arrangements that help reduce cash costs.
No two droughts are the same and there is no standard response. Of course water security is critical so necessary water supply investment should be part of any drought planning. Being ready and having the 'peace of mind' that you have done all that you can to be prepared is what is important.
Call us if you need help with your Drought Management Plan any time, before, during or after a drought.
