Turning grass into money with Nigel Kerin

Mark: Today I was really keen to hear about the journey of Kerin Agriculture and some of the mindset changes that have occurred over time. Obviously you grew up on the family farm, but have built a business that's very different to the family farm. How did all that get underway and where did that start?

Nigel: I left school at 14 and went jackarooing. Where it really started humming is when we did our succession, which was in 2007. The first thing we did was employ a business coach. The reason we employed one was because we were okay at agriculture, but we weren't that great at business. We knew business skills were what we had to sharpen up on, not agriculture.

One of the big learnings was that what actually got business going was bringing an outsider into the business to hold your hand through a change. I know that exists very much in the cropping business. Agronomists hold your hand through change, but in the livestock industry, especially the sheep industry, there's absolutely bugger all outside influences that you can bring into your business to make a difference.

The guy who we employed was an absolute, fantastic game changer. In the way we thought, the way we addressed and conducted business and also very much how we managed climate.

Mark: I've heard you talk about your understanding of what's in front of you in terms of grass and your grass budgets. How does that system work?

Nigel: One of the one-liners that our coach uses over and over and over again, nearly every meeting is, "Nigel you'll make really good money in the good years, and then you'll tear it up in the bad." Drought was our enemy. Over time we developed a process where we started using trade animals to adjust stock to carry capacity.

We were 100% breeding back then. We started using trade animals to adjust stocking rate and carrying capacity but the problem with that was we were doing everything the way everyone else used to do it.

Most cockies consider wealth by the amount of animals they're holding and that's not how trading works. For us, a trade comes in and it's got to be in and out in four months. The reason it's four months, is that’s all we can see ahead of us as far as grass- four months. We won't buy trade sheep or cattle, unless we've got the grass to finish that trade, before we actually buy it.

Mark: How unique is that four months to your neck of the woods? Is it universal?

Nigel: Yes. Very universal. It doesn't seem to matter where you go across Australia or go to a strange place. How long can you see in front of you? I say four months.

It's very different when you go into the pastoral zones, they can actually see further out because they're in a much bigger area and they can do a pasture or herbage assessment of what's there. They can get out to six and seven months at a time but in the higher rainfall areas, four months is about as good as you can get it.

Mark: A lot of livestock farmers are very proud of their breeding herd or flock and it ends up being a hell of a lot of emotion tied up in those animals. You've obviously broken out of that mould.

Nigel: I remember that when the old man was boss. The biggest issues we ever had were in droughts. The sacred bloody cows and the issues that maintaining and keeping those sacred cows used to create...

Well, when I got my own business, the most stress that ever came into our business was in the dryer years, so something had to change.

We used our grazing charts and grass budgets to determine what we’d got on offer. It allows us to monitor exactly what we are doing with how much grass we've got and how many months ahead.

We like to have four months ahead of us all the time for the core breeding herd and we maintain that by adjusting it with trade animals.

Mark: I've seen a fair bit on social media this year of some fancy-looking canola. That's obviously been a bit of an interesting feed for this particular year.

Nigel: Yes, we put in 710 hectares. It wasn't this year that got us really interested, it was how it performed in 2019 in the worst drought ever. It was just amazing the way this stuff would go chasing moisture. We wondered, how can we get the highest cash flow after going for basically two-and-a-half years of being in drought? What will be the highest return on a millimeter of rain that we can get, with the least amount of risk?

Some people will say, well, hell, canola's pretty bloody risky. Well, not when you've done it before and you know what your costs are and you know what the return is. We thought, "Well, if this stuff can grow so well in a drought, my God, it would have to perform well in a good season." We went for canola and started planning in February, finished in March. It just went kaboom because the season went kaboom with it.

We then looked about what stock would have the highest return from grazing on that canola and at the time it was lambs. We looked at what the lamb industry was doing and we worked out that this stuff had run about 35 DSE a hectare. That's what it did standing on its head.
We went in then and we brought lambs. The thing was with the lambs, we didn't buy any lambs until we got the contracts. Now those contracts at the time were $9 a kilo. Did I have to think about taking $9 a kilo as a forward price? No, because it was in the 100th percentile band. It doesn't get any better. We went and brought all the lambs.

