‘Managing risk can have a big impact on farm businesses’
Financial planning and measurement is key to the development of a resilient farming operation, according to AIB’s Tadhg Buckley.
The Senior Agri Advisor with AIB said that there are risks in farming, but management of these risks are key to developing a sustainable farming business.
Speaking at Wednesday’s Positive Farmers Conference, Buckley said there are two categories of risk, one being unavoidable and the other being manageable.
“If you are a dairy farmer in Ireland you have weather, disease, operational and compliance risks – all of these are unavoidable.”
However, there are a number of manageable risks, he said, and these include liquidity, markets, volatility and people.
“You dictate, at least to some extent, the level of risk you take and these decisions will have a big impact on your business,” he said.
Making better business decisions will drive your business, he said, and these decisions need to be goal orientated in terms of driving the farm business forward.
Buckley also discussed the difference in the returns generated between the top 20% and bottom 20% of Irish dairy farms in 2015.
Despite having similar sized operations, the top performers achieved four times the return on 66% of the cost base of the bottom performers.
Buckley also advised the farmers in attendance to make financial planning as simple as possible as he said many are guilty of over-complicating the process.
Farmers should also use the past performance of their business as a guide to the future performance that can be achieved, he said.
The importance of managing work load and stress
Another key area Buckley spoke about was workload and stress.
When a farmer works more than 55 hours per week, he said, their productivity falls of a cliff, this further deteriorates when the work load passes 70 hours per week.
He added that farmers should aim to become more efficient and the most efficient operators tend to have simpler systems.