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Are higher returns THE answer?

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Posted by Brendon Walsh on 22 April 2014

The focus for many sheep and beef farmers at the moment is on lifting returns "to provide a decent reward for their efforts and make farming actually worthwhile." This is mainly due to the sentiment around lack of profitability in sheep and beef farming - a lack of spare cash and the lack of options people perceive around that.

I was asked at a recent networking event (once the questioner discovered I worked with sheep and beef farmers) if sheep and beef farming actually made any money at current market returns. He sounded as though it would be very unusual if it did (for him). He may have been looking for hope that there was some money to be made so I will give him that. "Of course," I said. " as long as the farmer does what it takes, profit can be banked most of the time." He left the conversation not quite sure what to think. I get the feeling it wasn't the answer he was looking for.

Now, I support farmers getting well paid for what they do, but lets get honest - with current returns for product sold at well above historical long term averages, why are farmers still not banking enough spare cash to have the choices they really want? It comes down to how farmers run their businesses, the assumptions they make, their appetite for change and their appetite for doing what it takes.

In general many sheep and beef farmers are running operations that are not designed to generate spare cash. If they have to rely on high prices to "make" a buck, then what happens at medium or low prices (which will inevitably come as all cycles work through their ups and downs)? These businesses just won't cut it! In this situation, even if we looked at an average expected cycle scenario (which usually doesn't happen exactly like this) with prices up half the time and down the other half, we could reasonably expect to see some profit banked half the time and some losses made the other half. The sum total over the long term? You guessed it - zero! If good years (for returns) are 1 year in 5 then the equation looks even worse.

While higher income is nice to have, farmers need to ensure they make profit regardless of the prevailing prices. If prices cycle down, they may need to make changes - that's just the way it is in business! You can't sit there and complain that it is not fair when things cycle down if you are not prepared with systems to step up and bank profit anyway. Once again, there will always be higher prices at some times and lower prices at other times. That's how cycles work, that's how supply and demand works, that's how humans work. By the way, the point is not how much you make but rather how much you keep! The question is what will each farmer do to generate and continue to bank profit?

How about we as farmers aim to make a good profit in times traditionally seen as "bad times" and do extremely well during times traditionally seen as "good times?" Wouldn't this be a great way to operate every year? What would your farm business and life look like if you could do this? Can it really be done? Well, it can be done and it is being done, but only by those who have taken the time to learn how.

You see, the "how" is actually not very difficult. It is just a system, like any other method of achieving success. However it does take a shift in thinking boundaries and being open to getting real about what profit actually is. Anyone can cope with this just fine if they have a genuine desire to deliver real measurable results - spare cash, freer time, peace of mind and control on their choices.

Are you serious about wanting to know how to bank profit every year? Click here

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Comments

  • Part of the problem is jealousy of the supposed profits that are being made in dairy. Part, as we well know, is a question of age and education. And part is a long ingrained habit of blaming the 'system' and ignoring the shortcomings of their own 'system'. There is still the perception that farmers farm for the lifestyle, and don't actually run businesses. Until this changes there will still be some farmers moaning, just as some of them do now about the meat and wool industries.

    Posted by Sue Edmonds, 30/04/2014 7:54am (5 years ago)