In that trade, the whole lot were in and out of there in 14 weeks. In that period, we netted, after the cost of carry at $16 a head on each lamb, $75 a head. I've never seen weight put on, no matter whether it was Merino's or crossbreds, as quickly as what that stuff did. We had basically zero losses, there were zero animal health issues. It was an absolute piece of cake.
When all those lambs started going back out the gate, had we not taken that forward price, we would've burnt money up.

Mark: A key principle for you is if it's not already sold, then you don't buy it?

Nigel: I love record store markets and restocking markets. When black steers are making $5 I get excited. When you're buying a restock of lambs for $200 at 43 kilos, that's when you know you're going to make a heap of coin.

The reverse opposite to what most people think.

Because what do the meat processes do when everyone's got grass fever? They want to secure supply and they do that in a way called forward contracts. When the restock market is at record levels, 90% of the time the forward pricing will be at record levels.
I don't look at what I pay for a black steer or what I pay for a restock of lamb, I convert everything back to DSE return for the weeks that I hold it.

That's where it gets really interesting because it removes all the emotion out of record prices. In our lamb fattening business, we traditionally and quite easily, put a kilo of dressed weight on per week for each lamb.

If we've forward sold at $8, it’s $8 a week we're making on that lamb. So our cost to carry traditionally, on lambs, is about $16. That's interest freight, in-out, induction costs, blah, blah, blah, interest, whatever you can think of.We only have to hold those lambs for two weeks to cover our cost to carry, so if they're here for 12 weeks, the next 10 weeks are all net profit.

That's a really, really good business when you know your cost to carry is covered in two weeks of grazing in the next 10 weeks, it's all cash. It's the same with cattle buying black steers.
We don't bring animals on to park them here and put bugger all weight on, just because they are cheap. I’d rather have nothing running on my farm. There is nothing good about cheap, because usually when an animal's cheap, it means you've got no grass anyway, so what are you going to do? Just go and park it there, and incur a cost of carry with bugger or weight gain?
I'd rather leave the money in the bank and leave the grass in the grass bank and do nothing than buy something just because it was cheap- that's really dumb business.

The thing with these lambs or any trade lambs we buy, we know we're going to bring them here and they're going to be here for a maximum of 16 weeks, but they're usually out the gate and gone in 12 or 13 and they're going to do a kilo of dressed weight a week.

It's the same with the cattle when we are dealing with black steers. We want to be doing a couple of kilos a week. With cattle, when you've got $100 cost to carry, if you are looking at $4 a kilo and you're doing two kilos a day, it takes 12 and a half days of grazing to cover your cost to carry. Then after that, it's all profit, so 12 and a half days, I've got to pay the bank back, and then after that, bingo the rest is mine.

When you annualize the return of the lambs they annualize out. Admittedly, you can't do this all year, but I have to annualize it out to know well, is this a good trade? Those lambs came back at an annualized return of $230 a DSE. The cattle this year, which were forward sold at $7 a kilo of dress weight, come back at $177 per DSE annualized.

Mark: How much of your bandwidth is taken up looking for those trades or have you got people in your business that are always looking?

Nigel: It's pretty simple now, it's just like a button you push. You do a feed assessment, you update your grazing charts, you look at the trend line on your grazing charts, you look at what grass you need on hand for the core breeding herd, whether that be sheep or cattle. Then you go, "Well, I need to put on another 4,000 DSEs. So I’m going to buy lambs”.

I rate lambs at 1.3 DSE per lamb, and I'll rate cattle at whatever they are at 1 DSE for 50 kilos. I use 50 kilo a DSE because I can work it out in my head rather than 45. That just tells us how many DSEs we've got to go out and buy or how many animals and I just give that order to our agent and he goes and buys it.

I used to do all that myself, but I choose not to touch that anymore because I will never have the networks that a great agent has. There's a lot of difference between a great agent and an ordinary agent. If you've got an ordinary agent, you're going to find it hard to make money. If you've got a great one you'll find stuff will fall into your lap, and that's very much when you take that focus off cost. Though while your focus is on cost, you'll never see cash. And that's been a big realization now in our business. If you focus on turnover you get turnover, you focus on cost, you'll get a low-cost business. It's bloody hard to have both

Mark: Just to flesh that out a bit more, and there's a lot of, I guess, advisors running around that spend a lot of time with their clients trying to take the last percent of cost out of the business. That's certainly not the way you've found a successful way to make money out of grass?

