The Farmers Club

No 185 - Saturday's Club Notes

Dwain Duxson
April 20, 2024

The “Club Notes” for Saturday, the 20th of April, 2024.

By Dwain Duxson

Filling the Gap

For today's edition, we have shifted the paywall break to the bottom of the page. In other words, today's edition is available to everyone in full as a once-off. So what is the Gap? We class it as the information gap, or what sort of information you need on a daily basis to get that small advantage that sets you apart from your peers. Information can fuel ideas that can change the trajectory of your Farming business. If we have a closed mind, then we can miss opportunities. We get caught up in everyday things and fail to notice things when they come along. That's why I'm urging you to invest $44 a month (first month free) to fill your gap. To sign up, go to the bottom of the page or yell out, and I will give you a hand. You knew there would be a punchline, haha. Do you like to keep up with things, or is too much information unnecessary noise? Reply to [email protected]

The hits and the near misses

Scroll down to the last article on the page and read about the couple in New Zealand that were killed by a Ram. They were in their 80s, terrible. We know Farms are very dangerous places to work, so we take Farm safety very seriously. If you have spent any time on a Farm, you would have been involved in a Farm accident of some sort, sometimes many, along with a few near misses. And unfortunately, there are the ones that are fatal. I know, I have been bowled over by a Ram, and if they can get you in the right position, they can do some damage. Another time, I was on a roof, and it collapsed and landed six inches from an upright steel post. I also rolled the Ute into a Creek on my way home from Golf when I was in my early 20s (yes, there is a bit more to that story). I see Farmers in their 50s and 60s who have limps and pain from Farm accidents. It's a brutal business and we need to really look after ourselves. What are some of the accidents you have had on the Farm, and do you have any long-term injuries from something that happened on the Farm? Reply to [email protected]

The view of an Accountant turned Farmer

Below is a reply from an Accountant turned Farmer on Kelsey Miller’s article about our fixation on avoiding/reducing tax. You can read the article here. I think this is a great response and food for thought. “Hi Dwain, I’ve been a Farmer for the last 8 years; prior to that, I was an accountant for 15 years, and my clients were predominantly Farmers. I’ve seen many ”monuments to tax avoidance” (Machinery) purchased in my career. We don’t focus on tax savings each year on our Farm, but on the very odd occasion we purchase some Machinery, we may time the decision for the best tax advantage. As an accountant, it’s interesting how different clients approach income tax. Some clients saw income tax as a cost of doing business - the philosophy I subscribe to. Minimise your tax where possible, but don’t drive your business based on saving tax. Focus on cash flow. One client had a “zero tax policy”, meaning they did not want to pay tax at all, an extreme philosophy in my experience. To avoid income tax at all you either have a) a business that doesn’t make profits or b) a rapidly expanding business that is profitable, but profits are eaten up with ever-increasing tonnage of inputs, regular property purchases and no repayment of debt, as debt reduction needs to be done from after-tax dollars. Our client fitted into category b) above. This philosophy puts a lot of pressure on a Farm. I’ve seen clients go broke trying to avoid income tax with ever-increasing amounts of borrowings. As an accountant, we did a taxplan for most of our clients each year. This would flag tax issues early and devise a strategy that prevented reckless on-Farm spending. In my experience Dwain, the best Farmers and business people focus on running their Farms for maximum cash profit; they then make decisions on options for tax reduction based on their upcoming inputs/Machinery needs. A lot can be achieved with the correct Farming structure that enables the payout of retained earnings in lower profit years.” Reply to [email protected]

End of message.

Dwain Duxson
0427 011 900

Weird and wonderful ideas for today:

Idea 1 - Change the word “can’t” with “how can I”. A subscriber told me this last night. He said it will change your approach to things. He has been using it for 20 years and with favourable results.

Your replies:

Below are snippets from some of the replies you sent in. All quotes will remain nameless. See a few current ones below:

In reply to our note on Batteries and what their limitations might be. - ”It's a long way off in the bush Dwain. Imagine if you had an electric 6-deck Road Train pulling export Steers down the Gibb River road. No, not in our lifetime nor Headers, Dozers, etc. So how are "they" going to get "net zero" by 2035?
Here’s a story about someone who was a Corporate, then went Farming (albeit in a niche industry) and is now back in the corporate system. It’s ain interesting story - “Hey Dwain. I saw your piece about the wool job. I was Victoria’s last Rabbit Farmer but gave it up at the end of last year. It was my main form of Farming other than a small beef herd. Our little industry had been trying to get a Calicivirus vaccine approved for years, but APVMA steadfastly stood in the way until, one by one, we stopped due to excessive losses during disease outbreaks. It was a shame as it was otherwise a great business that could make money, and we were price makers rather than takers. Govt department apathy ultimately killed it. I came from corporate life before Farming, and after 7 years, Farming has returned to it now. It’s a much easier way to make a living than Farming I’m afraid. My experience of Farming has been discouraging, I guess…I would caution new entrants to get in to it unless they have deep pockets, are in one of the more profitable sectors, and have access to (subsidised) family labour. The corporate space is a much safer and easier life…that’s why so many young people off Farms go to the city. Other than land value appreciation, too often farming is a way to make a small fortune from a larger one. So, I’m staying on the Farm and enjoy the lifestyle, but not interested in trying to make a living doing it…Just too many headwinds for me. I have sold off much of my Equipment…some through you, and am enjoying earning city money and enjoying country life”.
This person, who is a student of the Wool industry, has found something to be excited about - “Hello Dwain, Please find a link to comments from an Italian top maker. Also comments from AWEX’s Mark Greave re Sustain A Wool accreditation. This is a new beginning that is long overdue. These are Wool grower’s customers. See the link to the story here.
This guy was so impressed with Alex, the Victorian Agent who bought those sheep out of WA that were destined for the pit, that he set up an account with his company - “Well done, Alex, I’m now going to email [email protected] and set up an account”.
This relates to the story above about our focus on reducing tax - ”Making Machinery purchase decisions based on tax outcomes is the tail wagging the dog”.
More in relation to the reducing tax story - “My observations are focus on maximising cash profits, then have a tax plan done with the options identified, e.g. FMDs, bringing forward input purchases, etc. There’s an old saying I hear from farmers: “ I’d rather pay interest than tax” Paying some tax can take the pressure off to keep spending money to avoid it. Sometimes it’s better to pay the tax and keep the difference”.
Another one on the reducing tax story - “Hello Dwain, A proper “tax plan” should always be documented so it can be presented and discussed with the bank. For example, whenever we have done large tax saving options for our clients, there is a separate document prepared, which is then presented separately to the bank which shows adjusted profit pre and post-measures”.
In reply to our note on loading control and how its frustrating for Farmers. This Farmer is pissed that he got duded by the processors - “Hi Dwain, I wholeheartedly agree with comments about feeling like we’ve got no control with a lot of aspects of Farming. We had Merino Wether Lambs booked into the processor at a good price. Straight off a Bean stubble weighed up well and sent off. The kill sheet came back, and they reckoned all the Lambs under 24kg dressed weight didn’t have enough cover, so they paid us over $1/kg less, and for the rest, they paid us 10c/kg less than we contracted them at. Took $10/head off a b-double load. What could we do? Agent rang up and argued the case, but the processors just did what they wanted”.