Profit Drivers in Agriculture

Speaker 1 0:01

welcome back to head shepherd nigel karen thanks for having us back , mr ferguson .

Speaker 1 0:05

Good to be back no , it's excellent to have another yarn and , as I talked about in the intro , there's uh been a heap of downloads of our our first , first recording , so it'll be good to good to get another one out there and and keep those . Those minds are listening , curious where we might start . People have heard your backstory on our previous episode so I won't go back through that , but it'll come back out a little bit . But I was pretty keen to start with profit drivers . We get lots of good advice on social media telling us to stick to our profit drivers , and that's obviously a good idea , but I think people get a bit confused about what they actually are . What's the biggest profit driver at Kerran Agriculture ?

Speaker 2 0:42

I think when you sit back and look at it and it's been battle tested well and truly over the last 15 years it's realising now what is considered the biggest negative in agriculture is now our biggest positive , and that is climate change or climate variability , or highly variable climate whatever you want to call it but that massive change in climate and the variability that's been created by that climate . Now we've learned how to harness that and there's times now where we can put three years of income of cash flow into one year , just simply by taking advantage of sentiment and having systems in place that have been battle tested . They've failed . They've won , they've failed . We've gone back through where they've failed . Where they come undone made that stronger .

Speaker 2 1:36

So for me , it's very much about looking at a whole , a business as a whole , and always look at that like a pizza cut into little quarters . If I go ahead and do this in our business , how does that affect this part of the business ? And it's very much a grazing business . We have moved , I think 15 years ago , away from cropping . We've only harvested once , I think , in 17 years . So even though we've got beautiful cropping country , it's very much now a grazing business and that's a grazing business that revolves around fitting in with climate .

Speaker 1 2:09

And decision rules have been a major part of that to get that inherent climate risk that you're turning from a negative into a positive . That's all around sort of great decision rules .

Speaker 2 2:21

Yeah , I think a really good way to look at um when you talk about rules in your business that are guidelines or guide rails that keep you on the road . I've played rugby union . I've played rugby league . I've never played um aussie rules . If you put me on an aussie rules paddock , I'd either get sin bins sent off or put in hospital in the first 15 minutes because I simply don't know the rules of that game .

Speaker 2 2:46

And one of the things that was drummed into us by our first business coach is to get a stringent set of rules of how you make decisions , and a lot of that was learning how inadequate you were at making decisions and how those decisions were made . Were they emotions-based decision or did they come from really rigorous , what I call gut feel , where you pick up a pen and paper and really work things out . And for us it's very much about doing spreadsheets on what's it going to cost us to hold these animals , to take them to the next level . Do we have enough grass available ? And we've said it before a hundred times if they're too dear to buy the animals that are on your farm , that you've bred yourself and they're too dear to own , we just cash out and take the money . So having very stringent rules , if you won't buy something then you have to sell it and even in the drought we still stuck by that .

Speaker 1 3:38

That in that three-year drought , yeah and I've heard you talk about your , which I think we'll we'll get to a couple of times throughout this interview but that sort of triangle of decision making around any of these small decisions well , some of them big , some of them small but making sure you're road testing it through a sort of decision matrix .

Speaker 2 3:55

It's a really . We might be able to get a diagram for you to put up on your website . It's very simple . Think of a triangle . Down one side of the triangle you've got business growth . Down the bottom , you've got cash . And up the other side of the triangle , you've got people , infrastructure and I've now added technology into it .

Speaker 2 4:15

So when you're going to battle , test a decision or something that you've got in your head that you want to run by , if I go ahead and do this particular thing , does it increase growth ? Does it increase cash ? Have I got the infrastructure and people and the technology to do this at scale ? And when I look down each side of that triangle , where's the weakest link in our business at the moment ? Is it actually growth ? Is it cash flow ? Do we have a people problem at the moment , which may be a lack of staff ? Do we have an infrastructure problem and that can be wire and mortar stockyards , cattle yards , sheep yards , laneway systems or do we have a lack of technology ?

Speaker 2 5:01

And a good example of technology is I think for about nine years now we've had observant on all our tanks and watering systems , which is basically in summer for us . That's one labour unit we got rid of . Just look at it water and it's saved our bacon countless times . So I just look at that triangle and in the centre of that triangle you've got values . If you go ahead and do this , does it fit in with the values of your family business ? So for me to go ahead and go down a particular path of doing something , does it fit in with those three sides of that triangle ? Do I have to increase growth at the moment ?

Speaker 2 5:39

No , where's the weak link in the business right at the moment ? And right at the moment we're focused on cash flow . Infrastructure is good , people are good , technology is good . We've just been up to beef week and we've spent a bit more money on technology that will save labour and add to efficiency . So every morning we get out of bed . Right at the moment , we're looking at cash flow . How do we turn rainfall grass into a value add and sell it ? So cash flow is our biggest one at the moment and that's what's on their mind basically most of the time at the moment .

Speaker 1 6:12

Yeah , and you won't be your Robinson Crusoe there . I guess the ways we approach problems differ massively across all humans , across all businesses , and so some people can see a cash flow restriction as a well . It's always , always stressful , but there's sort of I don't know . There's a few ways out of it . One of them is to really work out new ways and new opportunities for for a business , and that only happens if you stay curious , and I think we're born with the fear of heights and the fear of loud sound or something , and the rest we invent over over our , and I've heard you talk about staying curious . What does that mean to you and how do you ensure that you stay curious ?

