By Dr. Anne-Marie Butler, agricultural manager at Ulster Bank
In his book ‘The 7 habits of Highly Effective People’¹, Stephen Covey discusses the seven identified habits to achieving private victories. Farmers and their farming systems can apply these habits when considering investment priorities for the future of their farm.
Often, when considering investment plans on a farm, priorities are not always listed and considered. This may lead to unnecessary or unproductive investments in the short-to-medium term, while other key investment needs are often overlooked.
The process for approaching farm investment decisions is no different. Irrespective of farm system, key on-farm efficiencies are needed by Irish farmers as they seek to compete successfully on the global stage.
Farmers must take a long-term view of agricultural investments; recognising the inherent volatility in farming and the efficiencies required to prosper. The increased volatility evident in the agricultural sector due to weather, price or unexpected individual on-farm challenges is a reality that each farm must manage.
Farmers must focus their investment priorities on improvements in on-farm efficiencies to survive and grow both across and within income cycles.
It is imperative that all farmers continue to develop a broad range of skills to navigate their business through all seas of calm and turbulence.
When approaching investments, farmers must begin with the end in mind, put first things first and ask themselves ‘will this investment improve my efficiency and profitability’?
Invested funds may come from both own savings/reserves or borrowed funds, with each carrying their respective costs.
Before any farm expansion is planned or new lands acquired, the existing farm must be operating at peak efficiency across all resources.
Teagasc 2016 eProfit Monitor Analysis² for spring milk dairy farms detailed the top farms generated a gross output of €4,402/ha compared to €3,371/ha on the average farms.
The higher output on the top farms reflected a combination of both higher stocking rate (14% higher) and higher output per cow (9% higher milk solids output per cow). These farms reported a net profit of €1,827/ha compared to €1,043/ha on the average spring milk dairy farm.
The overall resilience and sustainability of the dairy sector is dependent on increased productivity and the efficient conversion of grazed pasture to milk. This relies on financially sound and sensible on-farm investments, which directly generate profit-enhancing outputs in an environmentally sustainable way.
As we look forward to 2018, it is worth reflecting on the first three habits of highly effective people as detailed by Covey and their applicability to on farm investment decisions:
References
Financial gain from investment decisions