Nigel: I don't make a living out of agriculture, out of anything, but grass. I don't make a living out of having the lowest-cost business. In the sheep and cattle game, it costs you pretty much $300,000 of direct cost to create a million of sales.

Let's say on the 1st of July the beginning of the new financial year I get out of bed and I say, “I'm going to wipe 10% off all our direct costs for the next financial year.”

I'll wipe 10% off $300,000 of direct cost, that adds up to $30,000. Now, what does $30,000 buy you? Absolutely bugger all. It doesn't change your world. By the time we buy one of these brand new side-by-side bikes, deck out with a bull bar and two way radio, spray tanks and roofs and what not on it, they're about $30,000.

But what if I get out of bed on the first of July and my focus for this financial year is going to be putting another 10% of turnover into this business?

For every million dollars I turn over and I create another 10% on top of that, I make $100,000, and what does $100,000 buy you? $100,000 can buy you an absolute cracking labor unit.

Most people are that busy being busy, they haven't got time to make money. If your focus is on turnover it allows you to create more cash and it allows you to employ more people. That actually gives the CEO of the business time to get up in a helicopter and look down on that grass business to think, “How do I convert grass, which is actually water, into the highest price value thing I've got?”

That's the big difference. If you're busy being busy, you're not focused on all those things.
Here's where it gets really tricky. You do not have to have a very good skill base to cut 10% off direct costs. It's just a matter of ringing people up and screwing them. And my thing is, who wants to do business with you when you're being screwed all the time?

But when you actually look at your business and ask “How can I create an extra 10% of turnover?”, it gets really bloody exciting.

In our case, it comes in the simplest form of grass management and looking at how we keep that grass in a production mode before it goes into reproduction mode. That’s where it turns to cellulose and then we need bypass protein to turn that into a usable product.
That's where the thing of matching stocking rate and the carry capacity works. It's in the eight months of the year where we're lucky enough to get big rainfall events is where we're making our money.

What I've been seeing in the last 10 years, and you'll hear this “In the central-western New South Wales has just had a one-in-50-year event as far as rainfall” in the news. Well, how do you know you're in a one-in-50-year rainfall event until it's finished? Then all the 100% breeders look back and say shit, it was a good year? Well, it was a great year but was it a great year for turning it into cash?

In the last 10 years, we've had three, “so-called one-in-50-year” rainfall events. I've got a feeling the one we're in now, which might go from this March till March 2021, may end up another “one-in-50-year event”.

What I'm saying is, if you can change your management systems and the way you manage your grass, which is your business, where you capture those so-called one-in-50-year events, which in our area, Central West, New South Wales is now turned into three-years-out-of-10 year events.

We're making more money in one year than what we will in three of average rainfall. It all happens and gets created by grass fever. Grass fever pushes the store market through the roof. When that happens, it also pushes the forward price through the roof. You're actually protecting your investment that you're buying back in, by forward prices.

Climate change, there's something going on, it's happening, but don't throw the towel in. We just need to change the way we look at our animal business and stop trying to force profit into a business in a year where rainfall is tight.

That's where you have got to have grazing charts and grass budgets to work out “How big a budget of grass do I actually have in this business at the moment? How do I dish that out to the core breeding herd?”

We use grazing charts to map stocking rate and carrying capacity. Because if you sell early you sell little, if you sell late you'll sell lots, but the problem with selling late is you will have already affected the landscape function, and how that landscape bounces back when it does break and that's the big killer.

Mark: I think that's a key one. That's an absolute key function of handling climate, isn't it? Getting animals off paddocks when there's nothing there

Nigel: Yes, I just lay down in front of the climate. I know it's going to win, it's going to beat me. For the core breeding herd, we go back into containment, but we go back there with the least amount of animals that I actually need. I don't get emotionally involved and hold on to animals and go, oh yes, it always rains.