Speaker 2 6:51

I reckon it's , without doubt , a massive profit driver in your business , no matter what business that you're in , whether you're a news agency or pharmacy or butcher shop , farming , whatever . If you're constantly in a curious mindset , you've got your mind and your peripheral vision open to new ideas all the time and you don't get bogged down in that around here . This is how we do it around here , this is what we run around here . We do this and that staying curious is when you hardwire yourself and I'm 59 now and I'm , I reckon I'm more curious than ever because I believe there's no doubt about it , if you're in a stay in a curious state state , you're constantly opening your mind up to shortcuts , those one percenters that drive business , and you keep adding 1%er after 1%er into your business year after year , and a lot of that cash flow is taken care of from staying curious . Now , I see too many people at the moment talk about addressing cash flow through cutting costs . How many businesses do you know that are sloppy with their direct costs and , just you know , splash cash around everywhere on direct costs ? I'll tell you now , I don't go on any farms where I see that too often , so for me there is no upside . In looking at direct costs , it's staying curious and looking at the one percenters that I can add into the business that makes that work , the one percenters that I can add into the business that makes that work .

Speaker 2 8:30

And I heard a fantastic one-liner only not that long ago . This guy was a dairy farmer in New Zealand and he said to me Nigel , you've got to cut the fat out of your business , not the muscle , and that will mean a lot of different meanings to different people and for me . I live in a 650ml rainfall zone and for me straightaway that meant phosphorus and sulphur , keeping phosphorus and sulphur levels up in that high rainfall area to keep that engine turning over that drives production . So this year will be the biggest spend I've had on phosphorus and sulphur and nitrogen in a lot of years , because for me it's the last thing I'll cut out because that is the muscle in our business . So there's just a simple example there .

Speaker 2 9:20

And I said earlier on this highly variable state we've got in climate , if you're staying curious , it's opening up doors all the time where you can actually , at a point in time , do something that has a massive effect on cash flow . It's a lot easier to do in the livestock game than it is in the cropping game , because the cropping game is very much now . It's very prescriptive . If I happen to be at the wrong stage in a climate period , I might miss those big cash using cropping .

Speaker 2 9:50

So in livestock we're very , very agile , quick to react and I think we have to be now because the fluctuations are that massive in markets and climate now they're . They're actually there now to take advantage of , not to hinder your business . So I think staying curious to me is staying curious to new technology . Looking at your business as a whole is a really important part , not just one part of it that happens to be going well at the moment , and for me the most important thing is getting off farm and actually going to some of these better conferences where they have really top-line speakers , and what I've found is the dearer the conference is to go to , the more I learn , because it costs a fortune these days to get your top-notch speakers in and they're the ones that I pick up the most gold nuggets from .

Speaker 1 10:47

You've also been a big fan of various coaches in your business for want of a better term . In addition to getting off to those places , I know you've been to the Wagyu Conference , you've been to Rocky , you've been over here to the Xander McDonald Awards . They're all absolutely top-notch events and you make sure you get to those sort of events . But in addition to that , when you are at home you've also got outside , I guess , information coming in to you , as well as having to go and source it through having coaches around .

Speaker 2 11:13

Yeah , I think we can reverse engineer that a bit and go back , hit a bit of rewind about if you go back to that triangle we were talking about when I talk about people .

Optimizing Business Operations Through Innovation

Speaker 2 11:26

Have we got enough people in this business to function where those people that work in the business aren't in overload all the time ? Because if you're in overload constantly all the time , you'll never get into innovation mode , and innovation mode comes from having enough staff back on farm that allows the CEO of the business to get off farm or out of the business and go and be curious . And one of those and it does cost you money to get off farm and go to those conferences , but I know it costs our business a lot more money for me to stay on farm than it is to go and learn . So when I look at the businesses , I look at when we did our succession in 2007 and what that asset was worth in 2007 compared to what it is now . You know you don't have to have that big a holding anymore in agriculture in Australia , especially in the eastern states , to have a $20 million asset , but what I see is the CEO of that business is that busy being busy . It's bloody hard to be curious when you're at the coalface swinging a pick at a coalface all the time , trying to keep your head above water . And that's where this having rules about how you make decisions , and those rules are agreed upon by the family or the employees and they have been battle-tested over time and they've been made stronger . So it's a long-winded answer to your question , but I think what football side wins a grand final without a coach ? What tennis player at Wimbledon wins without a coach ? And I don't have to know everything and I don't have to be that incredibly clever , just as long as I'm bringing those people into our business to help us question how we make decisions , help us make decisions and sometimes hold our hands whilst we're making those decisions . But , more importantly , it's the next generation that's coming up into the business seeing how you do business . So see how you , if you take on this , I guess , this mindset of I don't have to be the smartest person in the world , I've just got to bring the smartest people into our business . See how you're changing the culture for the next generation coming into your business and that is gold . So , instead of those young managers that are in , say , from 30 to 40 , having to wait until I get to at least 45 , 50 before they have those rules in place . You've changed the culture of the business so that's instilled in that business at a young age . And guess what , when you start talking that way , the young people in your business , if you can teach them how to stay curious , start injecting curiosity into your business and they start looking for those one percenters just as much as the CEO is , and no one is . I have a a great saying no one is smart of all of us together and I . Just that's where this curious thing comes in and it's such a strong part of mindset . Now , just being curious , and I um , I'm very much in tune to one-liners and one of the best one-liners I've heard .

