Farm Business Management and Innovation

Speaker 1 0:00

Welcome to Head Shepherd John Francis from Agrista .

Speaker 2 0:04

Thanks for having me , Mark . Looking forward to talking with you today .

Speaker 1 0:08

Fantastic . So am I . It's been , yeah . I really enjoyed a couple of talks back in Ballarat and probably hadn't really crossed paths before that properly . So it was good to meet you and great to have the opportunity to chat through a few concepts today . We might just kick off , as we normally do , with a bit of background and a view yourself and the company and the work you do now .

Speaker 2 0:29

Yeah , sure , so I've got a technical background in agronomy but I sort of moved out of that agronomy space into whole farm business management and a lot of that is largely that . I felt I knew a small piece of the whole farm picture and I felt I was giving investment advice without really understanding the context of the whole farm business . So I was fortunate to get a role in a business called Home Sacket and that business sort of evolved from a commercial veterinary practice to a consultancy business which was delivering farm business management advice , largely , I guess , because the the owners of that business realized there was probably more to be gained from their expertise in that farm business management space and educating their clients around that sort of thing than there was to be gained from another vet in the country sort of thing . So they built a profile and a reputation for sort of provision of evidence-based insights and I guess a key part of my learning in that business was to take the science and apply the economics to answer some of the questions about does it actually pay ? There's some really good science out there in the production space and we were just taking it that extra step about whether it actually pays or not to do some of the things that were actually touted in a lot of that really good research era .

Speaker 2 1:59

So that required a bit of discipline because it was a regular . We had regular publications and I needed to actually contribute to those . But it was a really powerful learning pathway and eventually I bought into the business and they sort of exited my former bosses and then since then I've moved into another business . We sort of succeeded or executed the succession plan in that business and I've started another business and I do a lot of the same things , which is sort of understanding the goals of the business , the business owners and managers that I work with and deliver strategic farm business management advice based on reviews of performance and assessments of some of the accountability measures . So I also work in the education piece or space a bit and I like to think that my science background , coupled with my applied learning of economics and my non-tertiary interest in behavioural economics , delivers some value at some point .

Speaker 1 3:07

I'm sure it does . We won't leave that out there floating . But what I want to talk about today how you do help people make decisions about achieving good financial outcomes in farming . But before we get into that , I guess I don't know whether it's a story I'm telling myself , or it seems that not everybody is motivated by financial freedom . What do you think the sort of main motivators for innovation in Agar ?

Speaker 2 3:31

Yeah , this is a really interesting question and , to be perfectly honest , I don't think I'm qualified at all to answer that .

Speaker 1 3:39

That never stops me , no , no .

Speaker 2 3:42

Well , that's probably right too . I guess I've got to define innovation and I guess my view on innovation is that it's a new idea or a new method being brought into the business . So to me that question is sort of what's the main motivator of the implementation of a new idea or method ? And I think you know the factors differ by person , personality type , by stage of life , by goals , by beliefs , by the ability to be influenced or , more recently , maybe it's motivated by a lack of choice . You know that you're forced , something's forced on you , to actually change something .

Speaker 2 4:22

But I guess , in the context of what I can contribute here is , I think my clients tend to come to me because they are motivated to some extent by financial factors .

Speaker 2 4:34

And again , whether that's forced on them or whether they're at a stage of life that they're wanting to grow , or they've identified that they don't really understand business and they want to go on a journey of discovery , then that tends to be how they land with me , and that doesn't mean they all want to be the highest profit farmers , but they all want to improve in some way or another .

Speaker 2 4:55

And they know that we start by measuring the existing level of performance and they know that we can probably help to identify the opportunity for positive change and I think you know from my perspective , the value of a metrics-based approach is that you can actually measure that change over time . And I find that particularly rewarding for those that have actually implemented strategies that are delivering improvements , because you can actually see the value of those improvements over time and you can well give yourself a pat on the back or a kick where you need to give yourself a kick , assuming you know you're getting closer to your goal , or if you're getting further away , you know you can at least identify it and come back to why is that happening ?

