In 2011, the red meat industry discovered a startling statistic. High-performing sheep farmers earned more than twice as much for their meat per hectare of land as lower-performing ones, and produced more than double the amount of lamb per hectare.
The industry group took a hard look at the main problems impacting productivity and profitability with poorer-performing farmers, and they came up with five key areas:
• Inconsistent information flows to farmers (from banks, Government, processors, advisors, ITOs, etc);
• Poor information and technology uptake
• Lack of integration between farmers’ various management systems;
• Lack of measurement and benchmarking;
• Poor budgeting. The partnership estimated that only 5% of sheep and beef farmers
used an effective budget, and 65% didn’t budget at all.
The gap between the top 20% of farmers and the rest was compounded because 80% of farmers believed they were in the top 20%. Basically, most farmers didn’t even know that they could be doing much better.
At the end of 2014, ANZ’s AgriFocus team took a look at the issue, producing a report entitled ‘The secrets of top-performing red meat farmers’. Once again, the authors focused on the gap between the top 20% of farmers and the rest – and concluded the situation was getting worse, if anything.
“The gap ... has doubled over the last 20 years. There even looks to have been a further divergence in performance within the top 20% in recent years, driven by high performers continuing to push the boundaries beyond what was thought feasible just a few years ago.”
But the overall message was positive: that the achievements of the best farmers showed a huge potential for the rest. “From an industry-wide perspective the potential to increase on-farm performance is immense,” the report found.
“Even using conservative estimates of how far the performance curve can be moved yields a large industry benefit ... if 30% of farmers in the bottom 80% achieved the same performance as the top 20% this would generate $640 million (+23%) of additional EBITR [earnings before interest, tax and rent] each year (based on the 2011/12 season).”
While bigger farms did have some advantage over smaller ones, the report found farm management practices – such as weight gain generated, cost of feed utilised, trading margins created and the timing of buy/sell decisions – were “equal, if not more important, determinants of profitability”.
Julia Jones, a specialist with KPMG’s Farm Enterprise team, gets up close and personal with farmers every week. She says too many are running their businesses the same way they did 20 years ago, and that needs to change.
Ground-breaking smart technology is already out there, she says, and as rural broadband speeds and connections improve, so farmers will increasingly be able to use them to boost productivity on their farms.
The technologies fall broadly into two categories: business management (banking, budgeting, financial performance monitoring etc); and farming systems (clever stuff to improve productivity and cut costs out in the field) – though there is quite a bit of overlap. And there are plenty of New Zealand companies with products available.
At the business management end of the scale there are products like cloud accounting software Xero and farm management app Figured, which help farmers to do their finances and budgeting, and share their numbers with their banker, accountant or consultant. ASB Bank recently bought 500 Figured licences for its farming clients.
Then there’s Blerter, a real-time health and safety app, which enables farmers to instantly report incidents, observations, and near misses, including when they are out in the back blocks, via smart phone, tablet or wearable device.
Meanwhile, the growth of electronic monitoring and cloud-connected weighing and metering systems (Gallaghers and TruTest are just two of our top agri firms involved in this area) has opened up the market for systems to make sense of all the data that’s now available. Farm IQ has developed farm management software for sheep and beef farmers, allowing them to use electronic ear tags (which uniquely identify each animal) to monitor their stock right through life – and death. For example, a farmers could record data on an animal’s genetics, and combine it with other information, including how much it weighs at different stages of its life, what it’s been fed, and what health treatments it’s had. Then, once it’s gone to the meat works, farmers could add processing and meat inspection data. Put the whole lot together and farmers are able to see, for example, which animals are the most productive. They are also able to share information with other people – bankers, advisors, even vets. And that makes it easier to make good business decisions, says FarmIQ CEO Collier Isaacs.
Take Rob Lawson, who farms sheep at Moana, just north of Dunedin, and uses FarmIQ to monitor the performance of lambs so they can be sold at an optimum time and weight. Lawson tags all his lambs at docking or weaning and then follows them through against performance target weights. For example, he tries to get his “replacement lambs” (the ones he keeps to breed from) to 55kg by the time they are 18 months old. If a lamb is underweight Lawson can decide to give them additional feed, send them off for grazing elsewhere, or sell them.
