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Five big questions - Chris Sounness

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Five big questions - Chris Sounness

  1. 1. Five Big Questions Chris Sounness DPI Farm Services Victoria Thanks to Graeme Anderson, Danielle Park, Lucy Stott and Carl Sudholz
  2. 2. Thought exercise <ul><li>Woke up Jan 1 2000 </li></ul><ul><li>Head thumping (Millennium party) no memory of last 10 years – However everyone has travelled back in time. </li></ul><ul><li>Noone has knowledge of commodity prices, land prices etc. lotto numbers </li></ul><ul><li>BUT, Back pocket has every bit of climate info that anyone could want until 31 December 2009 </li></ul><ul><li>How many farmers would make changes? </li></ul>
  3. 3. Change <ul><li>I have been presenting climate risk information to farmers for a number of years as part of the DPI climate extension program </li></ul><ul><li>Questions this work has raised includes </li></ul><ul><ul><li>what are the key pieces of information that is going to allow the farmer to run a more profitable business </li></ul></ul><ul><ul><li>In the scheme things how important is the climate information </li></ul></ul><ul><ul><li>Particularly in the context that that broadacre farmers are constantly changing to stay in the game </li></ul></ul>
  4. 4. Types of Changes <ul><li>Incremental change – Encouraging the farmer to keep on doing what they do but do it better. Nearly all research is focussed on this. </li></ul><ul><li>Strong service sector supporting it </li></ul><ul><li>We also nearly always frame our discussion about farmers in this context. Ie how can farmers keep on doing what they do. </li></ul><ul><li>Transformational change is far harder to do – is often thought of as failure by the person undertaking it and has far less support at the proactive end of the spectrum. Once people are forced to do it there is a fair bit of support. </li></ul>
  5. 5. The farmers challenge – export priced produced base year: 1977-78 = 100
  6. 6. Farm establishments by $ scale Victoria 2006
  7. 7. Farm establishments, area and value by $ scale Victoria 2006
  8. 8. Family income broadacre farms from farm and non-farm sources $25k-$100k EVAO: 1990-2007 Source: ABARE ٥ Unlikely to be generating sufficient income to invest, build risk reserves or support family without off-farm income. ٥ Family income sustained by off-farm income.
  9. 9. Family income broadacre farms from farm and non-farm sources $100k-$200k EVAO: 1990-2007 Source: ABARE ٥ Farm income makes a significant contribution to family income. ٥ Non-farm income is a significant secondary income source.
  10. 10. Family income broadacre farms from farm and non-farm sources $200k-$400k EVAO: 1990-2007 Source: ABARE ٥ In ‘normal’ seasons these farms have generated a healthy farm family income with only limited supplementation from off-farm sources. ٥ The current run of dry seasons has cut severely into this income.
  11. 11. Family income broadacre farms from farm and non-farm sources $400k+ EVAO: 1990-2007 Source: ABARE ٥ Generate a volatile, but sustained high cash surplus. ٥ Impact of dry seasons is there, but less severe than in other segments. ٥ Suggests there is the capacity of many of these businesses to adapt to changing climate. ٥ Income is variable, but capacity exists to build resilience to cope with income variation.
  12. 12. Farming for some is very profitable with acceptable risk levels
  13. 13. Thinking about change <ul><li>Change options can be </li></ul><ul><ul><li>Easy </li></ul></ul><ul><ul><li>Difficult </li></ul></ul><ul><ul><li>Outright wicked </li></ul></ul><ul><li>When is the right time to tackle change question </li></ul>
  14. 14. The Golden Year <ul><li>“ I will make those changes when </li></ul><ul><li>we get a good year.” </li></ul><ul><li>When was the last one – that last golden year? </li></ul><ul><li>Was it you that experienced it? </li></ul><ul><li>Was it really that golden? </li></ul><ul><li>What major decisions did you make? </li></ul>
  15. 15. The Bad Year <ul><li>When the pressure is on, big decisions get made </li></ul><ul><li>Not really the best environment for these decisions </li></ul><ul><ul><li>Stress </li></ul></ul><ul><ul><li>Pressure </li></ul></ul><ul><ul><li>Tight timeframes </li></ul></ul><ul><ul><li>Lack of information </li></ul></ul><ul><li>Are these the best decisions in retrospect? </li></ul>
  16. 16. The 5 Big Questions <ul><li>Are you enjoying what you are doing? </li></ul><ul><li>Can you sustain the effort? </li></ul><ul><li>Is your family supporting what you are doing? </li></ul><ul><li>Are you living a lifestyle that you are happy with? </li></ul><ul><li>Have you enough to retire on? </li></ul>.
  17. 17. Doing something differently <ul><li>If it is no longer fun then how long can you continue? </li></ul><ul><li>Masochistic tendencies </li></ul><ul><li>Or do something differently </li></ul><ul><li>The options have always been the same when involved in farming </li></ul><ul><li>There are five options </li></ul><ul><ul><li>each one is an excellent choice </li></ul></ul><ul><ul><li>at least one will be right for you </li></ul></ul><ul><ul><li>Each option has easy options, more difficult and bloody tough </li></ul></ul><ul><li>But which ones are right for a particular business? </li></ul><ul><li>As appetite for risk is such an individual choice. </li></ul>
  18. 18. 5 Big Options <ul><li>Improve profitability </li></ul><ul><li>Change the business structure </li></ul><ul><li>Change enterprise </li></ul><ul><li>Change the capital base </li></ul><ul><li>Exit </li></ul><ul><li>All are excellent and viable options, but everyone’s situation is different. </li></ul>
  19. 19. 1. Improve profitability <ul><ul><li>Refine the management system/s </li></ul></ul><ul><ul><li>lower cost structures/increasing production </li></ul></ul><ul><ul><li>Adopt and adapt new technology </li></ul></ul>
  20. 20. 2. Change the business structure <ul><ul><li>Set up family trust </li></ul></ul><ul><ul><li>Buy out family partner </li></ul></ul><ul><ul><li>Create company </li></ul></ul>
  21. 21. 3. Change enterprise <ul><ul><li>Either change enterprise mix ie increase livestock decrease cropping </li></ul></ul><ul><ul><li>Start new enterprise to compliment existing enterprise ie feedlot </li></ul></ul><ul><ul><li>Exit current enterprise and start new business based on current land </li></ul></ul>
  22. 22. 4. Change the capital base <ul><ul><li>By more land in a current climatic region </li></ul></ul><ul><ul><li>Buy land in a new climatic region </li></ul></ul><ul><ul><li>Move to a new climatic region </li></ul></ul><ul><ul><li>Sell/lease a parcel of land to free labour </li></ul></ul><ul><ul><li>Off-farm income through labour </li></ul></ul>
  23. 23. 5. Exit <ul><ul><li>But maintain the land (Lease) </li></ul></ul><ul><ul><li>Leave the industry </li></ul></ul>
  24. 24. Another thought exercise! <ul><li>Why is the majority of our resources encouraging farmers to tackle incremental change </li></ul><ul><li>Are we sending many down a dead end path and worsening the situation by encouraging bravado </li></ul><ul><li>While climate information is never going to be a main driver of change we need to keep the context as it may be often blamed. </li></ul><ul><li>If context being successful broadacre farming is all about increase scale (buying out neighbours - keeping ahead of terms of trade) what is the role of the adaptation RDE community </li></ul><ul><li>A larger percentage of farmers are going to need assistance in identifying which incremental and or transformational options to explore and allowing them to do it on their terms. </li></ul>
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