Mindset Change Brings Farming Turnaround

Mindset Change Brings Farming Turnaround

The idea that if farmers produce more they will always be better off financially is wrong and farmers need to become more clearly focused on profit, according to farm business specialist Peter Floyd.

“The ‘need’ to increase production that has been drummed into our industry for the past three decades is seductive because it sounds sensible, and all the technical and financial support services are geared to promoting more intensive production systems,” says Floyd.

“But in reality the payoff to farmers is disappointingly small, and I talk to many who are driven to despair. “

Floyd believes that the way out is to change the mindset from production to profit although that is not as easy as it sounds. Farmers and their advisers will invariably say that they are focused on making a profit but he finds that they usually have no idea what the most profitable management strategies are.

“Farmers I speak to generally don’t know how much profit they made from pasture last month or last week let alone how much they will make tomorrow, next week or over winter,” he says.

“The only sure way of getting a handle on where the best profits are going to be made is by measuring the profit per kg of dry matter eaten by stock and using that to determine which management decisions are profitable and where money is being lost.”

Floyd, who is the managing director of the farm business system eCOGENT, has found that irrespective of the level of pasture production the profit per kilo of dry matter eaten by stock is around 3c for an average farmer and up to 8c for top farmers. However, within two years of changing the way they measure profitability these same farmers can be achieving 15c and potentially heading towards double that figure, by which time they are doing very well financially and enjoying a very different farming lifestyle.

“When you measure profit in this way you quickly learn to assess potential profit per day from different classes of animals, and from changes as small as drenching frequency and as large as a whole new management regime,” says Floyd.

“Profitability is not necessarily about growing more grass or changing breeds or using more vaccines, drench, fertiliser, etc. – it’s about measuring daily profit and exploiting the opportunities that it reveals.”

ENDS

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