Maximizing Pasture Utilization and Stocking Rate

Speaker 1 5:46

Yeah , we'll go off a bit of a tangent there , but I think , yeah , the power of probably both our businesses , but the power of just measuring something means that . I think that it's amazing what that does to the human psyche . Once you've got a number on something , you kind of can't help but want it to be better , mostly just because it's something that you've been walking past for years or decades in your business and never really had a metric on it . But once you've got a metric , it does definitely change how your subconscious and conscious brain are thinking about it .

Speaker 2 6:13

Yeah , well , it's interesting . I'm doing a presentation on benchmarking for another job I'm doing at the moment , and I actually went to the All Blacks because there's a few New Zealanders in the room that I'll be dealing with and I was trying to find some benchmarking on the performance of some of the players there so that I could demonstrate . You know what a benchmark is , and there's just a number of accountability and that sort of thing . Now , they didn't have the best , Surprisingly . You would think they would have the best resourced and best stats and so on . But if you go to the AFL and you have a look on that site and you want to be held accountable , well , it doesn't matter whether you want to be held accountable or not If you're an AFL yeah absolutely .

Speaker 2 7:01

If you're an a yeah , absolutely . And you're an afl player , there's nothing to hide because every one of your stats is there and and they've made it so useful that you can compare yourself against any of you . You know any other player in the league , so you know talk about accountability and talk about metrics in front of you . There's nowhere to hide . If you're an AFL player and I think some of that is really good in farming yeah , 100% .

Speaker 1 7:30

If we get into the devil a bit deeper . Obviously , pasture is the foundation of a grazing business , and growing more of it and , importantly , utilising that extra stuff you grow is pretty much always almost straight link to profit . Talk us through the key opportunities . How do you maximise utilisation of pasture and what are the normal pasture utilisation rates ? I think people have romantic views about how much pasture actually gets consumed by animals versus what just degrades .

Speaker 2 7:58

Yeah . So of the two things you mentioned there growing more of it and using more of it I would start with the latter , and the reason I say that is because the evidence suggests that the majority of us don't actually do a great job of utilising what we've got , and a typical approach is to start with the former , that is , grow as much as possible , but I think that's actually the highest cost approach . So if you think about it , using more just requires more mouths . Growing more requires more investment in fertilizer plus the mouths , or in seed fertilizer , fertiliser and mouths , not to mention the time out of production while the pasture establishes , which could even add more cost . So I think the order there is important , but just getting into how you use more it is relatively complex , and so I think , as with most things in agriculture , the complexity and the biological components often mean that it's too hard for us . So we break it down into something simpler , and I guess what I tend to think about is starting with estimating the existing levels of feed utilization . So stocking rate is one way you can do that , or you can actually calculate the level of feed consumption if you know your numbers well enough and you can assess that against annual pasture growth estimates and if there's a gap between that existing and ideal , then it could be .

Speaker 2 9:41

Typically it's a systems-based issue . So if I take an approach to improve that , typically the way I would start is look at a whole farm feed budget and typically that involves , you know , understanding the alignment of feed demand with feed supply . And that feed budget is just like a financial budget . In a financial budget there's funds at opening Hopefully there's incoming funds , there's outgoing funds and that leaves funds at closing . And a feed budget's actually no different . There's opening feed inventory , which is the feed across the farm at any point in time . There's incoming feed , which is what grows or what's provided as supplement . There's outgoing feed , which is what's consumed or what's decayed , and that's what gives closing inventory . So it's actually a bit of maths and if you put that maths together then you can actually quite easily work out what opening and closing are likely to be , based on a forecast over the year , and that way you can sort of establish whether your feed demand is looking like it's actually matched with feed supply . And so I think , because that's reasonably complicated it's not complex but it's complicated and I think there is a distinction between those two , then I think people tend not to do it , but it's probably the most important thing or one of the most important things you can do on farm , and I really think that understanding that systems-based approach is really important .