Speaker 2 14:42

I picked up off a speaker at the Xander McDonald award . No , it was actually a phone visit we did in New Zealand . It was an Aussie bloke and he looked at us and he said do you realise it's absolutely impossible to trip a centipede . I went what the bloody hell does that mean ? And then he took us through all the things that could go wrong in his cherry orchard that he was going to change . So his cherry orchard never tripped over . Everyone told him in New Zealand , do not put a cherry orchard in there . And now he's got this unbelievably sophisticated , profitable cherry orchard .

Speaker 2 15:18

But the way I took it in my business is , every time I'm driving around the paddock or daydreamer , now I think where's the next trip that could happen in this business ? And how do I eliminate that trip now and take it out ? So for me , just that one liner that I picked up from a conference do you know ? It's impossible to trip a centipede . For me that meant how do I go back into the paddock in our business and remove the trips out of our business so I don't get caught ? And for me that's been gold because I've just got all these centipedes running around the farm now looking at where they're going to trip over . And yeah , I would never have picked that up if I'd have stopped at home .

Speaker 1 16:01

I think it's interesting how we get lost in the big numbers , like I don't know winning percentage or whatever , when it's really those small little things that add to the big and it almost makes it hard for people to innovate because they think that oh , I'm sitting at 80% lambing , I can't get to 120 . It's so far away . But you can change where that fence is or you can shift those sheep two days earlier , Like the small little things that all add up to a shift or to a change in outcome . And I think the scale of . Sometimes people are put off by the fact that the scale between best and current is so big that it's kind of impossible . But every little tiny bit just adds to a better enterprise .

Speaker 2 16:46

Yeah , you know , being just the average player . Nowadays you can't be average anymore because our land values are so high . Our costs now seem to be matching the land values , but the production isn't . So that's why you've got to keep looking for these trips . And you know , know , to go from 80 , 90 , 100 , 110 percent , lambing right up to 130 , 40 or 150 , is a mindset . It's very much a mindset . The reason if you're sitting at 100 percent you've never even imagined getting to 120 or 30 is you haven't put enough one percentage into your business to make that happen . And what's it costing you to maintain that mindset where around here , that's all you get . You only get 100 around here . Well , I I wish you luck trying to grow that business in the world that we now live in , because I don't think that average pays bills anymore . You've got to be shooting right up in that top 20% . And what I love about it , mark , is it costs you nothing to get there .

Speaker 2 17:55

It's just about learning and being curious and bringing people into your business . Where you struggle and for when me and Kate started our business in 2007 , financial literacy was our biggest struggle we didn't understand the world of how . I guess you could say we didn't understand what the business of farming was . We knew how to run sheep and cattle , but we didn't know how to convert rainfall grass into a high-value add . We didn't know how to take advantage of climate and turn it into a positive , not a negative . And it was just that thing of staying curious and open-minded , very open-minded , and having a set of ears , like an elephant , to listen and take things in , especially from people that have been very , very successful in their chosen field .

Speaker 1 18:48

The end of 23, . Start of 24 . So far has sent a fair bit of soul-searching across the livestock sector . That will be no doubt another opportunity to learn what have you learned in the last 12 months .

Speaker 2 19:00

What have I learned in the last 12 months ? I think low interest rates were the worst thing that ever happened to agriculture , because money had no value . I could borrow at 1.7% , 1.8% , 2% . Suddenly , money lost value and there was a lot of toys were purchased which went from 2% interest to 7.5% . And the problem with those in so-called investments they were depreciating liabilities , not assets .

Speaker 2 19:33

So I think and the other thing I now know to be true in retrospect , looking back , when we brought the last two farms ago , the bank said listen , you're starting to stretch it a fair bit with your lending capacity . We're going to put a foot in your collar and make you pay principal . And I went oh shit , do I have to ? But that was one of the greatest things that ever happened to our business , because that puts a discipline into your business where you have to run , where I now put more effort in converting rainfall into grass , into money , because I want to stick by my commitment to the bank , where they will supply me finance to grow our business . But I have to have strict rules in place to service that lending . And part of that now is principle . So I've said it before principle has made us a better farming business . It's a lot easier to be green with your decision-making when you're in the black . So we've still got a lot of money borrowed , but the thing is now we're paying that off and it's made us better farmers . So I think low interest rates and interest-only loans didn't do anyone much good , because it took the discipline out of running a business .

Speaker 2 20:54

You can be sloppy and not be affected . Now we've got a . I see it in the generation under 40-year-old that haven't been battle-tested , that have taken over businesses are going shit . How do we actually wiggle our way out of this ? Well , you know this isn't our first rodeo when it comes to a bit of a cash flow crunch , but we've seen it plenty of times before and we know how to react to it . And let me tell you it's not from trying to smash down direct costs . You've got to increase turnover , and increased turnover is very much related to going back to that triangle and it's about staying curious . So for me , there was two big things there . I look back on that I knew before it happened and now I go yep , reinforce , don't get sloppy , have rules in your business that stop you getting sloppy . Big changes . I think the biggest change I've seen is average , doesn't just not going to pay bills anymore and that's exciting for the people that are average , because for me , to go from average to top 10 , top 15 , 20% is knowledge . And knowledge you can buy that and bring it into your business and I think that's exciting . Knowledge , you can buy that and bring it into your business and I think that's exciting , whether that's a business coach or you have a .

Speaker 2 22:10

I'm not a cotton grower but if I was a cotton grower , I have a coach and that's called a cotton agronomist to give me the best result . I have an agronomist in cropping if I'm a mag cropper or horticulture . In the livestock game there isn't enough coaches . And what I'm talking about with the coaches they're the ones that come in and hold your hand for a change and they're implementing and forcing small , incremental changes into your business nearly every month and basically they come at no cost .

