The “Poor” Farmer

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Instead of traffic jams on the way to work this is what we have to put up with.

The poor farmers have everything against them. The weather, politics, safety, price volatility and much more. This is a common perception of people looking from the outside at us “poor” farmers toiling hard all day to put food on your table. You see YouTube videos showing how tough our lives are and portraying us as martyrs that sacrifice our lives to put food on your tables. It’s as if we are only doing what we do, to serve others and ensure that you can eat. In most cases that couldn’t be further from the truth!

In actual fact we spend most of our lives trying to maximise our profits from your need and desire to eat. Let’s just say that most of us are in farming for the money and the life style is an added bonus. It’s a business like any other business out there. All businesses have their challenges and curve balls that get thrown at you. Undoubtedly farmers rely on a lot more luck to succeed than other businesses but that just means you need to be a little bit more conservative in your business. If you are smart in the way you operate, then the role of luck can be diminished over time.

The sheer luck involved also means that there are small fortunes to be made if you crack it with a certain crop in a certain year. My father is an example in that regard. He got on his feet with a few lucky breaks when he hit some record prices for his cabbages and potatoes. He started as a school teacher who grew cabbages and potatoes as a sideline. He told me of a year when he had about 4ha of potatoes that he sold at such a high price, that he cleared his overdraft of R80 000 in one week. This was during the 1983 drought. Work that out in in today’s money and it’s an astronomical amount of money. I suspect it’s around R2 million or more in today’s terms. That’s luck, but that came after a lot of hard work to get to where he was.

Those farmers that aren’t in it for the money are probably going to go broke or are wealthy individuals craving a piece of our amazing lifestyles. I sometimes get a little tired of hearing farmers complaining about too much rain, too little rain or low prices. It’s about all you hear us talk about when a bunch of us get together. I will admit I fall into the same trap at times, but you need to step back and look at things from the outside. We all know what farming entails and that’s one of the reasons we love it. Every single day on the farm is different which certainly keeps things interesting. Of course you are going be a bit bleak about a lack of rain, a failed crop or as in my case an entire dairy herd that has to be slaughtered. Yes it can be tough at times and farming is not for the faint hearted.  Life in general is not for the faint hearted. It’s easy to exist, but it’s not as easy to live. Farming is a great way to live and a great way to make a good living if done smartly.

We have had a worse year than i could have immagined, but it’s still been a lot of fun. What business makes good money every year? I don’t know of one. Somewhere along the line if you have been having a good run, your luck will turn bad. That’s just the law of averages. It won’t always go according to plan. My neighbour put it amusingly. “You wake up, wipe the shit out of your eyes and plant another cabbage”. That’s exactly what we did and it’s paying off well. It’s actually a fabulous time to have not a dairy cow on the farm. Sure we have to rebuild again which will be a slow process, but sometimes terrible things like culling your entire dairy herd can actually be a blessing in disguise. I now have seen the huge potential of growing cash crops. Due to our farms location on the border of the Transkei we are the first port of call for a cabbage or potatoe buyer. We also have a great microclimate where I think I can have crops ready in our area a few weeks before anyone else.

As a farmer you have to expect that you will have a severe drought several times in your farming career. You will get smashed by hail. You will have floods. You will have disease. Farming is risky business, which is why it’s so important to plan for these eventualities. There’s seriously good money to be made in farming if done well and smartly. I don’t believe that the way to success is to necessarily add value to your product. Adding value to your product may take some volatility out of farming, but it won’t necessarily improve your profitability. Over the 8 years that I have been a dairy farmer, I have had many debates about the merits of investment higher up in the value chain. We have always processed our own milk but I can tell you categorically that the best dairy farmers in the industry are far more profitable than we have been over the years. The moral of the story is stick to what you are good at and get better at it. For those farmers who are struggling to make ends meet, they should look at what the more profitable farmers are doing rather than blaming the supermarkets or processors for screwing them.

The profitability as measured by Return on Assets of the best 10% of dairy farmers is as good if not better than the best dairy processors, and the best supermarket chains. I did a little research to back up my claim. I know roughly what the profitability is of the top 10% of dairy farmers is from being part of study groups where we share financial figures benchmark against each other. The two companies I looked at to compare with farmers were Shoprite and Clover Dairies. They may not be the most profitable, but they are very successful publicly listed companies and so their financial figures are easy to obtain online. Clover’s Return on Assets has ranged from 8.6% to 15% over the last 5 years, and Shoprite has ranged between 15% and 19.5% over the same time frame. The best individual dairy farmers have been better than that over the same 5 year period. You will have greater variations between years as a farmer but over all you will probably make more money as a good dairy farmer than investing in the value chain. As for the average or below average farmer, then selling the farm and buying shares in Shoprite and Clover would definitely an option. I have never been a farmer in the top 10 % and there are obviously many good reasons why you wouldn’t want to sell the farm and buy shares in the stock market. The main reason being that you can see the room for improvement and that you have something to work towards. It might sound appealing to go and lie on the beach and sip on a Martini while Clover and Shoprite make money for you, but it would get awfully boring after a while. So we keep trying to improve the way we farm and while doing so we have a lot of fun and earn a good living while doing so.

Another thing that us farmers have that the most others don’t have, is a tight knit community. Farmers in our area have been amazing in offering support to us after all we have been through. It’s very humbling when farmers offer you cattle to help you replace your culled herd, even when they are struggling with the drought themselves. It really makes you realise that farming is more than just a business, it’s a way of life and an ethos.

I’m sure I speak for almost all farmers out there. We all know that feeling when we sit in a traffic jam in a big city, the poor buggers we think to ourselves, imagine doing this every day. We are some of the few people out there who genuinely have fun while making a good living. As I start my family, what more could I wish for than to be a farmer with my family close by and to bring my kids up with the mud squelching betwee their toes.

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My old man enjoying the younger generation.

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One if Ollies favourite things is to potter around on the bike.
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Anytime I feel the need to get out, I have a mountain in my back yard.
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