Top tips to help farmers plan for 2010

31 Dec, 2009 12:01 PM
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NO MATTER what part of Australia you call home, the agriculture sector has again experienced significant challenges this year with a volatile global economy and weather conditions making it difficult to predict farm incomes.

National Australia Bank (NAB) Agribusiness says this uncertainty highlights the need to talk to experts when setting strategies for 2010.

Khan Horne, NAB Agribusiness General Manager, said farmers have had varied results.

“Many in the south suffered under drought conditions again and late frosts followed by rain and heatwaves over the harvest period affected the size of many cereal crops,” Mr Horne said.

“For the north it was a mixed bag, with farmers in the Gulf still feeling the effects of excessive flooding during last year’s wet season, while the sugar industry had a bumper year with prices at record highs.

“The rise in the Australian dollar has impacted prices but also lowered input costs such as fertiliser, chemicals and fuel.

“It is during uncertain times like these that bankers, accountants, farm consultants and other advisors can draw on their specialist knowledge and provide insights to help develop business and financial plans.

“A good relationship and regular contact allow specialist to know your farm, your business and your plans for the future. That way, they can help you react quickly when opportunities arise, and help you deal with unexpected events,” he said.

Mr Horne has 10 tips for farmers to consider when planning for 2010, especially those needing finance to re-stock or plant the next crop.

Review your cashflow forecast with a best and worst-case scenario and work out if you have reserves or need to borrow. If you have extra cash, consider a farm management deposit (FMD) or high interest account until you need it. If you need to access cash consider different types of finance, including loans, overdrafts and leasing, and plan the timing and amount of repayments to best match expected cashflow.

Consider diversifying assets outside the farm gate to continue to provide income even when farm receipts are below average. At least once a year, review the weighting of shares and other assets and correct if necessary.

Start planning now for how to handle the next drought or flood, both financially and in terms of storing feed and other preparations.

Plan now to manage your exposure to interest rate risk. Splitting loans between variable, fixed and capped rates can limit the effects of rate rises and allow you to take advantage of lower rates.

With the recent volatility in global commodity markets, hedging or other risk management strategies are worth considering. Seek professional advice, for example from NAB Business Markets specialists, to explore options to suit your business.

Grain marketing has changed significantly in recent years. If you intend to hold or warehouse grain, review the effect this will have on your cashflow with your banker as early as possible.

Talk to your accountant about the tax implications of the year to date. Don’t wait until June or you may limit your options.

Ensure your financial adviser and / or provider is aware of any potential expansion plans, so you can act quickly when opportunities arise.

Develop a succession strategy for passing on the farm to future generations, or to manage unexpected events. Open and honest family discussions now can save an enormous amount of difficulty in the future.

Protect your assets, including yourself, by taking out adequate insurance cover.

Above all, Mr Horne said that while financial health is important, the most vital ingredient is personal health, so enjoy the holiday period with family, friends and neighbours.

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