Speaker 2 22:40

You know you go and buy a shuttle of Roundup now it's a hell of a cost , but when you look at the cost of a coach , it's bugger all . When you you know that shuttle of chemicals out and gone , never to be seen again . That coach , what they teach you sits in your head and it helps you build that business year after year . So , mentors , coaching , just hanging around smart people , now it will mean , if that's the space you want your head to be in , I'll guarantee the herd you hang around with will change and you have to accept well , am I going to be hanging around with a new herd ? It'll more than likely happen and that may take a bit of adjusting , getting used to .

Speaker 1 23:23

And one other thing often coaches will encourage will be stopping some stuff , so as well encouraging new practices . In every business there's things that have been done that just need to stop . They're not working , or they're not working as effectively as they used to , or they never worked and we just have ourselves , and there's certainly as much value in stopping some behaviours as there is starting new ones .

Speaker 2 23:46

Yeah , all I had to is starting new ones . Yeah , all I had to use once were words . Yeah , everyone has a bucket list , but how many of you have got written down in your office a fuck it list ? Will you actually stop doing things you don't enjoy doing ? And I can tell you , if you run a gross margin analysis on them , they will be the weak link in your business analysis on they will be the weak link in your business .

Speaker 2 24:07

So for me it's about the reason we're 100% livestock , because I mentally can manage 100% of the risk of livestock associated with climate and markets . I cannot do that with cropping . And if you're the sort of personality that mentally has to be in control to function well , then for me that bucket list was getting rid of cropping out of our business because it created the most anxiety in my headspace . So we got rid of it and you know I'll never forget . There was a lot of comments about why would you have country that good , not be grown grain on it ? Because I don't like it and I was really good at it and I didn't want to be good at it anymore because I just couldn't control the risk of it . But yeah , I think that one there is . Yeah , fits in with that trip and centipedes thing as well . It's just a mindset .

Speaker 1 25:05

We see lots of businesses crippled by sticking with genetics or systems that a previous generation have deployed and they're not , maybe , up to scratch with what those maybe . They are an average business now compared to what the top 20% is . What do you see the good businesses out there doing in terms of their approach to farming generally ? I guess for genetics and production systems being core to that .

Speaker 2 25:28

Yeah , that's pretty easy to answer . If you're not using science now in the cattle industry and sheep industry , I don't think you've got a business , if you're not using science to make your selection of animals . See , there's so many one percenters now wrapped up in ASBVs and it makes me absolutely cry when I go down to Tassie and they've got pivots everywhere watering soils that I wouldn't even bother watering . But they water them because the water's basically free . And you drive around and you look at genetics that are underneath pivots on beautiful clovers . Oh , what's the weight going ? Oh , yeah , they're doing 230 grams a day .

Changing Mindsets for Farming Efficiency

Speaker 2 26:10

And you and I'll never forget this , all the years it was a fairly big operation were lambing and all the lambs were still on pivots from last year . I said have you changed your lambing ? No , no , no , we land this time every year . I said well , so they're last year's lambs that you've got under the pivot . Yeah , that to me is that 1% , that's constant . There is no turnover in that business . They've got massive infrastructure spend putting the pivots in and putting all the associated technology and pipelines in to supply the pivots , but the pivots are run at about a 40% efficiency because the animals that are under the pivots . But the pivots are run at about a 40% efficiency because the animals that are under the pivots were good genetics 50 years ago and they paid the bills 50 years ago . But they do not pay the bills today .

Speaker 2 26:56

And I just scratch my head at why people won't change . And you know , I just can't get my head around that change and you know I just can't get my head around that . And I think when I look back and resonate about what the blockage is , the blockage is financial literacy . The blockage is around here . That's what we've always done and I think they're not staying curious . And if I looked at how I value add that water , I'd go back to that triangle .

Speaker 2 27:25

What can we put under ? Look at that triangle ? What can we put under ? Look at that triangle ? What can we put underneath that pivot to make the most amount of money out of ? Is our problem growth ? Is it infrastructure , people , technology ? No , is it cash ?

Speaker 2 27:40

I want animals underneath that pivot that I can do at least free turnovers of stock underneath that pivot . That I can do at least three turnovers of stock underneath that pivot , not one . So I think if you're ignoring science and this is going to get more so if you wander around , you don't realise what science is up to , until you go to something like Beef Week at Rockhampton last week and it's just amazing the science that's going to be driving these animal production systems , and if you can't keep up with it , I don't think you'll . I really think now that you won't be in the business for much longer and that science is usually a one-off cost , and a lot of science meant more labour . The science that's coming into the industry these days is less labour , quicker turnover , and it's also fitting in with the emissions world as well , and that's a really interesting place to be in .

Speaker 1 28:40

Yeah , and everything you talk about essentially stems from a mindset of growth and a mindset that , like a glass half full , half full , that there is like don't say no to me , it'll just mean I'll find a way around the no kind of thing . And I guess I've heard you talk about before how that's not the mindset you were raised with . You sort of grew up with lots of people , with parents saying money doesn't grow on trees , you can't do this , you can't do that kind of mindset . I was luckily not in and had a different set of parents . But how did you go about changing your mindset , is that ? I mean , that can't be summarised in a sentence , but that's .

