Changing mindsets is farmers' business

02 May, 2015 02:00 AM
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The average family farmer needs a whole set of additional skills

FARMING is unquestionably different to running almost any other business, but farmers are far more likely to cope profitably with agriculture's many extremes and challenges if they plan more like they're running a business in town.

While Australia's small- to medium-sized enterprises are generally getting better at setting annual or five-year productivity and profit goals, and setting aside time to plan and tweak those strategies, most farm businesses are slower on the uptake, says farm management educator, Ed Henry.

"Agriculture is also, on the whole, much harder to do well than it was 20 years ago," said the long-time Charles Sturt University (CSU) rural business lecturer.

"The average family farmer needs a whole set of additional skills and one of the most important is an ability to proactively plan and identify targets which balance production, financial, environmental and lifetime goals."

Unfortunately, huge changes in the farm commodity marketplace in the past two decades had coincided with a run of big seasonal setbacks and surging production costs.

These had tended to keep many farmers focused on their immediate problems and unwittingly shackled to reactive, forced responses as each challenge hit.

Planning ahead

Mr Henry believed farmers should ideally be making proactive and management decisions six, eight or 10 years out.

This included dedicating resources, as other mainstream businesses do, to reviewing those strategies quarterly or six monthly so they could stay realistically informed and focused on their goals.

Each session may take up to a day out of a farming family's usual management routine.

"You have to expect the world to change, no matter how frustrating or costly it might be to your enterprise," he said.

"We can be confident farming will always encounter a lot of uncertainty and some of it just cannot be controlled, including poor seasons and market fluctuations.

"But we shouldn't put too much in the 'can't control' box - there are many more technology and business tools around today than 20 or 30 or 50 years ago to help a farm enterprise perform better.

"Unless you have a real target and are ready to adapt to new strategies as you go, you don't know where your business is travelling or what you're really trying to achieve."

He said smart farmers who were thinking like this were "moving ahead in leaps and bounds", despite seasonal setbacks and tight gross margin challenges.

"They may not necessarily represent a big number in total, but quite a lot more farmers could join them by being helped into performing in that top quartile - or at least better than they are performing now."

Management guide

Mr Henry has teamed up with fellow CSU lecturer and financial planner Megan Rowlands to publish a guide to 21st Century farm business management based on "the quadruple bottom line approach" which emphasises four distinct areas requiring attention when farming families and businesses are developing business plans.

Acknowledging family farmers are special business people thanks to their strong attachment to a business environment in which they actually live, the authors said understanding the need for goals and trade-offs between production, financial, lifetime and environmental priorities was essential to surviving as a business unit.

"Farming isn't only about financial gain," said Mr Henry, a former beef cattle advisor who has taught farm management at CSU's Orange campus and managing his own farm businesses since 1977.

"If you devote too much attention into obtaining a big financial goal you'll end up working 24-7, leaving no time to focus on your family.

"It could all come crashing down around you.

"If a farmer's goals and personality are basically financially driven they may be better off buying a real estate agency or a taxi business."

While many farmers may find it extremely hard to change the way they responded to change or planning ahead, he said the farm sector could not afford to ignore the need to improve its management strategies given its exposure to fast changing global trends.

Change also brought plenty of useful technology and marketing opportunities.

Today's weather data resources were (mostly) well beyond the basic forecasts of 30 years ago, while innovative farm products, like organic beef from western Queensland, were selling in the US, and niche producer groups had horticulture lines going direct to buyers in Singapore or China.

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FarmOnline
Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

Jock Munro
2/05/2015 5:25:05 AM

Ed Henry should buy a farm himself and show us how to run it!
Cocky
2/05/2015 8:43:08 PM

"If farmers goals are basically financially driven you might be better off buying a real estate agency or taxi buisness" but yet we are supposed to "run our farms more like a buisness in town" says the first paragraph? Confused much? People pay for advise like this??
Qlander
4/05/2015 3:43:30 PM

The 'real' money, and growth in Ag is with Gov. subsidised 'farm management education'

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