Speaker 2 11:25

So we spend a lot of time actually exploring systems . So once you've identified whether there's a mismatch between feed supply and feed demand , you try and do a better job of aligning that , and that usually involves , you know , moving numbers , or it usually involves changing lambing date or calving date and changing time of turn off and then adjusting numbers up and down . Now what that does is it all flows through on the feed budget , so you get this minimum biomass at a critical point in time where you don't want to exceed that minimum biomass , and so I think there is a lot of complexity to this feed utilisation piece . But in terms of the level of feed utilisation that I think is achievable , I think it really depends on your resource base , your locality probably , and enterprise type , to some extent as well , and I think so if you go to the rangelands , some of those targets .

Speaker 2 12:27

And when I'm talking feed utilisation , just for quantification of the metric , I'm talking about the amount of feed consumed relative to the amount of feed grown and in the rangelands I think it's probably 20% to 25% . Not that I do a lot of work there . But then you go to you know the high rainfall northern tablelands , for example . I think the upper limits are probably around 40% and the reason they're not up around 60% like they are in southwestern Victoria is because they get a lot of summer rain and it's just very hard to go to consume all that feed . And then you go to places around us , around southern New South Wales , and we probably sit around 50% . Now I know they're probably meagre when you're talking with people , the dairy industry for example , who really punch the lights out , but they also have different systems and I think the return profile is a little bit different as well .

Speaker 1 13:27

Yeah , excellent , Thank you . I hear that often . I don't know smile a bit when people talk to me about how amazing it's going to be when we have feed-efficient cattle because they'll eat a bit less to produce a bit more . But the reality is there'll be at least that much just sitting left on the pasture decaying in most properties properties . So it's going to be of little , of little value anyway . We'll move on from that . That's one of my pet projects .

Speaker 1 13:51

But the undoubtedly stocking rate is the biggest driver of profitability of livestock . It doesn't matter which benchmarking study you look at , that'll tell you that and we know that if you sort of go back and look at a season that's gone , if you had a match stocking rate to available feed really accurately , there's hardly a year where you won't make money , Even in the tougher years . If you were able to be that tactical , you could actually still make money in those years often . What are the strategies that sort of people need to use to tactically adjust stocking rate to the season ? Like , if you get the macro right , which is a big step in the first place that you've just covered , then the micro of kind of adjusting as you go ? How important is some flexibility in that stocking route ?

Speaker 2 14:29

Yeah , I think it's important , but I think there's limited number of levers you've got to pull , to be perfectly honest .

Speaker 2 14:37

I mean , your levers are reduced numbers and you can sell trading stock or sell breeding livestock or sell both , or you can supplementary feed . They're effectively the levers you've got to pull and I don't think you can be prescriptive about that approach . But I think you need to think about it and I think you need to plan for it , and I think what happens at the moment is that if you've got an ad hoc approach to management , then you tend not to plan for it and you tend to be on the back foot . So I think your approach probably comes down to the infrastructure that you've got , your ability to handle the stress of feeding water availability , your access to capital , your ability to plan the know , the resilience in your business , the fragility of the landscape , your view of landscape resilience , your beliefs and the enterprise type , and there's heaps of other factors . But I do think one of the major things is again getting back to that feed budget is thinking about even now , you know , before we're on air , you're talking about what's it look like around home . Well , here at the moment it's looking . We've got above average temperatures and it's looking dry and we've got a drying profile and I'm thinking , well , we're not that far off , you know , making some of these decisions , or at least starting to prepare . So I'm you know my next step will be going to the feed budget , seeing where we are exactly . And we should be okay because we've got two of the main drivers of pasture growth at the moment doing well , or one of them at least . We've got the temperature parts doing well for us , the moisture parts not doing so well .