Speaker 2 29:19

Yeah , I dumbed it down to absolute stupidity . And we bought a farm and it had no sheep yards on it and we used those sheep yards for about 12 months and I got the old Massey tractor in the 175 and dosed the whole lot into a heap and burnt it . And this particular day the old man turned up what the bloody hell happened to the sheep yards . I said , oh , I just they've got to go . I said they're inefficient . I said they're bloody hard work and and I love doing sheep work , but I don't like doing them in those yards . And he said , what's that going to cost ? And back then I think it was the first set of , second set of yards of pro-wine Australia built . I said , including earthworks , concrete , the yards , everything that's $23,000 , now a pretty big set of yards , jeez thousand dollars . And they were a pretty big set of yards . Jesus , what do you think ? We are Bloody made of money . Why didn't you make do with what you had ? I said because it was just . I won't tell you what I thought exactly . It was just bloody hard work working in the yards . But anyway , he took off and went back home . I had the tractor there when he was giving me this lecture , filling it up with a chemical to go and spray a canola crop . So if I looked at those yards cost $23,000 and I divided it by 10 years cost me $2,300 a year to own those yards . So at the end of 10 years I got the yards , pushed them up to the bulldozer Without interest and opportunity cost . It cost me $2,300 . When I worked out the chemical that I just put in that boom spray , there was $2,300 worth of chemical went into that boom spray and I was going to be back there in an hour and a half to put another $2,300 of chemical in that boom spray to spray a canola crop with . And we were spraying that crop just in case it rained . We had to have rain to get that crop home and I was doing a ryegrass black oat spray . See the stupidity of that . Those yards are going to be there 60 , 70 years but that chemical in that burn spray was in there for an hour and a half and then I'd do it all over again and that was a trigger point , one of the trigger points for me that made me just go .

Speaker 2 31:24

As soon as we buy a farm , we clear , fell it , renew all the infrastructure , always water first , then the wire , then the yards , and if we need the house for staff , it gets done first renovated . So it's really interesting when you get young people and young being under the age of 35 , we had a couple of those from Victoria , one from actually Mount Gambier , another one from Casterton I think , and they drove around the farm . It takes about three hours to go for a good look around it . The time it took and they just said I wish Mum and Dad were here . I said why ? And both of them said just so they can see it's safe to spend money on infrastructure . And that once again goes back to the triangle . What are we lacking right now on that farm ? When we brought it it was infrastructure . So where does our spend go ? Infrastructure first , because we can't get efficiencies out of labor and pastures and rainfall until we get that infrastructure in .

Speaker 2 32:33

And you want your managers managing livestock . You do not want your managers running around with fire extinguishers putting out little fires , repairing waterworks , repairing fences , always doing repairing . Because what you'll find if you're the people that are working for you always doing repairs and maintenance , they're spending money . They're not making it . If they're there all the time poking around on a side-by-side managing livestock . That's what money comes into your business . It's coming in through great management , driving the production system of turning rainfall into grass , into money .

Speaker 2 33:07

And that's something I learnt . I went to America and did ranching for profit a seven-day school over there about five years ago and it was reinforced to me by a bit of a guru over there that I use as a mentor Always keep the people that are in your business . Have them there managing , not doing repairs and maintenance , running around putting out spot fires . It's the easiest way I know of creating turnover in your business is to look at what the people that are working for you are actually doing . And that's that's mindset change again where , the way I was brought up , the old man we were always doing repairs and maintenance and labor had no value . It didn't matter if you spend all day , you know , repairing fences , fixing up water that was stuffed . It didn't matter because wages spent all day repairing fences , fixing up water that was stuffed . It didn't matter because wages were so cheap . Now that's very much swung around .

Speaker 1 34:03

Yeah , I think value of time is something that I've been thinking about a lot and when you're actually been doing the maths on which sounds a bit morbid , but it's important to remember that I think , as farmers are in farming , we think time is infinite . You can fix inefficiency through just working harder and where there's a bit of a badge of honour , whereas the reality is we've got the average male in Australia has got 30,300 days on the planet , and if you're around 40 , you're down to 15,000 of them , and if you're around 60 , you're down to 8,000 of them , and really it's not infinite and we need to use that time really wisely and I think having and the same with our staff , if you've got them doing the job we've employed them to do and that they're good at , rather than jobs they're not good at , you can massively change the outcome , and very much .

Speaker 2 34:52

That is a mindset change . And I now look at how do I turn a shitty situation into fertiliser ? How do you turn shit into fertiliser ? Something went wrong or a mindset thing went wrong . How do I turn that into fertiliser ? Don't get the grumps and drop your lip and kick a rock around the paddock . How do I actually ? I've took a bit of a flogging here . I now look back , it was I made a stuff up with my decision making . How do I turn that into fertiliser ? Yeah , I just , and that's why I spoke about the herd you hang around with .

Turning Challenges Into Opportunities Through Innovation

Speaker 2 35:27

When you get in that mindset , there's a lot of people you just can't stand being near because of negativity , and the word can't gets used all the time , and there's one word that's just as it's like a siren going off every time . I hear the word tough , tough in agriculture . This is tough and that's tough . Well , everything's bloody tough if you let it be tough the way I look at it . So I think another one that really struck home this year was a speaker at the Xander MacDonald Award . She was a brilliant speaker , a New Zealander , and she was talking about resilience in farmers and what's going on in New Zealand , the flogging they're taking over there with various legislation and rules and regulations and blah , blah , blah . She said resilience is built up and then it gets eroded . Then you build it again , then it gets eroded . You build resilience again , then it gets eroded . And she said if you're in the mindset of knowing , you have to rebuild that resilience mentally . She said after you've done that for 10 and 15 years , you become bulletproof .

