The Weekly Advertiser Horsham

If the music stops...

- From left field with David Matthews

Harvest has started across much of Western Victoria.

And despite virtually no rain through September and October, the early indication­s are for high yields, excellent quality and with relatively strong grain prices.

To deliver high yields in a season with no spring rain is a combinatio­n of good luck and good management.

The management piece comes from saving every drop of water through summer with good weed control.

It’s about sowing on time and matching fertiliser applicatio­n to seasonal conditions.

It’s really an indicator of the pretty sophistica­ted management applied to operating a modern farm successful­ly.

The luck is the cool ripening period and minimal frost damage in most districts.

So through good management farmers have put themselves in a position to take advantage of the luck that came their way.

But what happens when the luck runs out?

How prepared are we for the season where there’s no stored moisture; when the frosts are more severe and the heat comes early?

That’s not an ‘if’ considerat­ion; it’s a ‘when’.

Being involved with the Community Bank network has given me some insight into the world of banking.

And one of the first things I noticed is how extensivel­y banks consider the different types of risk concentrat­ions they are exposed to.

They measure geographic risk, industry risk, strategic risk, interest rate risk, liquidity risk, climate risk and more.

They ensure their loan and deposit book is diversifie­d enough to withstand a significan­t ‘shock’ to any one part of their business.

So are we doing enough to ensure our farm business can withstand a severe shock event?

When I applied bank thinking to our farm it was striking the concentrat­ion risk we had in our business.

All of our assets in one geographic location, the Wimmera.

There was some diversity of market risk through growing different crop types and running a few sheep.

But the exposure to seasonal volatility was evident.

The response for us was to spread geographie­s by buying land in the high rainfall zones, and spread industries by buying commercial property in Melbourne.

There’s no one answer to managing risk concentrat­ion, but maybe it’s something we need to be more deliberate about addressing.

During previous droughts, the farm lobby has been quick to seek government support for impacted farms.

In an era where a typical family farm may have a balance sheet with $20 to $40 million of assets, I’m beginning to question if it’s reasonable to ask taxpayers to help fund our way through an inevitable risk event.

I fear this will eventually erode the confidence in agricultur­e.

Yes, we should continue to advocate for policies that help farm businesses use the good times to prepare for the bad.

But isn’t it better to present ourselves as a mature industry that understand­s and manages our risks?

At least then, when the music stops, we’ll have our own chair.

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