Speaker 2 16:30

And I think you know , and I think it's probably time to look at your feed budgets and think , well , should you know how far are we off making some tactical decisions ? Now , there are also . You can grow more feed . You know , gibberellic acid and urea and those sorts of things have been a big part of supplementary feeding , additionally to what we have done previously . But I think the number of levers are limited and I think you also got to not kid yourself about the extent to which a reduction in trading livestock will save you if it's a reasonable drought . So I think you know a lot of people say , oh well , I've got my steers , I'll get rid of them early . Well , that's nice in a beef system , but the extent to which it changes the dial on feed demand is relatively minor . So long as you're aware that it's relatively minor , that if you give up 50% of your feed in spring , selling your steers isn't going to get you to the end game , if you're optimising feed utilisation , does that make sense ?

Speaker 1 17:39

Yeah , yeah , 100% . You mentioned it earlier around shifting lambing time or calving time and I don't know . It's probably , I imagine , up there in my top five frustrations probably , of just when people calve and lamb compared to when the pasture profile says they should . How many people , in your view at least , lamb or calve at the right time and why do you think people are often outside of their optimum window ?

Speaker 2 18:07

You're asking me a lot of psychological questions here , I think . But I think I guess You've probably got a similar bias to me in so much as you've defined , or you've said , the right time . I think you probably need to define what we think is the right time and I think your point was the right time is as feed supply increases . Now , that is only the right time if one of your major objectives is productivity and profitability . If it's not , you could argue that well , who cares ? Carve any time and have fun . So it really does depend on your belief and the context behind that .

Speaker 2 19:01

So I guess , assuming you're involved in commodity livestock production and your ambition is to have highly productive and profitable herd or flock , then the right time to me is typically when that period of feed supply increases , and that's typically also the period when reliability of feed increases as well .

Speaker 2 19:24

So there's two factors there , and the beauty of that is , of course , calving at that time or lambing at that time increases demand during a period . So from the same animal I get double or triple the energy requirements , just because I've , you know , made my operational timings coincide with an event of increased fee . So what proportion , I don't know , judging by the number that actually optimise fee utilisation , which I think is relatively low , or which benchmarking data suggests is relatively low , then it's the minority rather than the majority . But again , why is it ? We're back to psychology , and I'm really regretting the fact that I didn't study psychology and that I studied a technical field , because I think a lot about what we do and I'm guessing this is no different in your business is trying to understand the way people think and why they do what they do , and I guess the power we have is we understand , you know , the biology and the things that are going on behind that . But we also have to study the power of influence , and I haven't cracked that nut yet .

Speaker 1 20:55

You may be well further down the pathway of that one , no , but I do listen to a lot of psychology podcasts these days and , yeah , certainly , if you see me driving around the countryside , that's what I'll be listening to most of the time to try and understand the human mind , because it is something very intriguing . I'm the same as you kind of wish that . Well , one of the options would have been to study that with more detail , but it is really intriguing how it's often mindset and not always biology , and I've just

Sheep Enterprise Profitability and Transition

Speaker 1 21:23

noticed that . The next question I'm going to ask you is also also psychological . Maybe I've gone a bit too haywire on that front . We'll try and get to some technical stuff as we round out this interview .

Speaker 1 21:32

But one thing that has kind of interests me and it's I think it is probably got more of a technical answer than a psychological answer is that often benchmarking will show that I get a merino system . This is that sort of increased dialing up stocking rate , not worrying about how many lambs you wean . Just maximise kilograms of wool per hectare is kind of it will give you the highest return versus maybe a merino system that's a different genotype with a different production system , which is more of a lamb production system , and it sort of always intrigued me whether that's just because that's the kind of systems that are in the benchmarking group and then that benchmarking group is sort of promoting , or is it reality , I suppose . And I don't know if you can answer that question or not , but I'm sure you'll give it a crack .

