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Independent.ie

Thursday 8 December 2016

Analysis: Don't be a slave to short-term highs and lows in farming

Mike Brady

Published 13/11/2016 | 06:00

Agricultural consultant, Mike Brady.
Agricultural consultant, Mike Brady.

What is a fashion trend?

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With clothes, images of perfect models strutting the catwalks of Milan or Paris displaying the latest styles flood into our minds.

In sport, the blanket defence in GAA, Barcelona's high pressing game in soccer and Connacht's fantastically entertaining open style of rugby are all currently in vogue.

Fashion is defined as: 'a popular style or practice' and a fashion trend can be influenced by political, economic, social and technological factors; but when it comes to farming, what is in or out of fashion?

We all know the calendar year of 2016 has been difficult for all farming sectors, primarily because of poor commodity prices.

Yes, the weather has been difficult in the western seaboard, but in all other parts of the country the weather has facilitated excellent growth rates resulting in record tonnes of grass dry matter per hectare being grown on many farms.

Active farmers put development and expansion plans on hold, and farmers considering retiring by leasing or selling land deferred their decisions.

Then, the milk price turned the corner with a series of modest price rises, but more importantly is the promise of more to come all backed up by significant lift in futures market and the popular Global Dairy Trade (GDT) Milk Index.

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It was as if somebody flicked a switch, the negativity of 2016 suddenly dissipated and was replaced by optimism for 2017.

Huge numbers attended the National Ploughing Championships, banks are currently experiencing an upsurge in finance applications, consultant and advisor mobile phones are buzzing again.

What is so different today versus three months ago?

How does a good idea in 2014 become a bad idea in early 2016, but it is now back on the table again as we head into 2017? Is this all just a fashion trend or is there real substance to farmer optimism?

Farming can be a lonely occupation with the early rising and late to bed routine creating 70-to 80-hour working weeks, often with limited human contact.

Newspapers, TV, radio and social media are the lifeline to the real world, but media tends to sensationalise, particularly if news is negative, this can easily send a vulnerable farmer into a tailspin of negative emotion.

Equally, excessive volumes of positive news can cause some farmers to overdose on the excitement, enthusiasm and euphoria surrounding something new.

Examples of this are the amount of new property builders and developers we saw during the boom and, to a lesser extent, the white gold comments in respect of milk on the removal of EU quotas.

The most important advice is not to make major decisions about your farm business when surfing the crests of highs or battling against the lows. 'If you fail to plan, you are planning to fail' said Benjamin Franklin, there is no better advice for farmers.

A clear well thought out plan for the farmer and the farm business will provide a clear path to follow when confronted with negativity and it will also help keep the feet firmly on the ground when tempted by the good times. In fact, there are four components to a good plan:

Long term Plan

Take a dairying example. In 2014 banks were budgeting at a milk price of 30c per litre for long term dairy expansion plans, they continued in 2015 and 2016, albeit with some jitters of late, but I have no doubt they will continue to do so in 2017.

Why? Because the fundamentals are still the same, world population is growing, there is an increasing demand for milk and Ireland can produce milk competitively when compared with our international competitors.

If expansion plans are based on a 30c per lire milk price and projected technical performance is matched to the farmer and the farm's ability, there is no point worrying about highs and lows. The long-term plan is sound.

Short term Plan

Yes, there will be speed bumps along the route of any plan, this is where short-term planning comes into its own.

Many farmers worry about the effects of low prices on their farm business and on their family, often they bury their heads in the sand and do nothing about it.

Burying one's head in the sand like an ostrich and hoping the problem will go away will solve nothing. Go and get somebody to look at the issue, and even if they don't immediately resolve it, remember a problem shared is a problem halved. A simple cashflow budget for any period up to 12 months provides clarity and a path to navigate through a short-term problem.

Contingency Plan

A contingency plan is a list of issues that may go wrong and how one is going to deal with them e.g. low commodity prices, high interest rates, disease, health issues, weather etc. These events will cause the best made plans to go off rail for a while, but if you expect it and have planned for such events the blow is a lot easier to take.

Exit Plan

Every business or project should have an exit plan. Personal health issues or no successors for a farm business are reasons for putting an exit plan in place at short notice but every farmer should have thought through his or her exit plan.

It is vitally important for farmers to enjoy and live balanced lives - 'all work and no play makes Jack a dull boy'. However, farmers must resist following the latest fashion trends just to experience shortterm kicks.

Carefully think thorough your long-term, short-term, contingency and exit plan and remember, fashion is temporary but style is permanent.

Mike Brady is an agricultural consultant based in Cork email: mike@bradygroup.ie

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