A CARGO-cult belief that rising demand from Asia is about to sweep farmgate prices to record levels is encouraging many producers to ignore the need to lift on-farm profit margins.
That was the blunt message to the National Farmers' Federation (NFF) Congress in Canberra on Monday from David Sackett, managing director of Growth Farms which has $360 million of farm assets under management.
Despite all the hype about a looming golden age for agriculture driven by Asia’s cashed up middle classes, Mr Sackett said the reality was that farmgate prices wouldn’t double in the next 20 years.
Farmers wanting to improve their profitability only had to look at what the top 20 per cent of producers were doing, he said. They need to focus on profit margins, not prices.
Using wheat and beef to illustrate his point, Mr Sackett said the average producer grew a tonne of wheat for $205 a tonne and $1.11 for a kilogram of beef liveweight. In contrast, the top producers were growing a tonne of wheat for $114 and a kg of beef for 80c.
The top producers were also doing much better from the sale of their produce: $265 a tonne for wheat compared with $220 for the average, and $1.90 a kg for beef compared with $1.84 for the average.
So the key to lifting on-farm profitability was to copy what the best farmers were doing, rather than looking to Asia for a major boost in prices.
If producers ignored the need to increase their on-farm profit margins they would be handing their destiny to what happened in overseas markets.
Mr Sackett said while the pursuit of off-farm policies such as better grain transport infrastructure and free trade agreements were important, the way to lift profitability “overnight” was to get on-farm profit margins “right”.
And a more profitable farm sector would encourage both more investment capital and more people wanting to work in the industry.
“A dream (farm) business that doesn’t make money is a nightmare,” he said.
Pip Job, winner of this year’s national RIRDC Rural Women’s Award and NSW Central West beef producer, said a disaster during the 2006 drought had completely changed her view of farming.
After being forced to sell stud beef heifers at Dubbo saleyards for $188 a head she decided she and her family would no longer be price takers.
They swapped stud cattle for cattle trading, buying and selling cattle in the same market to give full control of their costs and profit targets.
She learnt the key to success in agriculture was to take a holistic view of the farm business, the environment in which it operated and the people who worked in the business.
Life on the farm wasn’t just all about farmgate returns, she said.