At the core of farm management is decision making and choosing a path that provides a farming business with acceptable reward for acceptable effort at an acceptable amount of risk. This 2020 GRDC publication is an important resource for growers, industry and our RiskWi$e approach.

Preamble

Some things change, some things stay the same. Technology may have advanced, marketing options may have evolved and margins may be tighter than five decades ago, but the fundamentals of farm management remain. At its core is decision making,
choosing a path that provides a farming business with acceptable reward for acceptable effort at an acceptable amount of risk. The word acceptable is important because it requires individuals to define what is acceptable. One farming business may accept lower profits so as to maintain a lifestyle and production system that suits their goals and values, compared to another business that wishes to maximise returns but knowing they are operating at a higher level of risk and may be foregoing other opportunities. Both positions are equally valid.

This booklet is the collation of insights and experiences from the Grain and Graze program. The contents are loosely based on four important concepts that we believe need to be strengthened so farmers and advisors can make good, informed decisions.

  1. One concept is around risk. The primary reason cited by farmers for operating mixed enterprise businesses was to manage income risk. While the concept of describing and managing risk is not new, the current information on which many decisions are made around adjusting enterprise mix does not consider or calculate the change to the risk profile of the business (apart from the general assumption that livestock are less risky than cropping). Moreover information around price and production volatility is not easy to access.
  2. The second concept is how human nature can confound the most logical analytical analysis and argument. People make decisions and an appreciation of how people’s values, goals, biases and personalities influence their decision is essential for advisors to understand how to find the ‘hook’ and craft a ‘message’ that will resonate.
  3. Thirdly farming businesses operate within a set of basic operating principles. Understanding these principles is critical to ensure advice and decisions are made that do not jeopardise the goals and objectives of the business and ensure appropriate resource allocation within and outside of that business. This need has been exacerbated with the growth of fee for service and retail advisors, many of whom have a strong production focus and training, but may not have had exposure to the complexities of a farming business.
  4. Finally, we assume farmers know how to make informed decisions because they make them all the time. While it is true farming requires numerous decisions, both complex and simple, tactical and strategic, good decision making is a skill. It requires discipline, a process and practice to become good at it. These decisions often have to be made quickly and with imperfect knowledge. This booklet aims to strengthen the awareness of, and approaches to decision making, taking into account risk, personalities and farm business basics.

The booklet below is not a definitive account of all there is to know. Rather it provides some theory, practical examples and activities to gain a feel for each of the concepts and how they inter-relate. A series of case studies highlight some common interactions between people and risk, business basics and risk.

Click below to link to the full booklet