Written by: Rob Grima | Farm Business Consultant | 0427 382 490
On a recent flight while on holiday, I did the right thing and listened to the air stewards tell us about the safety procedures in the event of an emergency. Whilst I regularly take flights, I can’t remember the last time I listened to their procedures. One message was to ensure if you have dependents with you, put your oxygen mask on first and then theirs! This has always struck me as counter intuitive, with a parent’s natural instinct to protect those they love above all else. But of course, you can’t help others if you are not able to function well yourself. Hence the sound advice. It struck me this is not dissimilar to many of my clients after a very torrid 2023 season.
Whilst the most recent seasons have provided outstanding windfalls for most, the excellent production has covered over the massive increase in operation and capital costs. Hence with production commonly well below average to poor in 2023 many will have by far their worst financial result ever. Looking back over the past 10 years also highlights that production variability is arguably higher than ever before
with the gap between the best and the worst substantial.
I have reflected on the midyear reviews I conducted before I left on holiday and there was a very strong sense of the similarities to 2006/07. This is reasonable, certainly for those who haven’t reached 100mm for the season the landscape looks and feels eerily similar. But there are also many differences between then and now that are important to recognize including, thankfully, very strong starting positions (i.e. balance sheet strength).
Looking after yourself in these seasons is vitally important. Being in a good mind space to make strong decisions is of paramount importance, positioning you to rebound quickly. I have observed many clients taking advantage of the reduced workload this year by either taking some time to get away and have an extended break or using their time to undertake tasks that have been put off for some time. Both
fruitful pursuits. I hope this will positively impact everyone in your business. This thought process allowed me to reflect a little deeper.
After those drought years finished, many were left pondering the genuine viability of not only their business but also their industry. Many businesses felt their position was dire, and it is true there have been many leave the industry since. But the attrition rate of businesses has been stable for a long time, indicating these droughts did not expedite the exit rate. What has happened since 2007 is a strong focus on
reinvesting back into the main farming resource, the soil.
This, along with significant change in scale, has seen the most prosperous period of farming in Planfarm’s Benchmarking history emerge. Today, conversion of rain into grain for many is almost double what was being achieved 15 years ago and this is being achieved on many more hectares. Hence, creating the volatility observed. That is, the good years provide a level of production and profitability we hadn’t
thought possible but, yes, poor seasons also work against many due to increased scale (i.e. larger losses). Because yield potential is higher so too is operating expenditure which creates greater risk. But I am confident the risk/ reward balance is still appropriate for most.
In essence, it reinforces that while droughts or dry seasons are difficult both financially and emotionally, I sense most have confidence that when reasonable years return, they will make the most of those opportunities.
Further to that, the sheer wealth of the farming business has accelerated past that of the general public. In 2006 most farming families had greater wealth than the average person in the street, but the gap has widened dramatically more recently. Whilst this has been driven by both profits and asset appreciation, there remains confidence that the seasonal hiccup will not erode this wealth longer term. Hence the capacity to fund the financial loss plus next year’s working capital requirements is secure for most.
Again, I reflect on discussions had in 2006 and I remember that some just wanted to ‘exit the industry with dignity’. I haven’t heard one client use these words this year, another indication of their confidence in their business and wealth status.
And finally, as I observe our European friends on my holiday it reinforces, we are all so much more connected today than ever before. Communicating with your peers even in other hemispheres is as simple as communicating to those next doors! Truly remarkable, and providing you with so much capacity to talk through your thoughts and feelings in tough times.
It is my belief these and many other facts should allow you to be strong in your belief of your future, despite the poor seasonal outcome 2023 has provided.