New Zealand’s agricultural sector has experienced at least four significant financial downturns since the 1980s and while the one farmers are now facing is in a similar league, there are differences.
A recent Beef + Lamb New Zealand Farming for Profit field day in the Wairarapa featured a panel discussion made up of BakerAg farm consultants Ed Harrison and Chris Garland and farmers Willie Falloon, Royden Cooper and Bruce McKenzie. Drawing on years of experience, they put this current downturn in perspective and outlined ways farmers could look after themselves and their businesses.
For North Island east coast farmers, the effects of this downturn have been exacerbated by recent weather events, but it has also come at speed, with market prices declining and interest rates rising rapidly within a 12-month period.
But farm businesses today are far better placed to withstand downturns than they have been previously, particularly those experienced in the 1980s.
Farms have better soil fertility and infrastructure, livestock have far more constitution and resilience and most farms have solid equity which makes them more bankable. Trading banks also have a better understanding of their customers’ businesses.
What has been learnt from previous downturns
- When you are at the top of a cycle it is hard to believe things are going to fall over. When you’re at the bottom it’s hard to see how things will get better-but they inevitably do.
- In 10 years of farming there are likely going to be four average years, three great years and three rubbish ones.
- To survive, farmers need to be optimists and farm for average to better years. Successful farmers can recognise a change in the wind early and adapt their mindsets and cost structures to minimise losses and capitalise on opportunities
- Today’s sheep and beef farms are more resilient to climatic events and to restricting inputs than many realise.
Looking after yourself and your business
- Look after yourself, your family and staff before looking after the business. Stress and anxiety can result in poor decision making. This is due to the effect stress has on the frontal lobe of the brain. Do everything to maintain your thinking at a near-normal state. Engage in activities off-farm such as sport or community activities.
- Focus on your own business. Have a clear understanding of your business from an operational and financial perspective. Understand any risks and develop a plan around them.
- Discussion groups can be a valuable during tough times to share ideas and experiences.
- Focus on what you can control. These could include stock management, essential maintenance and managing the bottom line.
- Accept that a cash loss may be unavoidable- but try and minimize it.
- Question all spending. Know the difference been maintenance and capital spending.
- Trust your farm and your process- don’t make knee-jerk changes.
- Work with a realistic budget and revise it regularly. Keep your bank fully informed.
- Have a good discussion with your accountant about tax payments.
- Make decisions. In tough times, options are more limited and the consequences are large so it is easy to put off making decisions. It is better to make a wrong decision than not make a decision at all.
- Seek an independent, professional view of your business and personal management.
- Technology can greatly improve decision-making processes and overall productivity. Where feasible, embrace them to stay competitive and sustainable.
Find out more
For more about thriving in challenging times, listen to B+LNZ's recent webinar series Sow, Grow, Thrive on the Knowledge Hub.