This page is about profit on a farm, cash flow and how they are derived from the land you manage

1. The 'business' of agriculture is the capturing, packaging and marketing of sunlight for a profit
   This concept is known as the "Solar Chain to New Wealth", and it is a building block for farm profit and a farmers prosperity.
Click here for a full description of this important concept.


2. Profit is a cash surplus PLUS a measurable increase in the biological wealth of the land under management.
   This is regenerative agriculture, the great way forward!
   Every year farmers manage their resource base of land, plants, animals and equipment, in order to make money for their family, or for their shareholders if they are part of a larger organisation. The most important resource they manage is undoubtably the land. If the land degrades then valuable plants cannot readily grow; the crops and pastures they produce will tend to be poor, and increasingly expensive. If they run livestock it becomes more difficult and more expensive to produce a profit.

   Degrading land leads to impoverished people! When the land is regenerating it is easier to make a profit every year.

3. Profit is a function of cost of production, not sale price.
   Sale price is outside the direct control of most producers, although it is true that each year they have many opportunities to influence the price received for their output. In the event of a severe market downturn the most important thing for a farm family to achieve is to survive intact. The best way to do that is to keep costs of production very low.

   The easiest way to keep costs of production down is to have low variable costs: these are the costs incurred per unit of production - if you add another hectare (acre) of production you incur another hectares worth of costs (such as chemical or fertiliser), or if you add another animal you add another unit of variable cost such as drench etc. The easiest way to keep these costs low is to keep the health of the land continually improving.

   The other way to keep cost of production down is to keep overheads low.

Click here to see why.


4. Marketing produces the cream.
   Over the years farmers have developed many ways to protect the price they receive for their production. Examples include building relationships with the people who purchase their products, or the use of price setting mechanisms such as forward selling. Some farmers attack the problem of marketing by developing value-adding processes for their products.

This page might mean for you...
The good news is that when it comes to inputs, a farmer is in the happy position of being "the buyer". There is no law that says a farmer must buy anything (although we all know they experience huge social and marketing pressure to buy 'everything'). Keen marketers would like a farmer to buy all the inputs that sustain their production, even those, such as soil fertility, that nature traditionally provided at no financial cost.

It is my fervent hope that when people have read these pages they will have the courage to make a stand for themselves, and cease unnecessarily making other people rich at their own expense. But in doing so, they must be ready to manage 'whole' situations, and take a whole view of their situation.

This is where you start...
A great starting place for improving profit is in your own mind. Begin by reinforcing positive beliefs. Believe that any outcome is possible, and believe that you always have the opportunity to choose the result you want. It may not be easy and at times it may look impossible, but if you know the general direction you want your life to move in and your actions are congruent with your desire, you will move in the right direction.

You might consider making small changes to your language. Stop telling yourself and others what you do, and tell them who you are. Move from, "I am a cattle breeder", "I am a wheat grower", "I am a soybean producer". Tell people who you are: "I am a human being creating the quality and quantity of life I really want, by managing the resources available to me in the best possible way, regardless of changing circumstances".

If you believe you can create your own outcome you will move towards it, action by action. The interesting thing is that new opportunities will arise, seemingly from nowhere, when you adopt this attitude. Farm profit will begin to increase as you apply your unbridled creativity to pleasurable tasks that are ecologically regenerative.

Be prepared to gain more and more knowledge. Have an open, challenging mind. Two sayings spring to mind:

• We don't know what we don't know
• Nothing is as hard as you believe it to be

You should monitor...
First you need a plan. Without a plan it is stating the obvious to say, "any direction will do". Without a plan any outcome is a good outcome and there will be no need to monitor, because you will automatically arrive at what you planned for. Anywhere!

The essence of managing holistically is looking for early warning evidence of deviation from plan. Financially, you would be on the lookout for any expense that is greater than planned, or any income that falls below planned levels. It is not so much the fact that something has failed to achieve plan that is important, it is what you do about it the deviation.

Conventionally, it would be accepted that a drop in income automatically means a decrease in farm profit, because profit is seen as the cash that dribbles out the bottom. Farmers tend to accept without question that somebody else has taken their dollars. When managing holistically, a drop in expected income triggers a replanning process. The business objective is very clear: despite changing circumstances the level of profit required to experience the quality of life you desire must be achieved each year. It is a very different approach to conventional planning, monitoring and meek acceptance of circumstance.

Other things to consider...
The biggest change in thinking when managing holistically is the concept of producing a cash surplus is simultaneously ecologically regenerative and socially satisfying in the short and long term. We can no longer accept the current beliefs and practices that damage the ecology of farm environments. We can no longer think that we will indefinitely harvest cash surpluses without considering the effect of our actions upon the land.

Unless land managers have a goal describing the outcomes they want (ecologically, financially and socially) they may experience loss of hope and financial hardship. So not only must a financial plan be monitored, but so too should the social and ecological consequences of every action be closely observed. If something is going wrong, you should act immediately to fix it.