Targeted investment key to greater returns

Targeted investment key to greater returns

OPINION
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Managing volatility and its outcomes is incredibly important if you are to succeed in farming.

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Building a business can be a slow process but involves the right investment. Photo: SHUTTERSTOCK

Building a business can be a slow process but involves the right investment. Photo: SHUTTERSTOCK

Managing volatility and its outcomes is incredibly important if you are to succeed in farming.

Loss minimisation should be treated with the same endeavour as profit optimisation. A dollar saved is a dollar earned.

Poor seasons can bring about lessons that can be of benefit when things return to normal, while good seasons can breed complacency and poor spending.

With a couple of good seasons in the southern regions, combined with excellent commodity prices, even average producers are making reasonable profits.

In much of my 35-year teaching and consulting career, average producers have made little profit.

When I ask the question "How much of the improved profit is from your good management and what percentage is from the improved marketplace?", the answer in most cases was 100 per cent in the latter.

Up to this point, many businesses have been starved of capital to develop their enterprises and therefore production per hectare has remained rather static.

Given the past couple of good seasons, southern graziers are in a position to ramp up enterprises once starved of capital.

What I am seeing is investment in fencing that is replacing existing structures, sheds over sheep yards and new utes everywhere.

Investing in depreciating assets is inevitable in farming, but I believe spending needs to be on items that have a greater ability to improve production more efficiently.

Graziers must see themselves first and foremost as grass growers and harvesters, this sector is the engine room of a livestock business.

To produce another tonne of dry matter and then improve utilisation by, say, 10pc will have a huge impact on the bottom line.

This is not a one-off outcome; you should be able to repeat and even improve on this every year.

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Any expenditure that may be directed towards increasing the pasture grown and utilised starts with you, the manager.

The first investment should be in yourself, making sure you have the skills, knowledge, belief and conviction to implement the improved strategy.

It is interesting to compare croppers with graziers. With their modern harvesters, croppers can harvest 98pc of the grain they grow, while most graziers only harvest about 40pc of the pasture grown.

I realise the circumstances in each are different but I still believe there is a key message here. The challenge for a lot of graziers is to learn how to utilise or harvest more.

Growing more will help, but you really need both extra pasture grown coupled with better utilisation for the return on investment to be satisfactory.

Central to achieving this is your ability to grow more pasture at the front and back end of the growing season - not in the middle of spring when you do not have the mouths to utilise what is grown.

Species, fertiliser, grazing management and knowing what you are doing will always be fundamentals in achieving a better outcome.

  • Details: kensolly@rbm.com.au

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