Speaker 2 22:13

Yeah . So it's an interesting insight that you make , because the reality is that in benchmarking groups you do have or traditionally we had a lot of those wool growing enterprises . I think that's changing and there's a lot more dual purpose for one of a better term type merino systems . But your statement too is is a little bit dependent on multiple variables and often they're not easy to distinguish in a benchmarking study . So some of those variables are , you know , the relative pricing of sheep meat and wool , both of which have been reasonably dynamic of late , and so it's an ever-changing sort of position . But I guess our data doesn't necessarily say increased wool production delivering higher profits per DSE , but it does tend to say them delivering higher profits per hectare , and I think that one of the plausible reasons so typically what you do when you get this benchmarking data is you think about plausibility . Now that doesn't mean it's necessarily right , but a theory around that is that I guess meat production has higher relative energy demands when compared with wool production . So in other words , at the same level of feed utilisation you can actually sustain a higher stocking rate on a wool production type system than you can on a meat production type system , and that's due to the difference in energy demands and historically that higher wool production at the wool price of the time delivered higher returns when compared with that lower wool production with more meat , because the more meat system you do actually give up some wool to do it , because you've got higher energy demands for the meat . So that changes depending on those relativities between the wool and meat price as well . And so the other factor that I think , which I think you've got to be cognizant of if you're going down that dual purpose path and and a lot of people are , and a lot of people are doing it for ease , and I think the one of the points I was trying to make at ballarat in that presentation where you saw me , was that ease is nice but it often drags you away from one of the bigger goals , which is profitability .

Speaker 2 24:46

And so in those dual purpose type systems , what I'm finding is people are dragging their lambing date forward and they're actually doing that because you know they need to get lambs to wait by a certain date , or they want to make their life easier with weaners , weaner management , which sort of makes sense , but in in the process of that it means you're running less use through midwinter per hectare and I think an output of that is that you know you do tend to have lower profitability . So I think there's multiple things going on there . Potentially Now can you fix that , probably , but I think it's . You know there's more than one way and I understand that with the meat side at the moment it is a dynamic and changing sort of part of the business at the moment and there are people paying reasonable money for , you know , merino sheep . So you know , good luck to people if they're going down that path and they're generating a level of return that that suits them and they're doing something that they love doing .

Speaker 1 25:56

Yeah , I think I feel like this space is going to get finally filled in properly , hopefully with the work that John Young and Hart and Oddie and Andrew Thompson and co are doing at the moment with the GPIP , which is sort of trying to understand the role of whole body energy on potential stocking rate . And yeah , I think that is where we might finally see that if you build an animal that can handle higher stocking rates , which looks like a meat animal really , or it looks like you're trying to breed a meat animal , what you're actually trying to do is breed an animal that can handle higher stocking rates and therefore run more of them and make more money . So that'll be interesting as we learn more about that bit of biology which we sort of can only really make assumptions about until we get all of the numbers crunched . But yeah , it's intriguing Intrig of the numbers crunch , but yeah , it's an intriguing space , always has been .

Speaker 1 26:39

And I think it probably leads on to the next question which I often get asked , as recently as last week , like what am I if I bought a farm today and I wanted to put sheep on it or wanted to put livestock on it , what would be my most profitable option ? And I always well , pretty much always answer well kind of do what you want to do and do it really well , you probably won't go too far wrong . Like there's a lot of crossover in the relative profitability of different livestock systems . Whether you're shedding , whether you're really meat production composite or whether you're a cow-calf system or you're pure merino 17 micron wool , there seems to be lots of . I don't know . I'm sure the benchmarking has lots of crossover in return per hectare across different options .

Speaker 2 27:22

Yeah , that's right . So the benchmarking evidence supports your response , but there's probably a bit more to it , in so much as I think you've got to run an enterprise that suits the resource base , and not every enterprise does so . If you've got , you know , something requiring meat production and you've got no depth of soil or no quality of pasture , obviously that's going to be a challenge , yeah , or if you don't have the infrastructure to handle those livestock or that sort of thing . So obviously , outside of those key constraints , is there anything that sticks out ? Well , there always is , depending on what period you look at and depending on the circumstances . But irrespective of what sticks out over the short or even the longer term , our message is usually reflective of the one that you just delivered , which is there is more variation within any enterprise than between it , which suggests that it doesn't matter what you do , just get good at what you do . And I think there's a lot of people looking for silver bullets and jumping between different sheep enterprises , underestimating the amount of costs that is incurred when you move between enterprises and not even considering remaining in the enterprise they've got and ignoring the fact that they've built a lifetime of skill in that business and ignoring the fact that they've built , you know , a lifetime of skill in that business , and understanding the level of skill that they've developed and how much it costs to move from , you know , being reasonably good in one to average in another is bewildering , but there's still people taking that sort of approach , and so I guess the bigger message there is start with doing some analysis in your existing business . So the other thing that's astounding is the number of people that move who haven't even assessed the numbers in their existing business , that they take an industry average , which may not apply to them for whatever reason , and they change on the basis of an industry average , which may not apply to them for whatever reason , and they change on the basis of an industry average rather than on the basis of their own numbers .

