Tough times for farmers: Know your numbers and plan ahead

Annie Cates is a farmer and the Agri Training Advisor at Farm Focus.

Sheep and beef farmers have heard plenty of cliches about the cyclical nature of the sector. While some farmers have been in the business long enough to have experienced first-hand how the market ebbs and flows over time, for many, including myself, this is the toughest spell we’ve encountered during our farming careers. It’s not easy out there right now.

The mammoth challenges facing our industry are being driven by a mix of economic storms that can make it particularly tough at times to envision a way through it. Not to mention the challenging physical season many have experienced nationwide. For us here in the Wairarapa region, we’ve had a particularly poor physical season which has also hit us hard. Combine these factors with high interest rates and increased costs across some areas, it’s not hard to see how these have all conspired to create an incredibly challenging period for the farming community. Indeed, farm business performance is dramatically down for most farmers across the country.

Every household mortgage holder in New Zealand will know the pain of those high interest rates, but this is accentuated even further for the sheep and beef farmers who often carry high levels of debt. I have great empathy for those in the rural community experiencing this during the current climate. Looking at the combined impact of reduced farmgate prices, which has had the greatest impact on farm profitability this year, alongside high interest rates and on-farm inflation, it’s little surprise that the average profit before tax on sheep and beef farms has steeply declined.

Speaking with other farmers who work with Farm Focus, I know many are making cuts where possible. As a whole, I think taking the time to analyse your business will put you in a strong position. Reflect on what has worked and what hasn’t, understand your current position, and make a robust plan moving forward. Be sure to share this plan with your bank and accountant so that they’re best placed to support you.

Using tools like Farm Focus makes looking back on your past performance and creating a realistic budget simple, as well as being able to easily share this with your wider team. If this is something you aren’t confident in, there is a lot of support available. Rural economists anticipate that the trajectory of interest rates will turn around as the OCR starts to come down in 2025 - but getting to that point will be an arduous task for farmers battling under the current conditions. However, it pays to remember that time spent in the office, or with the laptop by the fire, is time well spent. Having access to real-time information puts us in control allowing us to make opportune decisions. And as they say, you can’t manage what you can’t measure, so utilising the tools available to identify what levers you have and when you should pull them allows you to put a firm plan in place, action it; and, importantly, then to communicate that plan with your wider team.

Carefully managing your cash flow and forecasting where you will be ahead of time enables you to make good decisions. Communicating your requirements with the bank puts you in a strong position to make the most of opportunities as they arise, and sharing your plan with your accountant allows them to be efficient with your tax planning - not having this clarity means you may have to make last-minute decisions or miss opportunities. No one goes into farming because they love sitting in front of the computer, but farmers know their businesses better than anyone.

In these challenging times being a good farmer alone is tough. Putting a plan in place and having the support of your wider team to make the best of the situation will help put your knowledge and experience into action. This doesn’t have to be done alone, there are excellent tools and support available.