Making more profit in the pastoral zone

Livestock producers were given insightful and frank advice when it comes to running a sustainable livestock business in the pastoral zone at a webinar this week.

Delivered to launch the Pastoral Profit program, these messages came from agricultural business consultant Dr Phil Holmes who recommended producers maintain a ‘safe’ level of 85% equity in the long-term, starting succession planning early, a husband and wife team should be paying themselves at least $140,000/year and all current operating and capital expenses should be generated from working capital.

Phil was accompanied on the webinar by pastoral livestock producer Andrew Miller who shared his experience in creating a long term productive livestock enterprise.

The Pastoral Profit program, a joint initiative of Meat & Livestock Australia (MLA) and Australian Wool Innovation (AWI) is designed to provide pastoral producers with leading industry information, resources and technical experts to build upon their business skills.  It will be delivered through regionally customised professional development activities both face-to-face and online.

Phil's recommendations during the webinar were:

Business management is crucial: Too often business management was overlooked within pastoral operations as the day-to-day running of a property consumed time and resources.

“A lot of people think if they can get it right in the paddock then the rest will work out, but in my experience this is not the case," he said.

“There are pastoral businesses which have survived this way for up to 60 years, however over the long term equity is slipping away, external incomes become a necessity, quality of lifestyle suffers and the business becomes unsustainable.”

Focus on productivity: Phil challenged the long-held premise that high production input costs were the primary contributing factor to poor profitability.

“If you look at the data over the past 50 years, in today’s dollars there is no evidence to show farm operating costs have gone up faster than inflation,” he said.

“The focus has to be on productivity – making sure the land, labour force and livestock are as productive as possible."

A numbers and mind game: Producers could take a number of steps to increase their business’ viability and profits.

“The first and most important thing is attitudinal,” he said.

“If the attitude is correct producers will have a flying start.

“From there they need to invest in their financial literacy and have the raw numbers on their desk to know for sure if equity is too low and what they have to do to run things efficiently.”

More information

Watch a recording of the webinar

Phil will host a follow-up webinar on 14 July 2015, providing more detail on how producers can implement better business management for greater returns. Visit www.pastoralprofit.com.au to register later this month.

Contact a Regional Coordinator and find out about activities in your area at www.pastoralprofit.com.au

Pastoral Profit National Coordinator Pene Keynes T: 08 8841 4500 or E: pastoralprofit@ruraldirections.com