Farm ownership – a dream or a reality?
By Michael Booth – DairyNZ Consulting Officer
29 June 2018
Is farm ownership still achievable?
It’s a common question, particularly among those at my age and stage.
We all know that land values have accelerated disproportionately faster than wages and profit growth, so there’s no doubt farm ownership is now harder than ever.
Prior to attending a DairyNZ Mark and Measure course, I would have said it was just a dream for many, but my opinion has since changed.
The three-day course is designed to help farmers understand their personal priorities and how their farming business can help them get the future they want.
The course covered everything from understanding key business principles to developing strategic plans.
A common theme which came up was the idea of ‘financial freedom’ – the ability to buy that farm, build a new house or go on that overseas trip. We all want it, but how do we achieve it?
DairyNZ project manager Paul Bird breaks it down into six simple components:
1. Understanding yourself – are you naturally a saver or spender?
2. Generate money
3. Educate yourself
4. Invest wisely
5. Compounding – earning interest on interest
6. Managing risk
The component around compounding is of most interest to me.
Taranaki farmer Donald Anderson understands this concept well.
Donald owns multiple farms in the region and has been able to achieve this by focusing on making little changes that deliver big results.
He has outstanding reproductive performance, rearing 15 percent heifer replacements compared with the average 25 percent. This also sees him save costs on animal health. He estimates this saves them $50,000 each year.
I was blown away that through this he was able to buy a farm.
But when you crunch the numbers it makes sense.
Saving $50,000 every year and investing that money wisely at a 15 percent return (achievable with sensible borrowing) will generate just shy of $1.7m after 12 years – enough for a deposit on a small farm.
To me Donald is proof and inspiration that farm ownership is still possible.
For those of you managing multi-million dollar businesses, making little changes to improve in-calf rates, or to increase pasture growth could be the difference between owning that farm or not.
Not sure where to start?
Talk to your local consulting officer to see what little changes you can make to achieve your financial freedom, or visit dairynz.co.nz/business for more information.
• Michael Booth is a DairyNZ consulting officer in Otorohanga/King Country
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