Large farm businesses aim to work smarter not harder: Mike Brady
12 June 2018 - Motivation is one of the most important attributes of successful farmers. Having the courage and conviction to manage and grow a business in the face of challenges such as bad weather, volatile market prices and an increasing burden of bureaucracy speaks volumes about the resilience of Irish farmers. Ireland has an image of small fragmented family farms. The average farm size has now increased to 80 acres (32.4 hectares) and there are an increasing number of large-scale farms in Ireland. Dairy farmers with over 1,000 cows, tillage farmers growing over 3,000 acres of crops, pig farmers with 2,000 sows in fully integrated units, beef farmers finishing thousands of cattle and poultry farmers with tens of thousands of birds are an integral part of our industry. What are the criteria that help these farmers achieve such scale?
Firstly, to achieve scale in Ireland you need to be technically efficient. This means adopting the very best science and research to ensure the system of production is efficient and ultimately more profitable than your neighbour. Whether it is tonnes of grass utilised per hectare in cattle systems, tonnes of grain per hectare in arable systems, number of pigs per sow in pig units or feed conversion efficiency in poultry units, hitting the target numbers is the first hurdle to climb.
Large-scale farmers know how to manage banks and borrow money. The key to expanding any business is using other people's money to make you more profit. Banks have three criteria for lending money, commonly called the 3 Cs:
Capacity: Repayment capacity for bank loans.
Collateral: Security for bank debt.
Character: The history and track record of the borrower.
Meeting the 3Cs is critical to acquiring the finance to drive the ambitious scale plans for these farm businesses. These farmers also have tax-efficient trading structures, whether it's a partnership, a limited company or group structure, minimising tax is key to ensuring more cash is available for expansion.
Maximise premia, schemes and grants
Basic Payment scheme entitlements, agri-environment schemes such as GLAS and grant schemes such as TAMS are just as important to the success of these businesses as the average farmer.
I often find such farms are better at compliance as they expect to be inspected whereas the average farmer is tempted to take a chance and resents the dreaded cross-compliance inspection.
Personality and people skills
Scaling up in Ireland involves dealing with other farmers and staff. Livestock and arable farmers must rent land from other farmers, pig and poultry farmers must find land for spreading of manure, and so people skills are critical. The criteria for success are; paying a fair rent, paying on time, taking good care of the land, improving the holding by hedgerow trimming, erecting new fencing, pillars, gates, etc and addressing the landowner's concerns, however trivial.
The best tenants don't pay the highest rents - they take care of the landowner and his/her holding.
Good people skills are also essential in hiring, managing and motivating staff; large farm businesses require good staff but even better staff management. Assuming a farmer is good on all four of the above skill areas, what motivates these farmers to achieve such scale against all the odds?
The most common motivation is to provide enough land or stock for sons or daughters to farm in the business.
The average farmer in reality can only have one successor, but it is a major achievement if a farm business is successfully grown to provide a good standard of living for two, three, four or five sons or daughters.
Pride in being the largest farmer in the parish, county or the country is also a motivating factor.
This motivation works well when the basic technical, financial and human skills are good but if they are poor it can be a recipe for a disaster.
Increasing net worth is an obvious motivating factor, yet most farmers would struggle to tell you how much they are worth. It is more traditionally expressed as how many acres you own or farm or how many livestock you have.
Today's new breed of farmers have a new motivation not seen in the older generation, the aim to be a 'gentleman farmer'. The traditional image of a gentleman farmer was that he wore a shirt, tie, jumper and jacket, supported a walking stick and did absolutely no physical work.
The work was done by hired labour and the gentleman farmer's job was to manage the labour.
It is said that the sign of any good business is that you can leave it for a full 12 months and when you return it is as good or better than when you left it. Not many of the traditional large farm businesses in this country would pass this test, but perhaps it is what they should strive for.
The graveyards are full of farmers who worked themselves into an early grave. Our large farm businesses should be embraced and encouraged - they are still small by international standards, but they must learn how to work smarter not harder.
Mike Brady is managing director at Brady Group agricultural consultants & land agents, email: email@example.com