Focus on farm management

31 May, 2013 02:00 AM
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IT is very good practice to be circumspect.

Yet in today's society, inexorably pushed by changing technology, self interest is probably the uncrowned king.

Uncrowned because who would want to admit they are focused on self interest.

And who can be circumspect anyway when there's a rural crisis in Australia?

Retired Planfarm co-founder Peter Falconer can be.

Having started Planfarm with John Abbey and Ken Boughton in 1974, after migrating from New Zealand to Wongan Hills, Mr Falconer spent more than 30 years providing farmers with a circumspect view of managing finances on the farm.

Most clients listened to him, some didn't, but the facts speak for themselves - not one Planfarm client was forced to sell the farm during his tenure with the company.

While he retired in 2005, he remains intellectually active and forthright, albeit circumspect, with his views.

He's not afraid to ask awkward questions, such as: Is there a rural crisis?

"The so-called crisis meeting at Merredin last month attracted 1000 people and it elevated the perception that there was a crisis," he said.

"But there's a big difference between perception and fact and the fact is the majority of WA farmers have got their finance and have put in, or are completing, their seeding programs.

"My inquiries suggest maybe 30 farmers didn't get finance to do that.

"The big picture is that WA is set up for a very good cropping year and it will probably keep the word crisis off the pages of newspapers for a while.

"But the good season shouldn't lull those farmers who claim there is a crisis, from not paying attention to financial management."

According to Mr Falconer, the spark for the Merredin meeting focused on bush news that banks were getting tough on providing finance, leading to an inevitability that many farmers would not put a crop in this year.

Premier Colin Barnett toured several eastern Wheatbelt districts, spoke with farmers and after the Merredin meeting - which he didn't attend - said some farmers may need to leave the land.

"It sounds a cruel and hard thing to say but some farmers probably do need to leave," he said.

Mr Falconer backed the Premier's comments.

"I can remember saying similar things to farmers in the 1980s," he said.

"Some refused to take advice to sell and it became a pride factor rather than objectively assessing their situation.

"I'm not suggesting farmers in low rainfall areas should up and leave but if we go back to facts, rather than perceptions, the problem in the eastern Wheatbelt and other affected areas, is too much debt and a failure to recognise climate limitations.

"Ironically if you look at the trend line of annual rainfall and the 10-year moving average in Merredin and Southern Cross, for example, it's going up," Mr Falconer said.

"People are blaming climate change for the drier years but the historical facts show climate hasn't changed significantly.

"The rainfall records are there for everybody to see and they show anomalies which is why the emphasis needs to be on analysing the longer term in deciding farming strategies.

"Recognise the risk if you're farming in a low rainfall area and manage your finances accordingly.

"My rule of thumb is to keep debt levels below 30 per cent but there will always be exceptions and I've known farmers to go out to 50pc by expanding but they have always worked back to below 30pc as soon as practicable.

"It doesn't matter where you are farming, it's all about financial management.

"You can't blame the financiers, you've got to blame the farmers who can't manage capital well."

Mr Falconer is acutely aware of farmers who are managing finances but are still finding it tough.

"There's no doubt terms of trade are impacting against farmers," he said.

"But it then goes back to managing finances and becoming more efficient without taking punts.

"You could argue that this year was a perfect opportunity to sow early to gain yield potential but the risk is hitting the frost window and the question is whether you should take that punt or hold off and sow later.

"A lot of the problems in the dry years of 1969 to 1971 were caused by people making bad decisions in the good years of 1965 to 1968 and putting all their eggs in one basket by total cropping.

"Those who established or maintained legume-based pastures and had sheep, handled the poorer years better.

"I've heard of the need to buy bigger equipment to achieve cost efficiencies and I think the younger generation, particularly, have a mindset that technology will solve the problems.

"I just question whether people spend too much on technology when there are least cost pathways to achieve the same thing.

"One example is using GPS to identify poor performing patches in paddocks when you should know instinctively from being on the header where your bad patches are.

"I'm not dismissing technology but I am suggesting that you use technology within the parameters of sound financial management.

"That's the key, not technology.

"And it will be a must to survive in farming because things are only going to get harder because agriculture's political influence is waning."

Mr Falconer is not a fan of government assistance for individuals per se.

"But a subsidy on input costs, like transport or fertiliser or tax exemptions would be a big help, not only to farmers but to the nation," he said.

"The flow-on effect from a healthy agricultural industry would be of big benefit to the government's bottom line.

"The biggest virus in agriculture is TMD - too much debt."

With the potential for a bumper cropping year, Mr Falconer says it is an imperative that farmers ensure there mindset is on good financial management.

"Farmers have a big chance this year to show how healthy and important agriculture is to the nation, which is why they should see this year as an opportunity to plan to provision for a bad year and if possible reduce debt," he said.

But despite the challenges of declining terms of trade and debt, he maintains a positive outlook for agriculture.

"We'll continue to see farms get bigger because a well managed farm will have more resilience (against negative factors) and I think it's okay for foreign investment if local farmers don't want to aggregate.

"But the bottom line for farmers is, if you can't make five or six per cent return on capital on your farm business, over the long term, you should consider whether your capital is better in fixed deposits."

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