As the likelihood of farming without subsidies looms closer, Lauren Dean takes a look at the Australian model to discover how the country’s farmers manage to sustain a roaring and profitable farm business with no help from the Government.
Farmers must get up from their ‘big comfy chairs’ in order to prosper and become self-reliant in an era of new challenges.
Despite Government promises that funding for agricultural subsidies will remain until 2020, the future of support after that time remains cloudy.
At a recent Brown and Co seminar, A View From Down Under, experts called on farmers to adapt their mindset to help tackle change and heard how an Australian approach to farm business could help UK farms.
David Heinjus, farmer and managing director of Rural Directions, a large Australian agribusiness consultancy, said change and volatility should be expected but what mattered most was how farmers reacted.
He said: “It is time to be a victor, to tackle change and take ownership.
“We are often in is this contentment paddock when you are in a big comfy chair and it is quite hard to get out of it because you are quite content – life is sweet.
“But it is important to get out of that comfy chair and to move forward we have to be confused and find a breakthrough.”
Mr Heinjus spoke of the notion of four paddocks – contentment, denial, confusion and breakthrough – which he said were essential for farmers to achieve a more sustainable outcome.
He added it was often easy to enter into denial, especially with the stress of collapsed prices, but said it was important to only spend a ‘split second’ there so change could be better handled.
Confusion is a ‘really good spot to be in’, said Mr Heinjus. He likened the confusion stage to the route to a ’lightbulb moment’, to ‘seek breakthroughs and move forward’.
He said: “Australian farmers spend a lot of their time in the confusion spot – they are permanently confused.
“And that is what you want. You want to be alert, engaged, and seeking ways to do things better.”
The award-winning farmer urged the audience to work above the line, which he described as taking ownership, being accountable and being responsible, but most importantly having the right mindset.
Farmers at the event also heard advice on how to future-proof their business as the uncertainties of Brexit continued.
Divisional partner of Brown and Co Simon Wearmouth said while no-one should second guess the detail of agricultural policy 2020, it was safe to assume direct subsidy would be significantly reduced.
He said: “Farmers’ net profits can be precariously close to their Basic Payment Scheme receipts and far too frequently be lower.
“This is unsustainable now and could prove fatal in the not-too-distant future if corrective measures are not put in place.”
Mr Heinjus, who also runs Pareta Farms, a 3,600-hectare (8,895-acre) mixed operation, said Australian farmers were testament to change.
The top 20 per cent of Australian farmers retained 30 per cent of revenue as profit, despite being subject to the highest level of production and market volatility and some of the lowest levels of support in the developed world.
He said UK farmers should start planning now to fine-tune the four main profit drivers.
Creating a low-cost business model was critical as the demand to be self-reliant and develop new markets expands.
“Work out what you need to do to create a profit without subsidies. Politicians can change things at the stroke of a pen, so it would be wise to assume such a scenario might exist,” he added.
The ratio of machinery and labour usage should be effectively equal – keeping the ratio at 1:1 to help maintain the structure of the farm.
If possible, the ratio should be 0.8:1, delegates heard.
Total plant machinery and labour should also not exceed 25 per cent of income.
Mr Heinjus said successful farm businesses had teams which were functional, entrepreneurial and opportunity-focused and shared the same vision which could withstand production and business shocks.
Inputs should be applied according to science-based evidence rather than a blanket approach, with a focus on excellence in agronomy and excellence in timings.
“Identifying risks and having management strategies in place is key to a world without subsidies,” he added.