Brown & Co’s George Lane looks into efficiency and scale during his month-long Australia exchange trip.
One of my projects for the exchange involves looking in to how Australian farmers keep unit costs of production down.
With the obvious answer being increasing scale and efficiency I wanted to look into the detail behind that.
During my first week I visited Anna Binna, a large and very efficient farming operation, on South Australia’s Yorke Peninsula, which dates back to 1875 now owned by Ben and Belinda Wundersitz, In 1997 Anna Binna began sharefarming and then, a year later, began leasing properties, often in low-rainfall areas and many with high weed populations.
This has seen an increase in its cropping capacity of 1,200 per cent in 15 years.
One of the main factors for the increase in cropping capacity has been down to a better understanding of the climate and soil to which the business operates.
Although the Yorke Peninsula is typically a higher rainfall area of South Australia, maintaining soil moisture is key.
This has been done by changing the seeding policy and moving to direct drilling, therefore moving as little soil as possible so that water does not evaporate. Talking to a number of farmers in the region, it is thought that by direct drilling it is increasing yields by circa 0.5t/Ha.
Weed management is also key, ensuring that the weed population is as low as possible to increase the soil moisture content, which is religiously measure by most Australian farmers.
Whilst visiting the Yorke Peninsula, I visited Rosevale Properties Pty Ltd, where the owner Marty Collins showed me around.
The first thing I noticed was the ginormous fuel tanks and large chemical store – I said “You get through some fuel and chemical here!”, with Marty simply replying “we have enough storage for over 12 months’ worth of diesel, we buy it when it is cheap and we buy enough of it to get a lower price and cheaper delivery.
The same with the chemical, we know how much of certain chemicals, such as glyphosate and snail bait we use annually, so again, we shall by that when it is cheap rather than waiting 2 weeks before we need it”.
That to me spoke volumes, buying inputs in bulk, when the price is right and storing it, gave the business real buying power and reduced input costs significantly.
Whilst I have been visiting farmers around the region, one thing has really stood out to me. The vast majority of progressive farmers that I have met, have been using independent advisors, not ones tied to a product or products.
In doing this they are insuring they get non-bias advice and ensure they are purchasing what they need, not what their advisor wants to sell them.
Whilst looking around the farm yard at Anna Binna, I have to admit it, I was in awe of the machinery shed, the trucks and road trains, two new Claas Lexion’s along with the chaser bins really impressed me.
But the types of machinery I have seen in South Australia has been a real variety. Some farmers run quite old machinery, whilst others have relatively new kit, but upon asking why this is, Ben informed me that they only buy machinery when it is needed, or will improve efficiency/profitability.
And because of his scale, the efficiency gained from this newer machinery was a no brainer when it came to purchasing it.
Farmers have drawn up a machinery policy, which incorporates a renewal policy, so that this is formalized and transparent.
The cost of running each piece of machinery is measured and reviewed each year alongside reviewing the general machinery policy. In doing this it means they can see which machine hais become inefficient to keep and helps maintain control of capital expenditure.
We are running a business that is a farm, not a farm that is a business. These are words which I have heard quite a lot from Australian farmers.
The various progressive farmer’s that I have met, have budgets in place, have brilliant book keeping and know their cost of production down to the nearest cent.
In doing this they know how the slightest of things can impact their business, along with using their figures to benchmark themselves against the rest of the industry to ensure they do not go backwards.
The use of advisory boards are very common with these farmers, with the aim to have a fresh pair of eyes involved with the business to ensure they stay on track, along with helping to address any elephants in the room.