Agronomic and financial plans are key in drought times

GRDC 'Dealing with the Dry' forums address issues in northern region

Learning & Development
New South Wales Farm Liaison Officer Jen Jeffries attended a GRDC 'Dealing with the Dry' forum in NSW. PHOTO Toni Somes

New South Wales Farm Liaison Officer Jen Jeffries attended a GRDC 'Dealing with the Dry' forum in NSW. PHOTO Toni Somes

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Forums delivered agronomic, benchmarking and financial specialists to grain growers.

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The GRDC's 'Dealing with the Dry' forums have brought regional specialists from the agronomic, benchmarking and financial sectors directly to growers in drought-affected areas.

Here, Ground Cover™ reports on some of the topics covered at a series of 2019 forums in northern New South Wales and southern Queensland.

Dealing with the bank

Having a financial plan in place is always important, but even more so in drought years, according to Garry Littlejohns, one of the specialists who recently presented at the GRDC's 'Dealing with the Dry' forums.

Mr Littlejohns is uniquely placed to talk about on-farm finances. With a career that has included both agronomy and banking, he says he has the ability to 'tell it straight'.

As well as the drought impacting on farm finances, Mr Littlejohns says the Banking Royal Commission's findings on the banking sector have also affected how lending occurs.

For example, a two-people policy for reviewing accounts means banks have become more diligent on lending.

"This has tightened-up credit and made money harder to get," Mr Littlejohns says.

Additional compliance requirements, also introduced because of the commission's findings, have slowed the approval processes.

"What was a two-to-five-day turnaround could now be four weeks, so be proactive - keep in close contact with your bank," Mr Littlejohns says

Being proactive should also include having a budget ready, including information about assets and liabilities, plus up-to-date business activity statements.

"If you have your cashflow budgets worked out, that will put you in a better position with the banks."

What was a two-to-five-day turnaround could now be four weeks, so be proactive - keep in close contact with your bank. - Adviser and 'Dealing with the Dry' forum presenter, Garry Littlejohns

However, it is also important because of another Banking Royal Commission change - banks can no longer prepare budgets for clients.

Maintaining communication with the bank and being transparent about strategy is vital.

"This could look like: 'I plan to plant a certain number of hectares of this crop this season and I have this amount of soil moisture. This means I've got a reasonable likelihood of success'," Mr Littlejohns says.

He says this information can make it easier for the banks to assess lending needs.

Post-drought preparation

A successful post-drought crop relies on preparation and this includes thinking about inputs and fallows, Mr Littlejohns says.

Seed supply is tight, so he says it is important to have a plan for seed access to ensure planting can occur as soon as the opportunity arises.

He says this may include talking to a seed supplier in advance about availability, or undertaking germination testing on stored seed.

"If stored seed is not up to scratch, it could be worth buying in seed. You don't want to go to all the trouble and cost of planting to only get 30 per cent establishment," he says.

"As for fallows, they need to be clean to preserve moisture. It is difficult to retain ground cover, but moisture is going to be key to a successful outcome.

"Aim to preserve what you can and make sure you keep chasing moisture when you are planting."

This means using the correct equipment and Mr Littlejohns suggests talking to neighbours who may have moisture-seeking tools or press wheels to ensure better germination.

"That certainly can be the difference between success and failure in a marginal season," he says.

Future

Financial expert Garry Littlejohns, left, with other participants at one of the NSW 'Dealing with the Dry' forums. PHOTO Toni Somes

Financial expert Garry Littlejohns, left, with other participants at one of the NSW 'Dealing with the Dry' forums. PHOTO Toni Somes

Decisions on foreclosures will always be made on a case-by-case basis. However, Mr Littlejohns says growers should know where they stand with their bank and ask the hard questions, including:

  • How do you view me?
  • Am I too highly geared? and
  • Do I need to be considering capital debt repayment or selling assets?

Although for some it will be a very slow recovery out of the drought, high commodity prices could help. But there are reasons to use low-risk crops next season.

"Grow a crop you know you can get a result on - one that is suitable for the season and the moisture conditions," Mr Littlehjohns advises.

He says doing the financial and agronomic planning and preparation will help banks say: 'We will back you in the long term'.

Dealing with benchmarking

Ensuring you have a low-cost business is important in a drought and benchmarking can help, according to farm benchmarking specialist Simon Fritsch.

He says one of the best ways for growers to do that is to become involved in a benchmarking group and understand where their business sits.

"There can be large differences between top-performing growers and others - while we all lose in a drought, some lose less," he says.

You cannot control everything, but a logical plan articulates to your financier and the people around you that you have thought through the issues and are making informed decisions. - Farm benchmarking specialist Simon Fritsch

As an example, Mr Fritsch says that some growers in drought-affected areas in 2018-19 achieved returns on assets managed of minus one per cent, while others in the same region produced returns as low as minus seven per cent.