I'll never forget being in Hamilton in Victoria. There was a group of cockies there and it was the beginning of a really dry period for Hamilton. They said, "Yes, we always had rain for such and such a date in Hamilton."

Well, guess what, 12 months later, they were still standing there going, "It used to always rain on such and such a date at Hamilton." Because they were so locked into this set pattern, they were like deer in headlights, they just didn't react. It really knocked that landscape around as far as the loss of perenniality.

Mark: We always learn a lot more in hardship than we do when things are amazing. The last two and a half years prior to this one, it was a very tough time to be farming in most of Australia. What were your key learnings out of this current or most recent drought?

Nigel: I think the biggest lesson showed in the people. The ones that kept making decisions, reassessing every month. Reassessing and acting, reassessing and acting. They kept their headspace clear. The ones that didn't, and just kept ordering trucks after trucks of feed. They weren't in a good spot. When they finished, it affected how they reacted when it broke. They're still very, very gun shy.

It affected them whilst they were in drought, their way of thinking and the culture that's in that business but it's also affected when they've come out as well, because it hurt that much whilst they were in it. What keeps rattling through their mind is "Oh shit. What happens if I restock and it stops raining?" That's why it's got to be a four-month trade thing. They got to be in, locked-in, purchased, then out the gate and there is no risking that. The main thing with trading is it's not markets usually that move against you. It's running out of grass.

Mark: One of the things in agriculture is there's access to new ideas, information and education. One of the things I think that you've really focused on is making sure you and Kate and others in the business are always exposing yourself to different ideas and being and challenging your own mindset. How important has that been and how do you see that playing out in agriculture? Is it important that people educate themselves I suppose?

Nigel: We wouldn't be where we are unless we brought external people in. Because the problem with, if we never brought externals in, we would only know what we know. The problem with that is, we don't even know what we don't know.

What we've found with consultants, and this doesn't apply to neXtgen Agri, the more you pay, the more you listen.

If you're using a consultant or an advisor, and he's charging you nothing, guess what? All you do is fight and bloody argue with him for a whole day. The more you're paying an outside influence, the more you listen, and the more you respect them, providing, they actually practice what they preach, preach what they practice. There's a big difference. It's not a broad swipe of the brush across all consultants. The really good ones are worth their weight in gold.

If we go back to 2010, we brought an outside consultant into our business. We did that for 12 months. Once a month we'd meet and we'd go for a drive around the farm, do the farm tour, then come back and look at the business. His job was to keep finding the weak links in our business. We got back to the house, before he looked at the financials, he said, "I don't even need financials. I know what your weak link is at the moment." He says, "It's a lack of finance." I said “What the bloody hell is the lack of finance got to do with a weak link?.”

He could see, and this was 2010, we were in another one of these so-called one-in-50-year events. Well, they're not one-in-50-years. They're happening all the bloody time if you keep your eyes open.

He said, "What I see is a lot of grass being wasted and turning into cellulose and getting no economic value out of that." Right at the time, we just bought a new place, we were maxed out as far as our equity position. I could not borrow any money through the traditional big four banks for borrowings on livestock.

As it would have it, that week in the land newspaper Landmark started advertising for livestock finance. Rang them up, they came down, did the interview, did all the paperwork and I mortgaged against our breeding units. I'll never forget this, the dude rang me up about 10 days later and he said, "Yes, we're finished doing your application, Mr. Kerin, and you've actually got access now to $5.3 million of funds." I went, "Shit mate, I don't need 5.3. I don't need anywhere near that."

Well, we got the money, we got the access to it and six weeks later, we'd spent every single cent of that borrowed money. We got contracts for all those animals we bought. We got the contracts, then we went out and brought the animals.

It was then that I started to realize, after going through that period, that these one-in-50-year events are so easy to make money in. That was in 2010 and we’ve had 3 since then.

When you look at what our gross turnover is in those 3 years, for those say 10 years, we could nearly not go farming for the other 7 for what we made out of those 3 years.

That's a bit of a revelation about how you're managing your grass business. Because when you looked at what we were generating in those 3 years out of 10, in these so-called one-in-50-year events, we were going from gross sales of $2.4 million, $2.7 million, $3.2 million to 2006 where we did $11.8 million of sales. We would have thought that totally impossible only two years earlier.