Speaker 2 29:48

So my view would be , in that case , start with looking at your own business and understanding it a bit more intricately prior to making that change , and then you know the next step is obviously then make the change if that's appropriate , but don't go in under-resourced , because you know , understand the extent to which it's going to cost you . So I've got some clients at the moment that have moved out of sheep enterprises into beef , not particularly because you know it's a better enterprise or anything , but for simplicity or it suits them . And they had relatively small sheep enterprises and a large beef enterprise . So the next step was just to simplify . But the cost of moving was high at that time because sheep prices were low and cattle prices in relative terms per DSE were far higher . So you're actually capitalising a loss on the value of the livestock but you hope that it was more than made up for in the simplification , the benefits of simplifying the enterprise and that sort of thing .

Speaker 1 30:54

Yeah , there were some really good points there , particularly that cost of transition , which I think gets buried a bit . It's sort of everyone just even if they were doing the numbers . It's kind of look at steady state today versus steady state in 10 years . But the burn for 10 years if you haven't got that right can be significant , particularly if you like your beef cattle enterprise , or example is , if you do it at the wrong time you can , and often we see people do that because things get on trend and people start buying ostriches and it's interesting .

Maximizing Lamb Carcass Weights and Profit

Speaker 2 31:25

I don't have any ostrich producers at the moment and my ostrich knowledge is limited .

Speaker 1 31:34

Yeah , I have eaten a couple in South Africa . That's about as deep as I go . But this is quite a specific question , but one that I think was asked at Ballarat , but it was worth recording the answer , and that's about as deep as I go . But this is quite a specific question , but one that I think was asked at Ballarat , but it was worth recording the answer , and that's we've got a processing sector that's looking for efficiency , which makes sense , and the way they're driving efficiency is to pay more for heavier carcass weights than what we've seen before . And I guess at an industry level that's fine because that should naturally shake out with specialised breeders , specialised finishers . But often we've got sort of breeders who try to finish and that sort of stuff . What do you like if you do try and hold on to those lambs and then grow them out to heavier carcass weights ? That's got to have an impact on profitability across the system .

Speaker 2 32:12

Yeah , it's already showing and I think what the processors have traditionally done is increase . You know , wasn't so long ago we were selling a 18 kilo lamb . Then that became 19 , 20 , 21 , 22 , and now I'm hearing I heard from a client the other day that they said 22 . Now that's the absolute bottom of the um of the grid . We don't want you to target there anymore . And I think the challenge with that is there's cost at either end of the season . It's either cost because I carry them beyond that growing season and the cost is then because I've got low quality feed and I've got slower rate of gain , or there's cost at the front end of the season , which is the cost of me having to move my lambing date forward , to meet more days , to turn off that animal or drop stocking rate , or both . Yeah , more costly of course , and that's what happens when you bring it forward . So the first step is to bring it forward . The second step is then I know I've got too many years um , well , that wasn't exactly right . You actually had , uh , you , you changed the boundaries and so I think , all the pushback and and not to mention the fact that then you go from shearing only a portion of those lambs , which is a loss making exercise , to shearing all of those lambs , and all that cost is being borne by the producer and I think what the processes perhaps need to understand is how that influences cost of production . And it is heavily influencing cost of production , in my opinion , because I don't know too many of my clients that can really afford to go to a 24 kilo lamb because the marginal cost of doing so would be very high . Now , that's not to say it can't work , it just means they've got to pay us to do it . The processes have been very good conventionally at paying you a little bit to incentivise you to do it and realising that if I pay 20 cents more , that might get you over the line . But the astute business managers are there sitting there going . Well , actually , it costs me another dollar . 20 cents isn't enough per kilo of carcass weight , so I'm opting out , and what you will see then , in my opinion , is a movement either to an alternative enterprise where they can make a bigger margin , or a request for you know more . And I guess , as those people move out , it'll be self-fulfilling because the price will go up . As you know , the supply goes down .

