Farming February 2013
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Highlights FARMING Farm Succession Planning FEBRUARY 2013 Coast Farms Moving with Technology West Coast Farming Forums are generally very positive at the on budgeting and work with them rate of response from Westland to get a budget that can be a working Milk Products and the related document through the season. services, especially given this hit right in the middle of the holiday As we move into our 20th year as period. Communication seems to an accounting practice on the West be one of the major issues arising. Coast, we have a number of new A key question emerging from this initiatives underway to assist our is how prepared and what level of clients. Our new website is up, the investment should farmers and our Business Management and Growth emergency services make in what we Seminars are underway and we are hope is a rare event. putting our financial support behind events like the West Coast / Top There is some discussion going on of the South 2013 Dairy Industry at present about whether to supply Awards. Fonterra or Westland. The Fonterra share price is now even more of a The website upgrade was significant deterrent, as is the fact that you and given the number of farming cannot guarantee that you won’t clients we have, we have added a pay $7 now and only be able to sell section specifically for farmers. We for $5 or $6 in the future. Fonterra are currently adding quite a bit of farmers are at the whim of the market content here so check it out at www. Following a good start to the season, (note the price drop from $7.40 in cuffs.co.nz and click on Farming the Wanganui Bridge washout posed mid January to $7.03 as I write this). under Key Industries. challenges for southern farmers, I have two suppliers in Canterbury the dairy company and emergency who have decided to supply If you are considering changing services. With many farms having Westland. accountants, I travel the region spare capacity for milk storage regularly visiting clients and and backup generators on-farm, In discussions with ANZ recently am happy to call in for a free, the impact of the washout appears they have informed me that they confidential, no obligation meeting to have been managed. Business won’t be preparing budgets for to discuss your business needs. Please interruption insurance does, farmers now. They believe that call me directly on 755 8912. however, pose a question for some farmers need to own their own who discovered a bridge outage budget and the bank doing a budget was not part of their cover. With that isn’t actively used by the farmer the cumulative cost of insurance, doesn’t achieve this. We do agree self-insuring has been mentioned but can’t help wondering if this is all as under consideration. From a their motivation is. In any event we logistical perspective, farming clients will be looking to upskill our clients Peter These photographs depict the 1942 washout of the Wanganui Bridge. A motorised cage was installed across the river for foot traffic. Vehicles crossed on a punt that was strung across the river on cables above the bridge and used the current of the river to float its cargo from one side to the other. (Hende photos from the Charles Lucas Collection) Level 2, Como House, 51 Tancred Street, Hokitika 7801, P.O. Box 325, Hokitika 7842 Phone: 03 755 8866 ¾ Fax: 03 755 8910 ¾ Email: [email protected] ¾ www.cuffs.co.nz The average age of New Zealand farmers is 58 and the average Step Three is about agreeing and developing a shared vision for age of those that own the farm is 60. the farming enterprise. A starting point here can be a SWOT analysis, where the Strengths, Weaknesses, Opportunities and It should be no surprise that farm succession will be a hot Threats of the farming enterprise are expressed by the family topic for the next few years. Many professional advisors are members. It can be quite enlightening how different the business realising this and upskilling themselves in this area. Late last can be perceived by the different parties. year I attended a couple of presentations and a full day seminar in Wellington to upskill myself in this area. (Yes, I know Step Four is about getting a plan developed. Talking about Wellington isn’t a hot bed of farmers, it was simply a central it with all family members so that agreement is reached place for farm accountants like myself throughout the country beforehand so it isn’t left as a shock with the reading of to meet.) the will. The ANZ business barometer survey of 8,000 farmers found Step Five is implementing the plan and keeping it on track. that farmers believed the barriers to succession were: • Ability to Finance (33% of those surveyed) In doing all this you need to make sure there is a sustainable • No barriers (31% of those surveyed) business that can handle the level of debt that the successor • Finding a suitable successor (14% of those surveyed) will be taking on. This may mean taking a fresh look at the profitability of the farm, seeking advice on how profitability It also found that 24 % of farmers expect change of ownership can be improved and implementing changes prior to any to occur in the next five years! change in the ownership. The most significant thing to take out of this is that no one solution fits all. In fact I had discussions with 4 of my farming In developing this plan you will also need to consider clients last year and each of their situations is uniquely the tax implications of any change. There are ways to different. So too, then, will be the solution. minimise the tax impact and some existing structures (e.g. companies) may minimise exposure, but often it is a matter Although each situation and solution is different, there is a of calculating the tax consequences and factoring it into common process that I look to follow when advising farmers. the plan. For some, one or two of these steps can be simply ticked off as the family may already have decided what is going to happen You will also need to make sure that wills are consistent with and have the means to make it happen. the plan. Step One is education of the owners and successors around farm Successful succession has been happening for hundreds of succession, the issues to be considered and what is involved. On years. However, with the value of farms increasing significantly, that note the ANZ has produced a booklet entitled “Passing we believe early planning is vital to a successful outcome. the Baton”. Email Cuffs or phone me if you would like a copy or check out our website at www.cuffs.co.nz under Free Stuff – Don’t hesitate to call me if you require assistance with Other Resources for this and other succession articles. succession planning. Step Two involves understanding ALL the family members’ needs and wants. This involves identifying what’s important to each party, what each party believes the outcome should be and gaining a better understanding of the future of the farming property. Cuffs Dairy Awards Client Entrant Sponsorship $1000 To further support the Dairy Industry Record entries have been received for the West Coast / Top of the South 2013 Awards, Cuffs is offering up to $1000 of Dairy Awards. Further, the West Coast is well represented with 26 of the 33 accounting services to any of our clients participants being from this region. The pinnacle of the event is the awards that have entered the awards to help you evening being held at Shantytown on 11 April. This will be followed by field days get the best possible score. Please contact at the winners’ farms on 24 and 30 April. Cuffs are a major sponsor of the awards us if you would like assistance with this. and we encourage dairy farmers to support the event by being in early to secure tickets to the dinner and also attending the field days. These events will present an outstanding opportunity to share farm practices and pick up lots of tips from $1000 other farmers and professionals attending. DairyBase – Just how beneficial is it? At Cuffs we fully support DairyBase and now DairyBase figures tell us that others are doing actively work with farmers incorporating it and holding production levels.” the results into their farm planning. For this newsletter we have profiled two farmers and “In remedying the cow-per-hectare we’ve their use of the programme. moved into reproduction with AI. This year we introduced sexed semen, and AI’d the Down in Hari Hari, sharemilker Rob Wilson heifers to get replacement calves into the herd. has discovered the value of DairyBase as a We were able to look at the cost and benefit useful tool across many on-farm decisions. of grazing bulls compared to using the land “Because the data is presented in graphs, not for milk production. The bulls graze on 2-3 hectares so that land is not producing milk.” “With DairyBase you can look at the whole farm. Because it’s done from a monetary perspective, you know if you spend in one area you can calculate what you will gain this before mating. We’ve now supplemented in another. It’s great for looking at the costs our feed with Palm Kernel to keep the weight and returns of options in our farm discussion on.” The Simpsons also identified their young meetings.