As Rural Directions celebrates its 20th anniversary, co-founder David Heinjus recounts there were doubts when he and brother Chris started out.
“In terms of grain marketing, we were still very much in the infancy of deregulation with most growers still simply dumping the grain at the silo and putting it in the national pool,” David said.
“Farm business management probably wasn’t on the radar for many farmers.”
A LEAP OF FAITH
However, the pair backed in their hunch that the grains industry landscape was going to change.
“It was somewhat of a leap of faith, but we had the view the market was likely to deregulate at some stage.
“We were both coming back home to the family farm and we wanted another string to the bow,” he said.
Prior to setting up Rural Directions David had worked as a farm management consultant with the SA Department of Agriculture and Chris had worked in grain marketing with AWB.
Today, the fundamentals of the business include supporting grain marketing decisions and farm management, including machinery purchasing help, transitioning family businesses to run on corporate lines and benchmarking.
“There are a lot of facets within the business, but our overall philosophy is simple.
“We’ve got three arrows on the logo – one represents production, one marketing and one management.
“Your returns come from your yield times your price and those two factors are set by how well you manage the business.”
“The key for us is profitability, not productivity, we look to find the most profitable way each business can operate, which might mean lowering overall productivity to lower costs.”
David believes the consolidation of cost structures will be a major trend in farm businesses in the future.
“The most obvious example is the sharing of machinery between two farm businesses, but there are other ways.
“For instance, it may be that rather than owning every piece of equipment, a farm business uses contractors for one particular operation while in turn maximising the return on the investment it owns by doing contracting work itself.”
Traceability and supply chain certification are other potential growth areas, but David warned against farmers expecting too much premium for their efforts.
“Supply chain assurances and traceability will be more about ensuring market access rather than getting more for your product. Unfortunately it’s a fact of life there are very few premiums, only discounts.”
In terms of other management advice, David said Rural Directions was busy working with clients about potential land purchases.
“Land prices are fairly hot at the moment, but we take a look at it and see what the productive value is,” he said.
“Sometimes people can afford to subsidise land purchases at above the productive value but other times they can’t.
“Our findings will often recommend a farmer does not buy a certain parcel, which can be not what they want to hear.”
He said man management was another new area for businesses that traditionally did not have full-time staff.
“Many family businesses have only recently put on full-time staff due to expansion and need to learn how to best manage workers.”
“This covers a lot of areas, from providing a clear career pathway with room for progression or maybe it is providing someone with a small farm of their own the flexibility to work some hours on their own place.
“It also covers areas such as occupational health and safety and compliance – things like fatigue management are critical in the agriculture industry.”
The team at Rural Directions is practising what it preaches in terms of having a clear career pathway for employees.
“We have encouraged the involvement of key employees, which has resulted in 40 per cent of the business now being owned by employees,” David said.
“Progressive transferring of management and ownership responsibility is critically important for maintaining relevance with next generation of farmers.”
David said use of farm management businesses such as Rural Directions was on the rise in Australia.
“We work with one in nine farmers in SA. There is also a strong farm management sector in WA, but less uptake on the east coast,” he said.
CHANGES AND TRENDS
Changes to grain marketing were the major shift in the grains industry landscape in the early 2000s but it was not the only big transformation.
“We have had many changes that include the introduction of the GST, a significant structural shift in livestock prices, and for many, a large increase in farm size,” David said.
He believed alterations in farm management would be a space to watch.
“One of the things we do is facilitate the appointment of advisory boards for family farms and that is something more people are looking at.”
A board provides a framework for transitioning the business culture from a family farm to a family-corporate style enterprise.”
“People using a board have said it has been fantastic taking the emotion out of difficult decisions, such as land purchases or succession planning.”
THE KNOWLEDGE BANK SERIES CONTINUES
This week, we bring you part three of the Knowledge Bank series, supported by Rabobank.
The series aims to tap into the collective brainpower of thought leaders in agriculture and share their ideas, experiences and innovations more widely.
We profile precision agriculture consultant Andrew Whitlock who's helping his clients change the way they manage their paddocks, from the soil up.
Meanwhile, in South Australia, agribusiness consultancy firm Rural Directions is helping farmers re-think their management.
For more inspiring stories in the series and to tap into the experiences and ideas of some of agriculture’s trailblazers visit: farmonline.com.au/news/knowledgebank