Speaker 2 35:11

So I yeah , I think the industry's got a bit to work out here . I really do , because we're at the limits at the moment . I mean there's 15% of producers that are producing lamb under $4.50 a kilo carcass weight and the remainder are closer to $6.50 . Now everyone's getting excited about the lamb price going to $10 , or I didn't go to Lamex , but that was sort of some of the feedback I got back . Now I'm not that excited by it at all because it's still not a particularly large margin .

Speaker 2 35:45

And if I look at alternative enterprises , I think , well , if they're sitting in those upper percentile ranks for pricing , there's more margin upside for alternative enterprises than there is for lamb alternative enterprises , than there is for land . So I think the industry's got a bit of work to do to actually , you know , liaise with people who understand those dynamics and I think you'll see pushback at a certain level . Now the main , the pushback will start with people that know their numbers and then it will filter down to the and the people that don that know their numbers and then it will filter down to the people that don't know their numbers and be ignorant anyway of , you know , the fact that they're only making a dollar or a kilo or not . Even so , I do think , yeah , this is a big challenge for us .

Speaker 1 36:34

Yeah , yeah , no , definitely Switching gears a little bit back to benchmarking , which is where we start and where we'll end , probably . But it is a fantastic way for businesses to see opportunities within their own businesses by obviously comparing themselves against others that are doing better or different , or just that learning that goes through , kind of comparing your metrics with someone else's metrics . It is kind of predicting the future from looking in the rearview mirror , which is kind of what benchmarking has to be . Is there any risk that that sort of becomes a bit of an echo chamber where we're not looking out to potential future outcomes because we're only comparing ourselves to what's been done in the past ?

Speaker 2 37:10

Yeah , I think definitely that's a risk . Looking backwards gives a rear-facing view and that's not always constructive . For example , a rear-facing view on budget projections over the last few years may have actually constrained growth opportunities . So , you know , you think about five years ago , if you only looked backwards and you weren't thinking about a forward-facing view of where you felt prices might be , thinking about a forward-facing view of where you felt prices might be , then you might have missed out on , you know , some aggressive opportunities , particularly when the fundamentals were right for growing in those businesses .

Speaker 2 37:51

But I guess , and I think the other risk , as you quite rightly point out , is there can be a bit of groupthink in groups where you all pat yourself on the back and you think you're all coming from the same point and you're boosting yourself up because you're smarter than everyone else , and I think the challenge there is to actually keep challenging yourself . So I guess there's some ways of dealing with that . One of those is we actually benchmark the budget , and I think that's a powerful way of making sure that not only so there's plenty of people that bench or that budget their financials , but it's also important to budget your production metrics , and this is where I think the power of benchmarking really is . It's in that integration of your production metrics with your financial metrics and the understanding of how those production metrics a change here or there drives the change in the financial outcomes . And so we tend to benchmark the budget as well as that rear-facing view . Now that doesn't mean it's always right , but what it does make sure is that if you're benchmarking a budget and it's giving you a 3% operating return across the business , I'd be saying , well , why are we only targeting three when conventionally or historically three ? You know when conventionally or historically , your returns have been five or six or should be better . So it starts the mind thinking about what the opportunities are .

Speaker 2 39:30

But I do take your point about , you know , this group think , which is a bias , and I do think you've got to continually have a group that challenges each other , and I actually love the fact that they challenge me . I mean it's exhausting . But you go to some of those groups and you know we have arguments on the basis of our views , shaped with evidence , and everyone's got their numbers . So at least you can have a really constructive debate about what's right and what's not right and that sort of thing . But it's also important to keep yourself grounded , or my clients keep me grounded , because you know they just call me out if they don't believe it and that sort of thing .

