Business Farming

Thursday 28 August 2014

New Zealand's seven secrets to running a top-performing farm

Mary Kinston

Published 09/01/2013 | 06:00

  • Share

Let me start by saying that the headline on my article from New Zealand before Christmas was a bit misleading and seemed to suggest that I was somewhat disillusioned with the direction being taken by many dairy farmers there.

  • Share
  • Go To

'Are New Zealand dairy farmers losing the plot in turning away from low-cost milk production?' was certainly harsh because we have still much to learn from New Zealand.

Closer to home, fodder supplies are becoming an issue. On many farms silage stocks are dwindling at a concerning rate and meal bills are constantly increasing.

Last year is likely to have a financial hangover on a number of farms, and many of us are now wondering what fortunes 2013 will bring?

Considering the winter feed supply, one can only hope for a dry and growthy spring.

For a number of discussion groups, 2012 financials are now being analysed and compared. The figures are unlikely to get anyone excited, but it's a valuable exercise.

It's important to know your cost of production, it highlights your profit margin and also gives an indication on an annual basis of whether the farming system you have in place is sustainable given the product price and weather, when compared to others.

Repeated cash surpluses are an important part of any business. Even in the toughest circumstances there are those farmers that repeatedly appear in the top quartile of financial performance.

Initial findings of a study in New Zealand by DairyNZ using the top quartile of dairy farmers ranked on operating profit per hectare found that seven characteristics were commonly associated with these top performing farms.

These were:

1.That top farmers benchmark against other farm businesses;

2.Eighty-five per cent of farm managers would have a financial budget, and were more likely to check their actual expenditure against the budget expenditure, while only buying supplies as required;

3.Top quartile farmers are more likely to network with other farmers, which would facilitate the swapping of ideas, improve their practices and be a source of advice to others. Some 59pc would participate in discussion groups;

4.Top farmers exhibited confidence in decision making, finding planning easier and were more likely to run their farm the way they wanted to regardless of what others said. These farmers had systems in place to assess opportunities and risk;

5.Top farmers generally had more than five years experience in farm management, with a high proportion having over 15 years experience;

6.Some 55pc of top farmers would describe their milking parlour as up to date and reliable;

7.A greater proportion of the top farms were managed by couples.

Having repeatedly analysed financials with my own discussion groups on an annual basis and having picked out the top 5pc, I would also concur with these findings.

No one county, soil type, stocking rate, breed of cow, kgMS/cow or kg of meal fed determined whether a farm was top class or not. What does determine a top performing farm is the person in charge of the business, and as many Irish farms are one-man units it came down to the "operator".

As farming is a biological system subject to numerous changing variables, top operators take the time and have analyst systems in place, which provide them with the conviction to make a good set of decisions.

They tend to do things to a high standard and in a timely fashion.

So as we face the start of 2013 it is important to have a financial budget in place for the year ahead. Many dairy farmers hate looking and working on financial budgets.

The common quote is that "there's no point budgeting when the weather determines what you spend".

While 2012 defined the control that weather had on a financial performance, a budget will help you plan, prepare and minimise the financial hangover that such a year creates.

Financial budgets help you control cash flow, and identify areas of spending that can be increased or decreased depending on the year.

For example, repairs and maintenance on a farm can often be deferred from one year to another which may facilitate extra spending on concentrates and fertiliser depending on the season.

However, without reviewing your financial position, additional spending without planning is more likely to result in a cash deficit.

Reviewing your budget and updating the figures throughout the year is an essential part of having a financial budget.

There is no point doing one at the beginning of the year and leaving it in the drawer.

There are numerous cash flow budgets around and even a simple spread sheet will work, so have a go and take control of your farming year.

Dr Mary Kinston is a Kerry-based dairy consultant. Email: mary.kinston@gmail.com

Indo Farming

Read More

Editors Choice

Also in Business