Planning through uncertainty

Dairy farmers have it all thrown at them; sector regulations, staffing woes, a changing climate, inflation and a fluctuating milk price, to mention only a few challenges. What makes a good strategy in highly uncertain environments? Effective and agile business planning is vital to any farm’s ongoing success. That planning should also factor in workforce needs, so our sector and its farmers recruit the right people from a variety of backgrounds – and make dairying attractive enough for them to want to stay.

It’s also important to have the right tools, information, and resources to help you plan and pivot (see list of tools/resources at the end of this article). Inside Dairy talked to farmers in Northland, Taranaki, and Southland to get their take on managing the known while factoring in the unexpected.

The Hendersons’ accountant Kylie Davidson and ex-banker Malcolm Scott now form a strategic team that help them put a realistic lens on the ‘good-to-haves’ and the ‘want-tohaves’, says Tracy.

Back in the North Island, Taranaki contract milkers James and Amy Padilla say business planning happens casually over mealtimes, or whenever they run a farm errand together.

“We talk about the farm, finances, our budget, production and how we can save more,” Amy says.

They also value their annual meeting with their accountant, Ken Vazey of Schurr and Ireland, saying it keeps them focused on reaching their goal of financial freedom easier and faster, with retirement an ever-present consideration.

Navigating the unknown

All three farm households say uncertainty is ever present.

Greg says a lack of clarity in the environmental space creates sector uncertainty.

“There’s conflicting science, and different interpretations by regional councils.”

Another challenge is that farming is moving into the administration space.

“Farmers are doers. There’s a cultural non-fit. It’s easier for big corporations, they simply recruit what they need. Smaller enterprises stretch themselves to develop admin skills, or pay consultants to do it,” he says.

To pull back situations beyond his control, like inflation or a milk price drop, Greg looks through them.

“We don’t change things year-on-year as a result of the milk price. We budget a couple of years out. Look through cycles, otherwise you’re in a boom bust mentality around costs. It’s not good for business or staff.”

Tracy and Steve take some of the unknowns out of an uncertain business environment by what they call ‘hedging’.

“We’ve hedged through milk futures for the last four years. We decided to hedge because we were growing and buying a farm and it was a risky time. Milk futures makes it easier for the bank to recognise that we can stick to our budget. It makes budgeting for the rest of the season simple,” Tracy says.

“Over the years that we’ve hedged, we’ve lost some and we’ve won some, but we’ve been able to meet commitments and not be at the mercy of the milk price.”

For the Padilla family, war, inflation, the milk price and weather all bring uncertainty.

James says to regain control they “tighten belts at the beginning of the season”.

“We try to budget for a lower milk payout. If we get more, then it’s surplus. We also limit the budget as much as we can, but still maintain farm productivity.”

Amy adds that 10 years ago, neither wet nor dry events were as extreme as they are now, so climate and weather extremes are a worry.

For this reason, James is selective about what farms they contract milk on, only selecting farms that are ‘flood safe’.

To add more certainty to weather events, the Padillas make sure their farm has enough drainage. They also ensure it has sufficient resources as a closed unit, so it’s ‘food secure’ in the event of weather extremes.

The right people, the right place

Amy Padilla says they’re working with a rural coach to help them sort their workforce planning, especially given additional requirements that crept up in recent times as a result of immigration policies.

For example, the couple needs to be accredited employers to recruit farm team members from overseas when they have gaps. And the pay threshold for international workers is now higher than what many locals are paid for entry level roles, says Amy.

Her advice for young staff in particular is that they have to be happy in the dairy sector, because dairy farming is not for the faint-hearted. “You have to be adaptable and teachable.”

James adds that it’s important to make friends among farmers, neighbours, contractors and tractor drivers. “They’re friends, not enemies, and they’ll help you in tough times.”

Meanwhile, Greg says to retain staff he tries to be an employer of choice.

“It isn’t just about money. Treat people as you want to be treated. Match people to roles. That matters a lot. Some people aren’t suitable for some things,” he says.

“We have some rules. We don’t like staff on the farm after 5pm in the afternoon, for example, because most of them have kids and wives or partners. And they want a life,” Greg says.

Steve and Tracy Henderson’s message to staff is that reputation is key.

“You’re always working for a reference or next opportunity, not a wage. The minute you get into your wage mindset, you don’t think about progression,” they say.

The Hendersons take on more people than they need. All of them work the same hours, which means their team always has some flexibility in their day-to-day work patterns.

A team member who has a personal matter to attend to can also be away for a short stint when needed.

There’s no hierarchy in the team; and any team member can do any job, says Tracy.

Steve’s philosophy on managing uncertainty well summarises the attitudes of all three sets of farmers:

“Don’t get too hung up on what may or may not happen in ten years’ time. Be aware of what’s coming, but always look to your values: they will never change.”

This article was originally published in Inside Dairy February-March 2024.