Speaker 2 40:18

And so what that does is forces you back to the modelling and , interestingly , recently , on the basis of one of these discussions , I've gone and looked at a prime lamb system and looked at the cost of ewe lambs in a system . Now , I've used some assumptions but at the moment I actually think you could probably buy in , have a , rather than having a six-year age structure with you lambs in the system , you can buy , you could have a five-year lamb or you structure , rather with no lambing , you you lambs , and then what you're buying yourself is higher levels of fecundity across the flock . You also allow yourself terminal genetics across the flock . Now , it's a non-self-replacing system which obviously has a range of issues , but interestingly , it's more profitable .

Speaker 2 41:17

Now that's based on a range of assumptions which are obviously related to the price of the ewes , the relative fecundity levels or lambs going to ewes joined of the different age structures , and the extent to which terminal genetics gives you production responses over maternal genetics , or at least that portion that are terminally joined . And so you know they're the types of things that my clients force me to think about , and it's really great because , you know I mean , I like playing with models and the value of the benchmarking data is you can actually shape it and say well , is this assumption real or not ? What does the benchmarking data say ? It works this way or it doesn't . Now , that doesn't mean I'm right because a model delivered this outcome . All it means is that we open up the debate and people will say , no , well , your assumption's flawed on the basis of X , y and Z . Great , but we can have a really constructive discussion that delivers , you know , some powerful insight , which are data-driven .

Speaker 1 42:25

Yeah , often the workings will be more valuable than the answer . Anyway , yeah , it's all the bits that go into the Absolutely , and I love that concept of benchmarking the budget , because that does , by definition , force you to think about new ways to be better and new ways to change that return on capital . The last question for today should well , maybe the more difficult one . I don't know , some of us don't like changing your mind . Some of us do , but what's the last thing you'd change your mind about ?

Speaker 2 42:51

I'm going to go left field here , good . So I used to think that my teenage kids had no idea about the way the world works , and I thought they didn't really have the ability to read people . But my observation of a recent interaction between my teenage daughter older teenage daughter and my wife changed my mind on that , and it probably reassured me to some extent that my daughter is far more worldly than I'd previously given her credit for . So for the purposes of the context of this story , you need to know that my wife is an outlier in our family due to her incredible generosity and kindness . She's a type of person that always looks out for others and finds a good in others , and she's just a friendly and considerate person .

Speaker 2 43:47

Now , none of the remaining four members of the family and this even extends to our family pets show even a remote sense of kindness . In fact , if I had to think of words to describe the remaining members of my family , of which I am one , the words callous , ruthless and savage sort of come to mind . So my wife and daughter have been watching this movie about a prisoner who spent a large part of his life in jail . When my daughter says to my wife , it's every man for himself in jail . You wouldn't last five minutes , mum . And now my wife's response and she's not a religious person was I think I'd be okay , I'd join a Bible studies group and befriend anyone . Well , my daughter again responded with mum , you are so naive , you would get used and abused in jail . So there you have it , words of wisdom from an unhuggable teenage daughter , and I had to change my mind and know that she will be okay in a tough world .

Speaker 1 45:04

Excellent . I'm absolutely pumped that we've got a family story into this one , because anyone that's seen a few of your presentations know that they feature prominently and are always good for a giggle . But I thought we might get one along those lines out of you , which is awesome . Thanks very much for your time , john . It's great the work you do there at Agrista . How can people find you ? Obviously on socials , or we'll put your website in the show notes . Is that the best ?

Speaker 2 45:30

way . Yeah , it's just wwwagristacomau and , yeah , happy to engage with anyone who's looking for that engagement and really appreciate the opportunity to speak to you and , yeah , as you said , nice to meet . Finally , it has been a while in the same industry and we haven't really sort of touched base .

Speaker 1 45:52

Yeah , no , excellent Thanks , mate . Thanks for your time Righto .

Speaker 2 45:55

Speak soon .