Almost every business experiences financial difficulties from time to time. Farming operations, however, face greater risks than many other businesses, which makes it even more important for farmers to stay on top of their game.
Theo Rabe, CEO of agribusiness NWK, explains that farming returns are significantly lower than for most other businesses, averaging between 5% and 7% depending on the commodity. To make matters worse, farmers are price-takers, with little or no influence over the market. So a poor yield is not necessarily compensated for by a better price.In addition to this, farmers have to cope with changing climatic conditions, and recent times have seen more droughts, changes in rainfall patterns and extreme weather phenomena.
To shield their businesses against these challenges, farmers should, first of all, be aware of their financial situation. According to Rabe, many do not have a clear idea of their income and expenditure.
DO A FINANCIAL ANALYSIS
A financial analysis will not only allow a farmer to evaluate the current state of the operation, but help him or her to predict future performance and make informed decisions by identifying wastage and areas where operations can be improved.
Nevertheless, predicting future performance is easier said than done, as many variables are at play. Ernst Janovsky, former head of Absa’s Agribusiness Centre of Excellence, advises farmers to base these predictions on longterm historic performance and to take into account long-term climatic and macro-economic trends, such as exchange rates and economic growth.
During the good years, a farmer should avoid overstocking or buying things that don’t add value to the business. It’s also crucial to save up for the tough times by building a feed bank, for example, or paying off debt in a ‘flexi reserve’ account.
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Syngenta Seedcare celebrates a decade of innovation
Syngenta's ambition is to enable their customers' investments to grow in healthy soil from treated seeds to young plants through innovation and collaboration, writes Magda du Toit.
Agri workers shine at Western Cape awards
Lindie-Alet van Staden, a garden and olive orchard manager at L’Ormarins Wine Estate in Franschhoek, was crowned as the Western Cape Prestige Agri-Worker of 2024 at a gala event recently held near Paarl.
Small and large farmers recognised at grain awards
The annual Grain SA/Syngenta awards ceremony bears testimony to the quality of farmers in the grain industry.
Growing partnerships: Fedgroup's flexible and innovative approach
Janine Ryan spoke to Warren Winchester, general manager of impact investing at Fedgroup, about why the company became involved in agriculture, and what it offers farmers and their immediate communities.
Why fish farms fail, and how to avoid becoming a statistic
The popularity of launching fish farms is not matched by their success. Leslie Ter Morshuizen, owner of Aquaculture Solutions, explores the factors that cause most of these businesses to go under.
Where history and modernity meet in a luxurious setting
Brian Berkman kept his eyes peeled for ghosts in the oldest continuously run hotel in South Africa, but all he found was a fabulous two-night stay.
THE HITCHING POST
I'm a stylish elderly lady with a radiant glow and a good sense of humour that keeps me young at heart.
Cutworms: check the weeds on your fields!
Zunel van Eeden explains why understanding the ecological interplay between cutworms and weeds is crucial for effective pest management. Producers should disrupt the life cycle of cutworms to minimise crop damage.
Does high-density grazing mimic grazing patterns of game?
In their paper on high-density grazing in Southern Africa, professors Angelinus Franke and Elmarie Kotzé from the Department of Soil, Crop and Climate Sciences at the University of the Free State say high-density grazing systems may not accurately reflect natural ecosystems. Roelof Bezuidenhout reports.
Global grain outlook: 2024/25 marketing season
In its latest summer crops report, the Crop Estimates Committee says South African farmers intend to plant 4,47 million hectares of summer grains and oilseeds in the 2024/25 season, up 1% from the previous season. As South Africa exports maize and soya bean, Annelie Coleman reports on the latest trends in the international grain and oilseed markets, amid fluctuations in weather conditions and ongoing armed conflicts.