“You are looking to drill down to a greater level of detail than you can see with the naked eye, and then make decisions using that information. For example, we worked out that we should wean our lambs earlier on our hill lands, because we noticed from the data that in the latter part of their growth prior to weaning, the lambs weren’t getting heavier, and they were just bringing the ewes down. So now we wean them at 90 days, rather than 120.
“We also realised that the strongest part of the operation was our low country early growth rate. Lambs in our low country paddocks were growing faster than we realised, so were ready to be sold earlier than expected. Five years ago we thought getting 1000 lambs away by Christmas was good, but now we are sending 2500 away. This means better cash flow earlier in the season, and keeping the ewes in better condition. And when it’s really dry, getting lambs off early leaves more feed for the ewes going into autumn.”
Lawson says better information allows him to make better decisions, which leads to heavier lambs and increased profitability.
“Without doubt, the most important tool
on a farm is a computer, as long as you’ve got decent broadband.”
KPMG’s Julia Jones says cloud-based farm management systems won’t just help with productivity, but will facilitate individual traceability right across New Zealand’s agricultural sector. In the same way that someone who buys merino leggings from Icebreaker can scan the barcode to find out which farm the wool came from, so in the future if a shopper in a German supermarket wanted to know where her steak was born, she should be able to pinpoint the cow to an individual New Zealand farm and field – and get the environmental and ethical data.
The other side of the field now known as “precision agriculture” is the sexy stuff going on out in the field. Drones, driverless tractors, soil monitoring, and imaging are transforming the way farmers manage their land.
Two years ago, a UK consultant, Ian Beecher-Jones, estimated 60% of Britain’s farmland was being managed by precision farming methods, including sensor systems, cameras, drones, microphones, virtual field maps, analytics and GPS-guided tractors.
The 60% figure might seem high, but Ian Proudfoot, global head of agribusiness for KPMG, says it likely reflects the high number of farmers (in New Zealand as well as the UK), who have adopted one or more pieces of technology that fit within the suite of precision farming. “Comprehensive adoption is probably less than 10%, but it would not surprise me if
New Zealand farmers’ adoption of some form of these technologies was at a similar level or higher than the UK. Although very few farmers have widely integrated sensors, data analytics, drones and robotics into their farming systems, many have mapped their pastures, adopted GPS in their tractors or started using precision irrigation.”
While farmers don’t need broadband to use GPS mapping, many of the other innovations need good internet access to be useful.
Isaacs says at the moment reliability and access is more important than high speed.
“I’d rather we had lower speeds in more places and absolute reliability, so when you went to use it, it works, even when it’s raining or blowing.”
FarmIQ product development manager John Dyckhoff says it’s frustrating for farmers who might have broadband in the farm office, but not out where the decisions need to be made. “For example, you might be running animals through a weigh scales in the woolshed and you want to get a comparison of what they weighed last time, so you can make an informed decision about whether you need to feed an animal differently, send it to the works etc. You want to be able to see the information in real time, rather than just relying on gut feeling.”
He says farming is increasingly complex, and the more information available, the more productive a farm can be. “Farmers have to have a degree of knowledge in a multitude of areas. They have to be accountants, agronomists, animal health experts. They think they are doing a reasonable job – and probably they are. But they could be doing a much better one. Technology can help, but so far we are only scratching the surface with what it can do. Because in the past they haven’t had broadband connectivity, many farmers haven’t looked to exploit the systems or tools which can help.”
And that’s not just damaging individual farmers’ profits, but it has a big impact on
New Zealand’s competitiveness, KPMG’s
Ian Proudfoot says.
“We are competing with countries like Ireland where the agricultural sector has taken a real step forward in terms of auditing and data collection. We need to have that data so we can better manage everything from production to the environment, from animal health to waterways. And we need to maintain our premium position in the future, with data available not just to the farmer, but to the consumer, who will want to know that the producer has done the right thing.”
Without doubt, the most important tool on a farm is a computer, as long as you’ve got decent broadband.