Speaker 2 36:35

And that's where I look at that thing of you know , turning a shitty situation into fertiliser is about mindset . And it just reminded me when she was saying that . Is that what's actually happened to get us to where we are now ? No matter what gets thrown at us , we just look at how we turn that into fertiliser . If it's a negative thing and if it's a positive thing , how do we really turn that positive thing into mega positive ? And for me , that'll pull your mind outside of where you've been stuck for years into what's possible or can be possible . And for us , that just made us look at starting another seed stock business . And for us , that just made us look at starting another seed stock business and , yeah , a seed stock business with a fair bit of emotion are tied to it as well , and that's the Wagyu industry . So we've got Kieran Pohl , and now we're adding into Kieran Wagyu as well , and that's already kicked off and we'll have something for sale in 2025 .

Speaker 1 37:36

Yeah , and that's an interesting . Obviously you're already , we're involved in cattle . We know you were using Wagyu genetics to value add the grass you were producing there and obviously saw that opportunity to get in the sea stock game . I think it's an interesting industry to kind of compare in the sense that you can't . Pretty much it's all about objective measurement in that industry because , as you've said before and as most people will say is objectively true , wagyu cattle aren't very good to look at so you can't really run them around in a show ring . Their value is in the meat that they produce and that makes it a different industry and makes innovation happen at a different rate , it seems .

Speaker 2 38:19

You're damn right At Arklays the beast you never look at . What I looked at was in the world of Wagyu . If I was to start an Angus , I've got to start a brand and then I've got to build it for 10 years before I get a tow-oil . But the brand is the word Wagyu and it's got a . In Australia we call it the world's luxury beef . But what really attracted me to Wagyu was simply this science and technology is driving the ugliest animal in the world . So see how it's not pretty . You can't put it in a show ring .

Speaker 2 38:53

It's science and technology that are driving the Wagyu industry in Australia . And when I went driving the Wagyu industry in Australia and when I went to the Wagyu conference this year , when the CEO got up and told the crowd of 620-odd people to a three-day conference just on Wagyu up at Cairns , when he got up and explained the direction the board's taking and what they're going to do to drive that production system in the Wag you forward , it all revolved around one setting the direction , then using science to implement that direction . Be it carcass , data , ebvs , genomics combine the three together boom away you go . And when you look at traditional , I'll just talk about marinos because that's what I know . If you look at traditional marino and then the job that a lot of merino breeders are doing in Australia now , using science to build this multi-purpose animal , there's a lot of commonalities between the Wagyu world and the modern world of merinos as well .

Speaker 2 39:52

Both have been driven by science , and the modern merino we're breeding these days isn't one you're going to put in a show ring because he will get kicked out in the first round of judging because he's not how around here it's always looked , and that's a good thing . So I just think this science and technology thing if we remove that from the cotton world , we wouldn't be growing cotton in Australia because it had been banned because of all the chemicals we were using . If we took technology out of seed breeding , science and technology out of seed breeding of wheats , canolas and barley probably wouldn't have an industry . See how those we've just given three examples there of industries that have totally adopted science and technology , that are stealing hectares off the sheep and cattle industry , the cropping game , the cotton game , and I don't know whether you want to go down this rabbit hole about the future of the lamb industry in Australia . Do you want to go there in this podcast or not ?

Speaker 1 40:55

Well , we're happy to hear your version of the future , Nigel .

Industry Growth

Speaker 2 41:00

Australia cattle feedlot industry hit one million cattle on feed for the first time two years ago . We've just hit . Two years later we're at 1.3 . And it wasn't until I sat down with a processor from Queensland a Zander MacDonald award that I really got me head around .

Speaker 2 41:16

What's going on with the feedlot industry in the cattle game in Australia , why it's expanding so quick , why we have feedlots now supplying processes in the cattle game is to take the fluctuations of supply which is impacted by climate change , droughts and fires and all that stuff . And in Queensland a lot of that can be upset by flooding as well . Because the labour component costs of a processing plant is that high , they have got to be running at maximum capacity in those plants each day , each shift , to make those plants economical with the wages that have been demanded by the people that work in that industry , and that's only fair . So if you take 1.3 million cattle on feed in australia and you convert that to dses , australia would have to have just over 15 million lambs on feed at any one time in austral Australia to even remotely resemble what's going on in the beef world . And if I look here right in Australia at the moment , big , heavy lambs are making good money and the light lambs are being given away . Restocker lambs are being given away .

Speaker 2 42:32

If you want to take the variability out of the lamb industry , introduce a feedlotting professional feedlotting industry into it , and I know it goes against ethics and it goes against the way the world should be and everything should be grass-fed .

Speaker 2 42:47

But the lamb processors have the same labour cost issues as the beef processors .

Speaker 2 42:53

They have to have constant supply of a product that they have forward sold into a market somewhere around the world and right now they're not getting that product and that's a heavy lamb because it's cheaper to kill a heavy lamb than it is a live lamb per head .

Speaker 2 43:09

So I think for the lamb industry in Australia to get fully sophisticated and I don't go much on the world of feedlotting , but I just think I don't see how there's an alternative option , because it was climate change when you looked at the way beef feedlots are ramped up in Australia . It was climate change that created that growth of feedlots in Australia , as well as the wages component . So you just can't sit there and say this is the way it is . You have to adapt as the climate keeps adapting and economics keep adapting , and that's why you can't stay in that static place , and that's where that curiosity thing comes in . So it's climate change has been a big reason why that beef feedlot industry in Australia has grown so quickly . It's to have guaranteed supply into a processing plant of a high quality beef product that gets sold around the world branded under an Australian brand , which is MSA .