What I've worked out is, climate change and fear is actually making it easier to make money out of turning grass into money. We have a drought, we come out of the drought, we go into a record year, like this year, 2016 and 2010, the restock market goes through the bloody roof, but so does the forward price. They're symbiotic together, if you can get your head around how to match it.

We are actually having a reasonably stable income, where we can play a massive amount of catch up from lost income from the last two and a half years.

Our ewe prices, well we've got crossbred ewes making $470, cows making $3,000. But I clearly remember back in 2016, when I was visiting ram buying clients that run cow herds, you'd say to them, "What do you reckon that cow-calf unit's worth?" They puff their chest out and go, "I know exactly what that old girl's worth, she’s $3500." I'd actually say to him, "Why don't you sell the three oldest age groups out of your cows?" They'd look at you as if you had 15 heads, because I'll bet you within six months you'll buy that same cow for half price, and guess what happened? It took six months and the ass fell out of that market, driven by drought.

You could have brought the same $3500 cow back six months later for half that price driven by climate. But one of the one-liners we have in our business, to keep our feet on the ground, is when we're driving around our beautiful breeding cattle-I asked myself the question “Based on today's value, what is that cow and what is that ewe worth in the paddock?”

Right now, I know I've got $350, $400 ewes running around in that paddock. I ask myself the question, "Would you pay that for those ewes, or for those heifers or for those cows or for those black steers?" If the answer's no, then they are too dear to own.

You better bloody sell something, because in the livestock game, the cream rises to the top in time. And when that cream gets to the top of the barrel, you better rake it off and take that cash and put the cash in the money bank and put some grass back in the grass bank. It's as simple as saying, "If they're too dear to buy, they're too dear to own. You better take some cash."

That keeps our feet on the ground by making sure we don't fall in love with animals at record prices, you've got to take some of that cash off the top.

Your wealth is not in the amount of cows you own or the amount of years you own, your wealth is actually how much money you have got in the bank and it's simply called cash.

Mark: I think it was a good point from Ken Solly, solely that a lot of people farm for a long time and don't actually build wealth- which isn't the end game. I'd love to know a bit more about your data and your business to help manage all those processes. Like being very aware of those prices around what's my cost of carry, what it cost me to grow all those trades. That's a really important part of how you manage Kerin Ag.

Nigel: We do not make any decisions based on emotion. How do you know you actually made a decision, or whether it was based on emotion or whether it was based on what they call the vagus nerve, which is gut feel? The vagus nerve, which is inside your gut will always force you to pick a pen, paper, and a calculator up. If you've made a decision about the future, and you haven't picked up a pen and paper to do it, I can guarantee it's the wrong decision. It's one based on emotion and emotions are very, very good at telling lies, they chatter in your head to make you think you're doing the right thing.

Mark: And, confirming your previous biases.

Nigel: Oh, confirming your absolute belief of BS. It goes back to education again. I did the KLR Marketing School, probably 15 years ago. I've done that school four times now and every time I do it, I cherry-pick something really good out of it that I didn't hear in the previous three schools and I make it better and better and better.

Everything we do goes through a quick spreadsheet which takes me two minutes to do. That gives me a number and all I want to do is look at a number, one number, and in a box it will have DSC return in dollars, annualized.

We won't enter into a trade on paper unless it's doing about $120 a DSE, annualized. Everyone will be sitting there going bloody hell, who's making $120 DSE annualized?

Well, I don't either, but the thing is, it's also got to do with all the animals you breed yourself. It's the same thing, I'll put animals that we breed ourselves through a spreadsheet to work out if they're too dear to own, and if it says they're too dear to own right here today, I'll sell them, because there's more money in the restocking game at the moment, as far as quick turnover. It's hard to do better than what the restock markets do at the moment. Everything comes back to a DSE return. If it won't do $120 DSE annualized, I don't touch it, I'll just stay out of that trade, I won't go near it.

That's how we don't get into trouble. But how do you know what the sell price is when you're using a spreadsheet to work out if it’s a good trade? Well, you have to know what your forward price is. That's pretty easy.

