Sunday, 25 July 2010

Its not what you do, its the way that you do it .....

What a difference an hour makes! Sometimes the shortest meetings are the best. I had from 11am to Midday to order a Hot Chocolate and the biggest Latte I’ve had in my life (it came it a bowl which meant my nose had a constant blob of white froth for a significant, embarrassing period!) plus interview my third NZ first generation sheep farmer as our paths briefly met on the shores of Lake Taupo in the North Island.

Alastair has a full time job but has entered sheep farming through leasing the land and stock on an 8,000 stock unit station hundreds of miles away from his home. He feels he has a business model that can yield 100% return on his capital and 7% from all farm assets (average sheep farmers may be struggling to get near 3% here). All he has to find is the working capital for inputs, wages and the rent for the land and stock (around $120,000)

In the absence of a clearly defined vehicle for progression - akin to share milking in dairying - Alastair has built his own in the sheep industry. He has accepted that most current farmers have increased their equity though their “land owning” - rather than their “farming” - business. In other words, most of the equity has been gained from the increase in land price rather than production profits. This is a really important point - I feel currently the only feasible option in the UK for those with minimum capital is to farm your way to a sustainable business. Buying land at current prices, well in excess of its productive value looks crazy ... and my bank manager would agree wholeheartedly.

He repeated Ben Allomes assertion - you have to be in the top 5% of operators to make a successful business from production alone. He called it “Operational Excellence”. You have to think outside the box and innovate. How does he achieve operational excellence? Simple systems was the top of the list - he only has two stock classes: sheep and cattle. With ewe hoggets, different breeds with different breeding strategies, all types of cattle youngstock; some equivalent farms might have 30 stock classes. The right genetics. Feed your sheep correctly - that meant rotational grazing of 1200 ewe mobs in 6-7Ha paddocks on the basis of detailed feed budgeting (a huge amount more dry matter can be grown this way). Forward planning. Excellent staff. In truth he felt it was 100 small things in addition to these but that was my hour up and I would have to wait to find out all the answers to Operational Excellence.

I waved goodbye with one hand whilst wiping the latte froth from my nose with the other.

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