Business Resilience and Drought

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Rural operations are a function of how well we manage four key components: our people, our land, our production and our business. Resilience is defined as, “the capacity to recover quickly from difficulties; toughness“. Therefore, for a rural operation to be ‘resilient’ following drought conditions, consideration must be given to all four of these key components.

As part of the drought management training in the GrazingforProfit™ School we talk about the three phases of drought management. Preparing before a drought, managing during a drought and then recovering after a drought. There are two key messages here: accepting drought is normal and that we survive droughts by what we do in good and bad seasons.

1.   Acceptance that drought is normal. Unfortunately many businesses are not designed to be profitable during a drought. If you find yourselves saying ‘if we could only get a few average seasons to get back on top, we’ll be okay’ then maybe we need to look at how your business is designed? The fact is we don’t get many ‘average’ seasons! We do get a lot of dry years and wet years and then every now and then we’ll get the magical ‘average’ year.

2.   Professional drought management is a result of careful people, land, production and business management during all seasons. A few key points are mentioned below, I recommend your own drought policy is more comprehensive.


RCS three stages of drought

RCS’ three stages of drought

Managing before a drought

Good seasons are a time to prepare ourselves. Build ecological capital into your land through a good combination of grazing and the correct recovery periods between grazes. Where economical, develop your water and fencing infrastructure for good water supplies and optimal land management. Match stocking rate to carrying capacity. Whilst feed is more plentiful, use this time to learn and refine your feed budgeting skills. A common mistake is to understock in good seasons. I’d consider the gross margins on all options to increase profit during this period to build financial reserves for poorer times. Get to know your business, its key profit drivers, its strengths and weaknesses. Make sure you are competent in cashflow management and economic analysis. Finally, can your production system survive during a drought? Are the enterprises suited to the landscape? Do you have animals that you are prepared to sell when the tap starts to turn off (a destocking policy)? Preparing, upskilling and educating the people is the key to achieving all this.

Managing during a drought

Now is the time to implement the skills you’ve learnt and refined. Feed budget carefully and assess which animals you are going to ration that feed to. Match stocking rate to the lower carrying capacity by implementing the destocking policy. Lengthen rest periods to reflect slower plant growth rates and reduce the number of mobs. This will reduce workload and allow for country to still rest. Redo your cashflows accordingly. If you’ve destocked early based on your feed budget, you should receive pretty good prices and so you’ll actually be cashed up. Carefully consider what to do with this cash. Communicate to the people and stakeholders what your plan is. Continue to educate yourselves and mix with networks that lift you up. Seek assistance if you’re struggling and please don’t avoid any issues at hand. Look for the opportunities that exist.

Recovering after a drought

Similar to the previous two stages, match stocking rate to carrying capacity carefully (don’t jump the gun). Be very careful in this stage managing cashflow as it could very tight and keep analysing the options you have. Keep an eye on the people around you to check they are okay if the drought has been tough. Be careful trying to breed your way out a drought – the next one could be here before you’ve built numbers back to where you want. Take a moment to reflect and learn from the drought. Were there any deficiencies in the water system or other infrastructure? Basically, what will you different in the next one?

Managing long droughts can be really difficult and often requires some really tough decisions to be made.  Luckily agriculture is full of tough operators.  Please make sure you get some assistance and input to help you out in becoming more resilient, you don’t have to do it alone.

Article by

David McLean
General Manager
Resource Consulting Services

David Small Square

and

Claire Mactaggart