Right now if I was to get a forward price for lambs, it'll probably be $7.80, maybe $8. Well, I'll go and put $8 in there as my sale and if it works really well, I'll go and ring up, take a contract out for the amount of lambs I want, three or four truck and trailer units, then go and buy the lambs. Because I know what I'm getting for them and that tells me what I can pay for them.

Mark: One of the things that will be very clear across various parts of your business is the power of genetics. Obviously, you've got the ram breeding business, and then you buy in lambs and other stuff all the time. How much difference do you see in genetics across all those different sources-- What's your pattern recognition for genetics?

Nigel: You got no idea of how stupidity is killing people's livestock businesses, sheep or cattle. We brought a big run of black heifers, mostly out of southern New South Wales and Victoria. They come here, they get inducted, they're recorded- where they come from, who they are, what they are.

The same thing with the lambs, when the drought broke, a property we have on a leased property, we put 14,000 lambs on there all off Auctions+, so we knew their breeding. Some of those lambs were ready to get back on the truck in eight weeks. Some of them were still sitting there 15 weeks, nearly the same weight as when they came in.

I'll pick on the Merino industry because that's the industry I'm in, I'll leave the terminals alone. There's just as much variation in the terminals and composites as the Merinos, but I'll talk about Merinos.

If I'm on Auctions+, and I see bloodline I know breeds their own rams, or doesn’t use genetics- I won’t touch them. Those breeders, they think a big adult sheep will have a big, fast-growing lamb. Nothing could be further from the truth.

The way the modern Merino is now, well the ones that are using data, they're hitting adult weight at nine months, 10 months and that's what we're seeing in all these restock lambs from Western Australia, South Australia, Victoria, right across Australia. The difference can be up to 30% extra carry time between a lamb bred without data and a lamb bred with data.

There's certain bloodlines of Merinos now that I'm just locked into that I'll buy and there's others, I don't care how cheap they… are because I'm selling grass and I've got to work out where's the best place to sell that grass to, and slow-growing genetics kill turnover.

Tell me what business you know that's got nothing to do with agriculture, that can survive and grow without growth? Growth is what stimulates all businesses. In the animal industry, if we don't have fast growth, we won't have a bloody business. It's driven by growth, by fast turnover.

What's happened with the revolution of ASBVs and data and genomics, where we can pinpoint things. We can grow a stack of wool, we can still have high fertility and shitloads of early growth in a Merino. If anyone wants to argue with me and say, "Oh, you're full of it." I can show you all the data of all the different bloodlines of sheep that have come in here, and what they've done when they get weighed and weighted and weighed, their bar graph on the true test monitor shows how they actually grow. Some grow fast, and some grow slow. And the ones that grow slow, kill turnover.

We had one particular mob this year come from South Australia. We just couldn't believe how they would not grow, all the other lambs we were selling B-doubles that were coming back at $280, $290. We had B-doubles coming back at $310 a head average. There were a lot of B-doubles that got a 50 cent a kilo discount because there were so many over 32 kilos, but it didn't worry me. Because they whacked the weight on that quick, it didn't hurt me a 50-cent discount.

But then there was others..these carcasses, we had carcasses coming back at 36 and 37 and 38-kilo average. There was one particular line of sheep. They all come in about a four or five-week period, and these were the last ones to go, and they were 22.3-kilo carcasses. Same feed, same canola, same fertilizer regime, same everything just simply shit, slow growing genetics. And that killed us on that trade. We lost a stack of money in that particular line of sheep.

Mark: I guess one of the things that becomes very visual in your business is genetics. Whereas in most sheep or cattle breeding businesses, where you are all breeders and you're not doing any trading, you never get to see that you might be farming those slow-growing genetics. You have no idea because you've never had anything else so you just assume that's how sheep do on your property.

I know that in an article with AWI you talked about in the cropping game, you'd never keep the same cultivar that we had when your grandfather was farming.

Nigel: It is amazing how incredibly wealthy this sheep industry is because we can still be in business with 50-year-old genetics. But if you want to put an absolute rocket up the bum of your business, whether you're in the terminal composite game or whether you're in the Merino game, you make that shift where it's data and technology that's driving these animals. Not traditionalist thinking. Because that's just an emotional bullshit chatter in your head that you've been feeding yourself, and more importantly you have fed it into the next generation.

