Grains Research and Development

Date: 02.11.2015

Flexible thinking allows expansion in drought

Author: ORM Communications

Image of sheep in a paddock

Brent and Simone Alexander opted to retain their sheep enterprise, including for its benefits in controlling weeds across their cropping program when they expanded the family farm at Lockhart, New South Wales.

PHOTO: Paul Jones

Making hay while the sun shone too much helped Brent and Simone Alexander emerge from the 2006–09 drought with their farm expansion strategy intact.

Their participation in a Farm Management 500 (FM500) benchmarking group around Lockhart in the New South Wales Riverina in the early 2000s validated their commitment to expand their farm business, Annesley Pastoral.

“We realised our financing costs were much lower than most in the FM500 discussion group and that we could afford to take on more borrowings,” Brent says.

“We were doing well with a 60:40 crop/sheep enterprise mix,” Simone recalls. “Except we could see we needed to leverage our land more.”

“This encouraged us to look for opportunities,” says 2005 Nuffield Scholar Brent who, like others around Lockhart, assumed a drought year would be followed by a decent season.

To get the scale they wanted they obtained land some kilometres away at Yerong Creek, and initially leased it for a flat rate. However, Brent calculated that a flat-rate lease put too much risk on the side of the lessee. So he worked out a lease formula that factored in yield and price to balance the risks.

While they lost out on several leases with the risk-sharing formula during those drought years, it is now working for both them and the lessors.

“I thought maybe total cropping was the way to go towards the end of the drought. A lot of it was to do with the workload with sheep, and I suppose the other side was looking at topsoil blowing all around the district while trying to find water for stock,” Brent says.

As rains returned, the Alexanders wanted to crop as much land as possible. Analysis showed that there was more immediate money in wheat and canola and it was easier than sheep. That also created an opportunity to liquidate the capital invested in livestock to raise money to redirect into other parts of the enterprise.

“We had a nice even line of sheep,” Simone says. “They sold for a good price.”

Brent had always enjoyed breeding sheep and kept their options open by retaining 500 lambs from the 2009 Merino drop.

“We also started cutting crops for hay in the drought. We really didn’t do it much before then,” says Simone, who adapted her grain marketing skills to hay. 

“It kept us going really. During the drought it was a survival mechanism, and now it’s an important weed-control tool.”

However, the would-be 100 per cent cropping operation did not eventuate because it soon emerged that apart from physical constraints, such as waterlogged and heavily treed areas, weeds loomed as a major problem.

Brent worked out that a cropping sequence that included cereals and pulses with brown manure and hay was needed as part of an integrated weed management strategy. Within this, decades with sheep and the new-found proficiency with hay would combine well for not only improved gross margins but also in the war against annual ryegrass.

Liming the soil enabled barley to be brought into the equation in 2010, allowing the Alexanders to spread the harvest window to better accommodate labour and machinery.

At the same time, the couple started using brown manuring and had another go at growing faba beans.

Simone explains that faba beans have cash flow and weed-control benefits: “They allow us to rotate herbicide groups and also produce good nitrogen for the following couple of years.

“Brent worked out how to grow them, and I’ve found a good market so we sell them profitably,” Simone says.

In addition to forward contracting, the Alexanders have added 1500 tonnes of upright storage that allows them to store grain and avoid the negative pressure on prices at harvest.

At a recent GRDC Farm Business Update in Wagga Wagga, NSW, Brent says livestock made manure crops profitable and provided some non-herbicide weed strategies.

“That 2009 Merino drop has paid handsome dividends allowing us to build our sheep numbers up again and capitalise on the opportunities presented with a mixed-farming operation,” Brent says. “The sheep fatten nicely on the early-sown wheat, stubble or [brown] manure crops.”

As Table 1 shows, recent farm performance data from the south-west NSW slopes emphasise the role that livestock enterprises play in overall farm profitability in the region.

Managing director of 3D-Ag Peter McInerney, who helps Brent and Simone challenge their strategic thinking by ongoing review of the business’s physical and financial performance, says the reason they are in a good position is their flexibility and accountability: “With faba beans, for example, they have the attitude and farming skills to make things work. They are not blinkered.

“If things don’t work out, they don’t say ‘bad luck, try again.’ They say ‘where can we improve? Was it us? Or was it the season?’

“They are constantly reviewing themselves and their system so they can improve,” Mr McInerney says.

For the time being the crop/sheep enterprise mix has settled on 85:15.

In the end, Brent believes it comes down to sustainability, which means being able to keep going and that their farm will still be there in a hundred years’ time. “That is what sustainable means to us – to have longevity, not a short-term thing.”

Table 1: Crop and livestock income, variable costs and gross margin per hectare, 2009–13.

Benchmark Top 20 per cent by
return on equity (ROE)
Average of dataset
Minimum
Maximum
Crop income/hectare
$1081 $922
$679
$1432
Crop variable cost/hectare
$483 $502 $244 $667
Cropping gross margin/hectare
$599 $419
$81 $821
Livestock income/hectare
$982 $621
$205 $1056
Livestock variable cost/hectare
$235 $175 $78 $376
Livestock gross margin/hectare
$745 $4441
$127 $810

1 For the average of the dataset, the crop gross margin is $419/ha and the livestock gross margin is $444/ha. Livestock would have access to crop stubbles in summer and potentially graze on grain crops in early winter. Given this, the strong livestock gross margins could not be achieved without the cropping enterprise.

SOURCE: ‘The integration of technical data and profit drivers for more informed decisions’,
GRDC Research Code RDP00013

More information:

Brent and Simone Alexander,
0427 206 215,

annesley1@bigpond.com;

Catherine James, ORM,
catherine.james@orm.com.au

Next:

Wheat breeding takes flight

Previous:

Dry spring curbs hopes for a big year

GRDC Project Code NUF00010, RDP00013, ORM00015

Region South