Eccles delivered the first in a nationwide Getting Your Plan Together dairy roadshow in Greytown, Wairarapa, with a heavy focus on scenario planning and budgeting basics.
The key was to get an accurate model of your current system, warts and all, which allows you to build a budget scenario around inputs and outputs.
Once you have a working budget you can adjust the model to reflect any new policies, like a change in feed or fertiliser policies.
“One little decision has lots of flow-on effects,” he said.
Eccles encouraged farmers to look at different options and record them. Once that was done, farmers could review the benefits and risks and balance those.
The next step was to implement or reject the change.
“Top operators often have several bright ideas before they latch on to “the” idea. Try out several different scenarios – there’s no one simple recipe for running a farm. Every farm is a bit different,” Eccles said.
“If I put something in, or take something away, what is the effect going to be?”
The process:
• Build a budget that represents last year. “You don’t need to go cold turkey and build from a blank piece of paper. Something concrete is a really good start.”
• Tweak last year’s budget to turn it into the status quo. For example, you might have had a drought, so bring things back in line with a normal season. Remove any revenue aberration or unusual expenses.
• Save a copy and use it as your baseline.
• Experiment with policy changes.
• Measure the net difference.
• When you have a budget you like, save a copy. Use a descriptive name, such as ‘low feed option’.
Validation is a crucial part of the process and by comparing data with last year’s figures, altering and readjusting them, you will be able to validate new policies.
“The key to a good budget is to keep it really simple. Validate every figure that has gone in, using last year’s data,” Eccles said.
Decide whether you think the figure is an accurate representation of your expectations. He suggested taking a realistic view of expected inputs and outputs.
“What is the realistic figure? Gut feeling is quite reliable. Work out the biggest figure and the lowest, and then decide where you want to sit on the continuum.”
In his video, dairy consultant Chris Lewis spoke about how he wanted to see the dairy industry not only survive the downturn, but to grow through it.
“We have to work with a lower milk payout. We need to change our farm systems to hold production. Simply cutting costs is not a solution.”
He cited three key ways to do so – being leaner and more efficient, using feed budgeting and system change.
He gave an example of a farmer buying-in three tonnes of supplementary feed.
“Increase the cropping area in your farm. Most farms in NZ have the ability to remove three tonnes of supplementary feed and replace it with home-grown feed.”
This would give farmers the combination of more pasture and higher-yielding crops.
Cashmanager RURAL is running a social media campaign called Right Decision and videos from experts, including Chris Lewis and Geordie McCallum, will be released over the next eight weeks.
They will give farmers practical advice about steps they can take to help manage through any season.
Farmers can sign up to receive videos as they are released at www.rightdecision.co.nz
