There are two pertinent factors I want to see change in how we run agribusinesses. The first, talked about in my last article, is that we should focus on profit, not just production. The second one is to stop riding the bloody unicorn!
Firstly, to the best of my knowledge, unicorns are a fictitious beast. We can’t go to a sale and buy a living unicorn and ride it home right?
Good, now that we’ve cleared that up, let’s change topics to rainfall. If you look at any rainfall patterns anywhere around Australia you’ll find a graph that looks something like this.
It will look like this because it will have years of high rainfall and years of low rainfall. It will have consecutive years of higher rainfall and consecutive years of lower rainfall. It will have variability and inconsistency. This means extreme difficulty in forecasting. This graph is showing the amount of rain received in a twelve-month period, at the end of each month (i.e. rolling 12 month rainfall). This gives us a real reflection of what the rainfall has actually been like for the past year through out the year. Not just at the end of December as measured with calendar year rainfall.
On the graph you’ll see that beautiful flat line called ‘average’ rainfall. You’ll notice that the actual rain received (blue line) never follows the average line (red line) for long. A few little periods where it tracked around it for a few months is about all. The rest of the time, the actual rainfall line is going straight through the average line as you receive either higher or lower amounts of rain.
I’m pretty confident all readers can relate to this trend. However, I’m also confident that you would have heard your neighbours say “If only we could get a few average years, we’ll get back on track”. Or “Once we get back to normal seasons things will be ok”.
Anyone who works with me will have heard me say that ‘average rainfall is a unicorn’. It simply doesn’t exist. Unfortunately these comments that refer to ‘normal years’ indicate that many businesses are designed to only be profitable in a average year. This a function of not accepting the reality, which is variable rainfall. Therefore these businesses are actually designed to fail because their base assumptions about what their operating conditions will look like, simply don’t exist! They are trying to ride a unicorn!
The alternative is to design or structure your business to be able to handle the true variation in rainfall received. Is this possible? Absolutely! I’ve lived in and worked with business on both sides. Let me assure you, the businesses who have a strategy in place to work with variable rainfalls are more profitable, with better land health and considerably less stress.
That doesn’t mean that our clients who have only had three good growing seasons out of the past 12 years are making huge profits. There is no silver bullet. What they have done is matched stocking rate to carrying capacity, accepted the reality of their actual rainfall, developed strategies (and income sources) to manage that reality, taken action to preserve the health of their people, land and finances and have not spent time waiting for ‘things to get back to normal’. They’ve managed what is normal, variable rainfall. They aren’t spending any time trying to ride a unicorn.
If you’re concerned about how your business is currently positioned and are stressed about how to profitably manage your way through current conditions, please contact our office and have an RCS advisor out to help you develop strategies to get control of the situation.
Post script: I may need to find a new analogy… Unicorn ride anyone?