Bottom line boosted with less rather than more
Author: Michael Thomson | Date: 09 Feb 2016
Exhaustive and stringent business planning combined with continuous innovation has seen Brad and Kate Jones change their farm systems and processes to focus heavily on return on investment, resulting in potential savings in the millions.
This expected impressive achievement has been achieved after significant research trials and analyses beginning in 2008.
Their aim was to achieve sustainable margin growth through business scale, reduced fixed costs and achieving input efficiencies is being run on a five-year program, of which they are currently in year three.
“We were trying to gauge return on investment, looking at soil maps, yield data and input effectiveness,” Mr Jones said.
“I’ve done a discounted cash flow analyses for the five-year program and our expected bottom line at the end of the five years will be approximately $2.7 million better off.”
The business they were analysing is significant in scale; Mr Jones and Mrs Jones expanded the Bungulla farm from around 5000 hectares in 2007 to its current size of 11,000ha.
Located 200 kilometres east of Perth in the Western Australian wheat belt, they grow cereals for export, running a rotation of peas and canola with chemical fallow on a 60:40 split.
“One trial was a 600ha liquid fertiliser trial, and it returned an 11.3% better net return than granular fertiliser, so in 2013 we swung our entire program to 100% liquid fertiliser use,” he said.
The soil analyses data also showed that more strategic fertiliser use would be more efficient.
“Our data showed that potassium was probably a bigger profit driver than phosphorus and that the farm had good Colwell P levels as a base,” Mr Jones said.
“We decided on a plan of less costly inputs used more strategically, and because of concern around the scientific theory of extraction we have given ourselves five years to do it, hence the establishment of the five-year program,” he said.
“At the moment, from our analyses of 470 soil types on farm, we’re finding we’re not depleting our P levels yet. I’m not saying we’re not going to, but at this stage they’re steady.”
Another significant feature of the on farm system is the metric for success.
“We are measuring return on capital rather than tons per hectare, which allows us to better match our inputs, creating greater balance and reducing risk,” he said.
Mr Jones stresses that it’s not a low input program, but the reduction of costly inputs does significantly reduce his risk into the back-end of the season.
“Because yield is not our metric but return on capital, my bottom line is enhanced by saving on inputs. Our efficiency in using liquid fertiliser as opposed to granular system means we’re 17% faster than we were before, so that has an impact on labour costs and time.
“With our time management enhanced, we can capture better conditions while we have them and more quickly,” he said.
Despite the significant improvements and successes of the program, it hasn’t been implemented without potential risks
“When we went down this road we knew a real risk was that the quality of our grain was going to be lower, protein being the issue. Being in an export oriented market like we are protein is what we’re paid for, so our benchmark is based on protein.
“So, to mitigate that risk our silo complex has been built with the ability to blend as well as aggregate and during that process we’ve found we’re actually making a better return on our lower protein wheat by keeping it out of the export supply chain and putting it into the domestic feeder market,” he said.
“We test with the same protocol as the export supply chain. We have a recording system to record tonnage, temperature, moisture and protein and as it enters the silo it gives accumulated averages.
“We know any silo at any given time, how many tonnes are in it, and exactly what the quality specs of that particular silo are. So from that we can blend back out if we need to.”
Mr Jones said the silos, with total capacity of 6500 tonnes, are a central part of the farm because it gives them the ability to control everything that leaves the farm.
“As opposed to taking it to a receival site and accept grade upon arrival there, we don’t ever put ourselves in that position.”
Despite the processes and systems orientated nature of his business, Mr Jones feels the key strength is his workforce of five full-time employees.
“We have long-term, loyal staff with whom we share decisions to keep them fully engaged. We respect their decisions and we empower them to make decisions, and that takes a lot of pressure off me as we all can change positions if we have to.
“This is a large part of our success. Knowing what our objective was at the start, and the whole team knowing what our objective is.
“On farm we have a real culture of continuous improvement so we all strive to get that extra one per cent. We ensure we have lots of background from trials, which we are constantly assessing so we can have the confidence to try without risking the whole system.
“That’s the message I give to other growers if they are looking at our system is just try a bit, do your own on farm trials, see how it fits into your system but make sure you know what you’re objective is at the start.
“Don’t start with the process, start with the objective and build the process from there,” he concluded.
ContactMichael Thomson, Cox Inall Communications
07 4927 0805
0408 819 666