Speaker 1 44:16

Yeah , I reckon the key word you mentioned in that future is professional . I think there's lots of maybe backyard lamb feedlots or whatever , but I think , yeah , an industry that does make it its profession and there are examples out there , obviously . And I think in those cases then I mean you mentioned sort of welfare and ethics . I think really one FDLOT is pretty ethical and can have really high welfare standards and I think that's what professional .

Speaker 1 44:46

So , yeah , it would have been interesting if and you're 100% right that we can't like to me I hear that and go , oh , it'll never happen , but that is a big siren to say it probably will . Because , I mean , things change , we always have to adapt and we have to stop thinking that just because it hasn't happened today doesn't mean it won't happen in the future , and that what used to be isn't anymore and won't be ever again . And I think that's probably one of those big mindset things is that like if you're sitting and listening to this and you hear climate change and think it's all crap and it's not happening , and then so there's no way you can make the opportunities of climate variability if you don't even think that climate variability is a thing .

Speaker 2 45:26

What's interesting is when we did this I think it was 2021 , coming straight out of the drought . When you've got record store cattle prices and land prices , you'll get a record forward price . So our operation we don't even own a breeding cow . We didn't own a breeding cow . Then we were the biggest suppliers of Angus deers into the second biggest feedlot in Queensland , and that's in a business that's never owned . Wouldn't know the front end of the arse end of a beast . We're sheep people in a business that's never owned . Wouldn't know the front end of the arse end of a beast . We're sheep people .

Speaker 2 45:57

But the reason we pivoted and went to backgrounding Angus Steers for a feedlot because we got a forward contract of $6.20 a kilo , which was in the 100th percentile . We knew our sell price . We then knew how to go and get a buy price . The reason I think feedlotting hasn't taken off in the lamb industry because the feedlotting's never got at scale where the processors can rely on feedlotters to give them a fixed price in advance . Yeah , so , and I think I said right in the opening of this session what we've learnt with climate variability and having yourself set up for that is we can jam three years of cash flow into one year coming out of a drought , because emotion drives how people think and right at the moment , if you were set up for feedlotting , there's a heck of a lot of money to be made in feedlotting lambs right at the moment , even at today's grain prices , because your buy price is so cheap for those light lambs and the forward price is pretty bloody good .

Speaker 1 47:10

Yeah .

Speaker 2 47:12

So see , yeah , we just can't stay static . If we stay static , someone's going to start throwing spears at us . Yeah , 100% .

Speaker 1 47:20

One thing I was intrigued to ask the question around was your offer which I've seen you present lots of times on socials as well as when we had Zoom calls or whatever that your gate's always open , anyone's welcome to come and have a drive around . What is bringing those people into your business , or that opportunity to drive them around for a few hours on Care and Ag , what does that bring to your business ? I mean , obviously you add value to those by showing them around and getting them , helping change mindsets of those people that turn up , but is there any benefit to you ?

Speaker 2 47:55

Oh , massive benefit . And it battle tests what you're doing , because I'll ask a heap of questions to them as we're driving around and vice versa . They do the same thing and what you do is listen to where their hang-ups are . What are they locked into a belief system so tightly that it's choking that business . So if you have a real good drive around , plenty of conversation we'll pull up on top of Eland , just might be there for half an hour yakking over something , a point of interest for them . And when we come back home , we come back to the house . I ask them .

Speaker 2 48:33

Every person that comes asks a question . You had a picture in your head of what it might look like and the business might look like before you got here . Now you've been for a drive around . Has it changed ? And then I'll ask them well , while you're driving home or in the next week , can you just send me , text me , three or four or five dot points that you picked up out of the visit ?

Speaker 2 49:02

And what usually happens is they reinforce . They will notice and observe and witness what the drivers profit drivers of our business are and they quite often come up with . Why aren't you doing this ? And that's where the goal is isn't driving around , because I'll take that back to that triangle and see where that fits in in that triangle of growth , cash cash flow , infrastructure , people and technology . And I pick up more off the people I run around than what they probably steal off me . The winner of the New Zealand winner of the Xena McDonald Award , nancy Crawshaw she was here the other day and she sent me five points and I went straight to that triangle and went , wow , that fits in beautifully right there and I need to do something about that . She saw something in our business that I couldn't see and I picked it up straight away . And not to know how old Nancy is , I'm going to have a guess at 26 or 27 .

Speaker 1 49:58

Somewhere there , yep .

Speaker 2 50:00

Somewhere around there and it was an absolute . Yeah , it was a hoot taking her for a drive around because she's a brilliant , open-minded thinker . Indeed , yeah , but yeah , no , I think for me , the biggest thing that I can give anyone that comes for a drive around here is that it's safe to be different and it's profitable to be different , and it's safe to look at infrastructure spending and pastures and look at where the muscle is in your business . Not the fat , because you've got to have the muscle in your business to create the fat , but how you spend that fat in your business . Not the fat , because you've got to have the muscle in your business to create the fat , but how you spend that fat in your business is where you need to have your head screwed on as well .

Speaker 2 50:43

And for me , it's not in investing into depreciating liabilities , just it's a bit like Robert Kiyosaki putting it back into appreciating assets .

