A spring in our step. What comes next?
There is a bit of a spring in our step.
This time of year always brings a shift in agriculture, and for many farming businesses this year there is a little more optimism around. In parts of Australia, the season is looking considerably more encouraging than it has for some time.
That isn't the story everywhere however with some regions remain in drought, others are still dealing with the financial implications of successive difficult seasons, and there's still plenty that needs to go right between now and harvest.
So, I'm certainly not calling the season done. And where there is reason for optimism, after the past few years, that's no small thing and we all know how quickly things can shift in agriculture.
For many businesses, 2023, 2024 and 2025 have incurred drought, difficult seasons or tighter financial conditions. In some regions, those conditions continue. The financial implications don't disappear because this year's crops are looking better.
They are still sitting on balance sheets and in bank accounts. Working capital has been used and debt has increased. Machinery replacement and repairs have been pushed out another year, livestock numbers have changed, and more than one plan has quietly gone on hold.
And for some farming families, there has simply been a long period of making do.
I've spent a lot of time over the past few years working with businesses through those decisions. When money is tight, there tends to be a much sharper focus on what matters.
Do we need it? Can we afford it? Can it wait? What happens to cashflow if we do it? How much debt are we prepared to carry? What happens if next season is difficult again?
They aren't always comfortable conversations, and they force us to be clear about why we're making the decision.
When choices come back
I think there is something from those difficult seasons worth carrying forward when conditions do improve.
The numbers might change. The discipline behind the decision shouldn't.
Because one of the things a better season can give a farming business is choice.
For the past few years, the decision might have been made for us. The tractor had to do another year because replacing it wasn't an option. Debt couldn't be reduced because the cash wasn't there, the infrastructure project stayed on the list, and livestock numbers were kept lower. The opportunity to expand stayed exactly that: an opportunity we couldn't take.
When the financial position starts to improve, those decisions come back onto the table, and suddenly there can be quite a few of them.
Perhaps there is:
debt we'd like to pay down
a machine that really does need replacing
livestock numbers to rebuild
repairs and maintenance to catch up on
infrastructure we've been talking about for years
country we'd like to buy or lease
or, after several difficult years, some money we'd simply like to take out of the business
There is nothing inherently right or wrong about any of those choices.
The challenge is that the same dollar can't do all of them.
So the question becomes less about what we could do, and more about working out our next best move.
Where the discipline slips
This is where I think we need to be careful not to lose the financial discipline that difficult seasons forced upon us.
It is easy to scrutinise a $100,000 decision when there isn't $100,000 available. It can be surprisingly easy to scrutinise it less when there is.
Good financial decision-making isn't about automatically choosing the cheapest option, avoiding debt or keeping every available dollar in the bank. I don't believe that at all.
Debt can create opportunity. Machinery can improve efficiency and capacity, and infrastructure can improve productivity. Expansion can be exactly the right move. And sometimes taking money out of the business, for the people who own it, is entirely reasonable.
The point is to understand what the decision does before you make it.
Putting numbers behind the decision
If we put $100,000 against debt, what does that change for the business? If we retain it as working capital instead, what options does that preserve? If we're considering a significant purchase or investment, what does it do to the business beyond the immediate transaction?
And what happens if our assumptions are wrong?
These aren't questions a spreadsheet can answer for us. Farming businesses aren't spreadsheets, and there will always be factors that can't be neatly reduced to a number.
Putting the numbers behind a decision allows us to test it.
We can change assumptions, compare options, and look at what happens to cashflow, debt and working capital. We can ask what happens if grain prices fall, interest rates change, or the next season doesn't deliver what we hoped.
Most importantly, we can see the trade-offs.
Because making one decision usually means not doing something else.
I've been thinking about this a lot recently, because so many of the significant decisions we make in farming businesses aren't really held back by a lack of information.
We tend to think we need more information before we can make a decision. Sometimes we do. Often, we already know a great deal about the decision in front of us. What we haven't done is bring that information together and test the options against the numbers in our own business.
There is no calculation that removes uncertainty from farming. What we can do is understand what a decision might mean for our business before we make it.
And the outcome of doing that work isn't always "no".
Sometimes the numbers tell us to wait. Sometimes they show us a different way to structure the decision. Sometimes they expose a risk we hadn't properly considered. And sometimes they give us the confidence to go ahead.
That last one shouldn't be underestimated.
After several years where the conversation has so often been about what businesses can't do, I hope improving conditions give many farming businesses the opportunity to start thinking about what they can do again.
And I recognise that, for others, that point hasn't arrived yet.
Whether we're making decisions because our choices are constrained, or because those choices are starting to return, the fundamentals remain the same.
The season might change the decisions available to us however it doesn't change the value of making them with the numbers behind us.
There is a spring in our step. Where there is reason for that optimism, let's enjoy it.
And let's also take something useful from the years we'd rather not repeat. The discipline of understanding our position, considering the alternatives and putting some numbers behind the decisions we make shouldn't disappear when conditions improve.
In fact, when we have choices again, it might matter more than ever.
So, what is your next best move?
If there's a decision sitting on your desk, or perhaps one that's been going around in your head for a while, start there. What happens when you put the numbers behind it?