And how is it affecting everyone else?
Like it or not, New Zealand depends heavily on its farming sector for export earnings and to keep the flow of money passing through our economy. Unlike many other industries, the money earnt on the farm passes out quickly into the regional economy and flows like water from farmer to contractor or service provider to shops.
When the dairy sector is in the dumps, rural spend declines massively and the regions suffer disproportionately. It’s not just about the money either. Farmers go from being saviours of the nation to near bankruptcy depending on factors entirely outside of their control. World commodity prices and the weather are not easily influenced by the farmer on the land.
So what can they do to help themselves and what can we do to help them? Despite the highs and lows of farming, it still is essentially a business like any other. If you can’t boost turnover, then you must cut costs.
If you’re a farmer, what are the things that you can influence?
- Adding value to your output – this is pretty tough at an individual level although some farmers are diversifying into high value products such as Mike Barton from Taupo Beef who produce and market high value beef.
- Re-finance – one of the larger hurdles facing farmers is the capital intensive nature of the business. They can’t quickly or easily liquidate their assets when prices fall. They can re-finance and take advantage of lower rates, interest only or even complete payment holidays. Banks are willing to help as the consequences of farm prices going into freefall are definitely not what they want.
- Cut all discretionary spend – go through your expenses line by line and see where savings can be made.
Farmers have a reputation of being slow to change, traditional and unwilling to use technology – this is a fallacy.
Every modern farmer is now looking to technology to cut costs and increase production. There are many ways to improve profitability and, at least, farmers are used to the vagaries of the markets (and the weather!) and can respond to change, probably better than any other sector.
Beany offers an accounting service which uses technology to cut costs on the farm and provide superior reporting so you can see exactly where you are.