Wednesday, 14 July 2010

Let's have a heated debate .....

In a followers survey to the question “Am I mental?” with respect to keeping pigs (see ‘Generation Next’ post), the results were as follows: “Definitely”, 50%; “Not bothered, but definitely”, 50% (OK, OK there are still only two followers).

My Wiltshire Horn wingman Tim reckons pigs are the quick path to no life and bankruptcy and sheep rule OK. (To be fair he’s had experience of the pink things). Building lots of capital only to die is a flawed goal, he says. This reminds me of something else Lynton Arney (the nice man, with nice Border Leicesters) said to me: “If you die with more than a dollar in your pocket you’ve mismanaged your finances” - maybe you’ve mismanaged your life too.

Yet all the evidence suggests that for first generation farmers to make an adequate living and have a sustainable business structure you need to a) make good profits - so you can live this year; b) build equity - so you can live next year and c) generate cash so you can live today and are able to fulfill a) and b). New Entrants are challenged with low levels of capital, a business that is too small to be viable and difficulty in accessing land at sensible values. Logic would suggest that given this you need to increase capital to build the business to a viable level and make a more cash generating use of land (than maybe sheep can provide).

I read a statistic that 32% of the New Zealand dairy industry are from a non- farming background. Most of these will be share milkers - it is huge here. I am going to meet a first generation sheep farmer on Saturday - to my knowledge (admittedly poor) he is the only one in New Zealand, it certainly feels like it! The reason for this discrepancy: cash generation; profitability and thus an ability to build capital all on a relatively low acreage without having to rely on living to 135. Best story I heard was an Englishman who spent 10 years share milking until he owned 1000 cows - he then sold them at the top of the market for $3000 each (now worth $1200) = a cool $3 million. He might be able to finance a sheep farm with that!

Example figures of turnover and profitability (on the same theoretical hectare) were given to me by a very clever man, whose first love was sheep:

  1. Dairy: Turnover - $9,000/ha; Profit - $4,000/ha
  2. Crop: Turnover - $4,000/ha; Profit - $1,500/ha
  3. Sheep: Turnover - $1,500/ha; Profit - $ 600/ha

Pigs that make a good profit is not a “mental” enterprise; pigs that aren’t done right or are victim of macro-economics .... well I would definitely have to see Dr Bonkers then. Maybe Tim is right - they will ruin my life. Maybe there is another way ... but in the mean time I would urge people to have more sausages and eat bacon every day ..... just in case.

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