I can't get over the amount of people that are in the sheep game under the age of 40, where their father's 70-odd, and all I hear is their father talking through their lips about genetics and I'm going, "Geez, you poor bugger, you don't even know what you don't know."

It's not until you actually start buying in different genetics, and you record that using technology, where everything starts to fall into place about how far we've come and how quickly we've come with modernizing genetics in all sheep breeds in Australia and New Zealand.

And you blokes now having a crack of footrot. We've had a hundred-odd years probably to try and get rid of footrot using science and technology while we never looked at actually using an ASBV type method of breeding the crap out of sheep- as in footrot.

Mark: That's massively powerful and that's obviously what I get to do for a living is see that power. Just this week I've been around folks where things like dag, and we're having a bit of a dag prevalent season in New Zealand, yet there's sires out there which all their progeny are clean. There's things like that, which if we allow ourselves to think a bit differently and use the data we can really change the way the sheep look and therefore how easy it is to farm and change that profit equation.

Nigel, I guess in life, there's a balance of luck and good management. If you were to sum up your career to date in farming, how much do you reckon was luck, and how much is making the most of opportunity?

Nigel: I don't think there's any such thing as luck. I think where the money is to be made is to bring outside people into your business and filter what's useful, what’s really good, and then quickly multiply it.

I think the five Ps. Prior Preparation Prevents Piss Poor Performance.. Managing a head of time, all the time.

I think the one thing farmers have really got to get their head around, if they want businesses that are going to thrive, they have to realise, you don't own a farm, you own two separate businesses.

You own a real estate business and you own a production business.

Whether that’s growing sheep or cattle, pigs, chooks, turkeys I don't care. It's a production business. That real estate business will grow whether you get out of bed or not in the next 12 months, and this is one of the things that keeps my head in reasonable shape when we get really tight years and drought years. We have this asset base called land and it just keeps appreciating whether I get out of bed or not.

Then we have a production business, and it's not until you get out of bed and go and farm that you actually have a chance you could go backwards. What I see is a lot of businesses do have a backward period in their stage of growth but most of it's based on making decisions from emotions. I don't see it so much in the grain industry but I definitely do in the animal businesses because there is a lack of great consultants in the animal-based production businesses, to hold hands through change, and that's a really, really sad thing that exists very much in Australia.

It might not be so in New Zealand but in Australia, there are all really good people in the animal production businesses that you can go and bring into your business to hold your hand through change, or just to keep you going to where you want to end up at. I don't think luck's got anything to do with it at all.

You can’t be in the black until you’re in the green. You can’t force profit into a business.

Where I really get shitty is a lot of consultants want to flog the last blade of grass on your farm, into an animal stomach, to make money out of it. That was a really good thing to do when my old man was, say, the boss. He had a very stable climate, we don't have a stable climate now. It seems to be dancing around everywhere and what seems to happen with our climate the last 15 years, we have extreme events, which are very short-lived and happen really quickly. You've got to capitalize on them while they're there, they can be really dry periods and they can be really wet periods.

We need to work a system out in our farming businesses of how we capitalize on those really wet periods and make money whilst there to keep that grass in production mode rather than let it go into reproduction.

You simply cannot force profit into a business, it has to happen organically. One of the things with that is, you can't be in the black unless you're farming in the green. I mean you've got to be fairly environmentally conscious of what you're doing, with your landscape and with your grazing.

The days of burn, bash and bury, well I wish you luck. Because it'll only be that real estate business keeps you in business. When you've got something that appreciates at 7-8% a year without you getting out of bed, let me tell you, you can make a shitload of mistakes in this business and this business keeps you in business because it's called change in equity, where you can go and borrow more on your overdraft to keep you supporting this business. Which is one a lot of people keep making bad decisions with. And they blame it more on climate than their bad decision making or more importantly, a lack of decision making.

Mark: Excellent. Thanks, Nigel. I think we'll wrap it up there with-- We're getting close to an hour and that's about-- That'll be a record I think. We better wrap it up, but I really appreciate your time, there’s great concepts there and fantastic to hear the season that is occurring for you, and great to see that you'll make the most of it as you always do. Thanks for your time.