Diversification

Diversification – mindset is everything!

Dairy Farmers are facing a time of unprecedented change as NZ’s agri-sector is encouraged to move from dairy centric to diversified food production with a reduced environmental footprint. Land use change and diversification of income are set to characterise the next decade of farming, opening opportunities for those who choose to participate.

Making the most of opportunities in a changing world requires the right mindset along with smart, strategic thinking and the courage to try something new. If farmers anchor their thinking to one type of food production on their farms, or undervalue their wider business skills, change will be near impossible.

For those who identify as single producers shifting mindset may not be easy and take some time. As the saying goes “first change the way you look at things, then the things you look at change”.

NZ needs robust farm businesses focused on the customer voice and embracing environmental expectations to ensure a buoyant primary sector and vibrant rural communities. To thrive through the next decade of change, we must master a new way to think before we can master a new way to be.

For many farm businesses the existing land use has most likely reached maximum land value for the foreseeable future. To continue to strengthen cash flow and build equity, a business may need to consider what “higher and better” land use options exist. Options for an individual farm business will vary on location, localised climatic conditions, access to water and soil fertility. Any pioneering options may take a good deal of trial and error and careful risk management, however diversification doesn’t have to start on a large scale.

Diversifying strengthens cash flow with the ability to offset product price variations with income from different sources. Cash flow can also increase through an intensified operation on a portion of the farm e.g. horticulture, tourism. Holding a fixed mindset around a farms land use may limit potential returns and equity growth as the farm business remains reliant on a single income stream. The proviso for achieving cash flow & amp; capital growth through diversification is the core business, in many cases a dairy operation, is managed effectively and continues to run at peak operational efficiency.

Diversifying on farm creates more interesting roles for the farm team and may enable a business to retain its key people. A new business enterprise on a portion of the larger farm may create opportunities for key people to invest in the business by becoming a shareholder or partner without compromising the core farming operation.

If you want to look at the options for your land and build a diverse farm business strategy, email Mark Heer or Rachel Haskew at 8pC on mark@8pointcompass.com or rachel@8pointcompass.com or phone 0275579422 (Mark).