Written by: Cameron Weeks | Farm Business Consultant | 0427 006 944
After the record crop production results of the past two years 2023 has been a challenge to say the least. In WA the major factor of course has been rainfall or lack thereof across the northern half of the state particularly. As you’d expect this has led to a wide range of crop production results with production being especially impacted where you see red – dark red on the map.
Compounding the production challenges though have been several other very significant factors which has made operating a farm business even tougher this year and when combined with poor production will lead to some large financial losses.
- Very high input and other operating expenses (inflation).
- A crash in sheep and cattle prices.
- The sharp and continued rise in interest rates.
With all this in mind and annual reviews fast approaching I thought it timely to look at how you can get the most from your review meeting.
A good place to start is to be clear about what you want from the meeting with your consultant and then do your bit to prepare to help make this possible.
Some common reasons why clients value their annual review and input from their consultant include.
- You’ll get a timely summary of the year’s production and financial results.
- This summary, which gets compiled into a detailed report for you, is invaluable when it comes to access to and the cost of finance.
- It should also be invaluable to you as the business of farming is big dollars and warrants a good understanding of your numbers!
- The Consultant is independent, knows your business in detail and is able to look critically at your management.
- The Consultant also gets to see what works and does not work in other farm businesses – they can therefore share some of this knowledge with you.
- The meeting is an opportunity for the whole family to discuss and consider the business / family vision, goals, and business plans with input from a knowledgeable third party.
- It is also an opportunity to prioritize what are the key goals for the coming year, what needs to happen and who is taking responsibility.
- Preparation of next year’s detailed cashflow budget to determine funding requirements and overall profit estimates.
- An opportunity to identify and consider key up-coming decisions such as farm expansion, machinery replacement, retirement planning, diversification, and farm succession.
Looking specifically at 2023 and into 2024 there are some obvious business factors that we will also be wishing to discuss and work through with you. Several that come to mind that I suspect have relevance to most of you are.
- Farming margins due to inflation – if you assume average crop production and average prices at current input costs then many businesses will not be forecasting a bottom-line profit. How will you deal with this?
- Sheep and cattle prices – what is the impact on your business, how do you respond, and for how long can you sustain low prices?
- Financing – interest rates have increased significantly over the past 18 months and so have bank profits. What does this tell us about margins? What are you/we going to do about this?
- Booming land values – what does this mean to you with your vision and goals in mind? How has this impacted succession thinking?
- Lease values – related to booming land values of course but if you are looking to grow through leasing are you sure you’ll achieve what you are hoping for?
- Very expensive farm machinery – how best to factor this into your business operations.
Whatever you want from your review day, it is always a good idea to let your consultant know. This gives him or her the chance to prepare and will help ensure you have a productive well focused meeting.
Finally, our analysis and report, which we strive to be of the highest quality, relies on good, accurate information and data. Please do your very best to provide this to us and in a timely fashion. We are not miracle workers and are also very busy at this time of year so your assistance and active support will help us give you the best possible outcome!
Finally on behalf of the team at Planfarm I’d like to wish you and your families a happy Christmas and a successful new year. It’s been our pleasure to work with you, our clients, over the past year and we look forward to working with you again in 2024.