Speaker 2 50:55

Putting it back into appreciating assets , so , yeah , I think , just making infrastructure spend safe and buying rundown farms that are completely stuffed , doing a full reno on them and turning them into yeah , just turning them into gold , basically , yeah , I think that's one of our strengths and just then showing people how you do that and how you fund it as well , and how when I have the bottom of the triangle as cash , I also have three letters OPM , which means opium other people's money . No matter what your interest rates are , you've got to have access to opium other people's money and learning how to make turn that into muscle in your business is a pretty important thing to get your head around as well . So cost I never worry about direct costs , it's turnover is the only thing I overlook at . So yeah , I think that's something that people really pick up on you very much . Where your focus is is where you're going to end up at . If your focus is turnover , you're going to end up with a turnover and profit if it's on direct costs .

Speaker 1 52:13

I wish you luck yeah it , yeah , it's a good point . To wrap up on the last question , I was keen to ask you which is one that's going to be a feature for Head Shepherd going forward , which is what is the last thing you change your mind about ?

Speaker 2 52:26

Yeah , you actually text me that while I was at Rocky walking around , and the next morning you actually text that when it happened . Talk about spooky . The world of carbon and emissions is one that I've been very arrogant and ignorant to and couldn't give a stuff really , because the direction we're going down now in Australia , or the world's going down , I'll guarantee you in five to ten years it's changed and we'll probably end up going this way , and I didn't want to be caught going down the wrong road , so I just sat on the sidelines and did nothing . There was the Woolworths , had a breakfast and one of the great things about Rocky , it's five days , it's every three years and the best speakers in the world come together to unleash a heap of knowledge onto you , if you're willing to accept it . So you've got breakfast start at 7 o'clock up at 6 in the morning , then you've got lunches you can go to where you've got speakers , and then dinners of the night and then through the day there's marquees everywhere with different speakers

Carbon Farming Practices

Speaker 2 53:30

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Speaker 2 53:30

Now , this speaker had come from Ireland . He was a farmer from Ireland who took us on a very well explained exploration through his farm and business and also , I think , seven other businesses that were battle tested with the future of where they go with carbon farming . And the one thing he was on is you're not selling anything . You're not going to sell lackeys . You're not going to sell anything to anyone . You're not going to sell our queues . You're not going to sell anything to anyone . All the work that himself and these seven other farms did in Ireland , what they were and I'm not going to do a good job of explaining this , so all I can say is I think these videos will be available at Rocky24 website in time , and it'll be the Woolworths .

Speaker 2 54:16

It was a Woolworths breakfast on the Tuesday morning and the guy's name was Johnny come from Ireland and I'll find that . But what he said was it was all about sticking muscle back into your business , for the first thing they did was liming . It was in a high-rown fall zone . Obviously they brought the pH up to 5.8 where the soil started to sink to them . For the first thing they did was liming . It was in a high-rown fall zone . Obviously they brought the pH up to 5.8 where the soil started to sing to them , and then they measured the living daylights out of everything .

Speaker 2 54:44

And so the biggest thing I've changed my mind on is the carbon thing , but how he explained it was to be a great carbon farmer first you have to be a great farmer , and that made a lot of sense to me because he walked us through all the changes in those seven properties and they were all positive and he was just making more and more and more and more money by getting his soils healthier and healthier . The production system just got better and better . But they measured the emissions and they measured the carbon going back into the soils and the more production they drove out of that business , the higher the carbon levels got in that soil . And there's so much more to it and I've glossed over about 3% of that one-and-a-half two-hour presentation . I wouldn't do it justice .

Speaker 2 55:39

So I hope , if you want to have a look at the world of carbon , where profit is one of the key focuses of being a carbon farmer , it's that bloke's breakfast session that he did . So I've changed my mind about that and I'm now going well , who do I bring into my business to help me coach , coach me or the staff next generation , joe . Who do we bring into our business to help us put that knowledge into our heads ? Because it isn't going to be me that drives it , because that is not the space I plan . So that would be the answer to that one . I have done a 360 on that carbon world , based on staying curious , getting off on going to brilliant expo , I suppose and having someone completely change your paradigm of how you saw something excellent , and that's highlights why that's such a good question , because I've only asked it twice so far and it's been a great answer both times .

Speaker 1 56:36

So that's um , but yeah , no , thanks very much for your time . No , just always awesome to have a chat and , uh , yeah , look forward to getting the feedback on on this , this uh episode , as well , yeah , no , I can't wait .

Business of Farming Economics and Succession

Speaker 2 56:51

And when you put it up on socials ? Just in comment , what were the three things you got out of that podcast because it'll resonate with others ? And that thing our gates are always open . We're only an hour off the New York Highway once you get to parks to whiz across . And if anyone ever wants to come in and actually go into our book , work , the accounts and that for the business , for cash books and that , I'm more than happy to go and show you the economics of the business and financial returns and all that stuff . And one of the reasons why I love to show that is if they have a look at the economics of the business first , then they go out in the paddock .

Speaker 2 57:31

When we get back here after a drive , I'll ask the question do you now see what in the paddock ? What is driving the business ? And what drives our business ? Now I believe comes down to since we did our family succession back in 2007 is just going into a state of curious and staying curious , where average isn't good enough anymore to have a business that's green and growing rather than having a business that's ripe and rotten . So yeah , thanks for your time . I hope someone gets something out of it , and it's a subject I just love talking about . It's the business of farming .

Speaker 1 58:12

Thanks , mate .

Speaker 2 58:13

Yep .