"On a $10 million asset, that's a $600,000 difference each year," he says.

"If you do that over three to four years, it's a significant difference in wealth erosion occurring between those managing their costs well and those who are not."

Control

Grower Clifford Lane, of Coonamble, with Simon Fritsch at the Coonamble 'Dealing with the Dry' forum. PHOTO Toni Somes

Grower Clifford Lane, of Coonamble, with Simon Fritsch at the Coonamble 'Dealing with the Dry' forum. PHOTO Toni Somes

Mr Fritsch agrees with Mr Littlejohns that having a plan in place is important and that top performers take a strategic view.

"The biggest issue in a drought is to have a farm business plan that shows you are in the driver's seat," he says.

"You cannot control everything, but a logical plan articulates to your financier and the people around you that you have thought through the issues and are making informed decisions."

A plan allows farm managers to deal with issues within the business, such as accrued leave, and low-cost, on-farm jobs, as well as plan for the longer-term, considering infrastructure development and expansion.

A strategic view considers the local environment - for example, when drought may occur and for how long.

"What you do with that information makes the big difference," Mr Fritsch says.

"For example, at Bellata we are in a 500-millimetre rainfall zone where the soil may hold 200mm of plant available water. At 25 per cent rainfall, it will take us more than 18 months to fill a profile, on average.

"You can use that information to build a resilient business and a farming system that can capture reasonably well the upside, but also take some of the downside.

"That could mean introducing a long fallow in response to it not raining as much as normal so that moisture in the profile is stored."

Above all, Mr Fritsch avises to surround yourself with good people, such as your banker, accountant, agronomist and agricultural consultant, to support and inform your decision-making.

"Make sure your plan is viable and sensible and that you are held accountable to it," he says.

Dealing with staff

Keeping staff employed, engaged and enthusiastic is also a consideration during the drought, says northern NSW agronomist Drew Penberthy.

"It's not only business owners doing it tough, it is staff too," he says.

"You probably need to include them in some of the decision-making, so they can keep abreast of what's happening."

Mr Penberthy says some staffing aspects to consider include undertaking other on-farm jobs, such as fencing, soil works or erosion control. Although they are still a big cost to the business, the farming business will benefit from them coming out of the drought.

Training and study courses, some of which are supported by GRDC, could also be considered to keep employees engaged and learning.

Mr Penberthy warns that if employees are put off during this period, it may be hard to find skilled employees when the drought breaks.

"A lot of people who have lost jobs are moving to the city and I can't see them returning when the drought breaks. But I also realise every farm is different. On some farms there is no extra work," he says.

He says some managers have helped employees find work using on-farm equipment.

"Use the dozers and excavators for contracting work, so that when it does break, those staff are able to come back."

Holidays could also be taken now - both for staff and families.

"Take your family away, spend time with the kids. We can do it now because we are not under a huge work pressure. I think that is really key for mental health," Mr Penberthy says.

He says it is important to remember that wives, partners and children are all affected.

"They carry a lot of the burden. This is the worst drought we've seen in history, but we will get through because we are resilient."

'Dealing with the Dry' initiative

An initiative of the GRDC, the 'Dealing with the Dry' forums were organised in response to calls from grain growers requesting practical advice about how to manage dry conditions on-farm.

GRDC grower relations manager, north, Susan McDonnell says the feedback from those attending the forums has been very positive.

"These forums have been about bringing communities together and offering support and advice on some really challenging topics, including what government support might be available," she says.

Ms McDonnell says the sessions are the first stage in GRDC's response to the continuing drought. More support will be offered to growers to deal with the ongoing agronomic and financial issues.

A grower herself, she has a first-hand understanding of the challenges.

"We have planted in 2017, 2018 and 2019 and have not harvested anything other than limited seed replacement," she says.

We need to be well prepared and position ourselves to identify and take advantage of any opportunities that arise. - GRDC grower relations manager, north, Susan McDonnell

"We know how it feels to have long-term business goals put on hold due to income changes.

"This series is about understanding the different ways we can effectively manage our debt and limited cashflow while planning for the future.

"But, importantly, we also need to be well prepared and position ourselves to identify and take advantage of any opportunities that arise."

GRDC has a dedicated web page to provide access to the latest research data and practical agronomic advice to assist with on-farm decision-making.

The 'Dealing with the Dry' page provides access to information on the economic, agronomic, farming systems and practical implications of salvaging crops for fodder, grain or grazing, as well as data about the long-term consequences of management strategies, in terms of nutrient removal, ground cover, weed management and other impacts.

It also includes links to relevant broader agricultural industry resources.

GRDC Research Code SEF1903-001SAX

More information: Susan McDonnell, susan.mcdonnell@grdc.com.au, 0436 622 649; https://grdc.com.au/resources-and-publications/resources/dealing-with-the-dry

The story Agronomic and financial plans are key in drought times first appeared on Ground Cover.

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