Advisers return big dividends

Many farm business specialists tell a story about two farms virtually identical in every way except one — one is prospering, the other is struggling to survive.

The two farmers assume their neighbour must be doing the same as they are because they produce the same product, are similar in scale, and employ the same production techniques.

But someone who has seen the books on the two operations — an accountant, banker or financial adviser — knows that when it comes to the bottom line, they are as different as day and night. Farm management can make all the difference in profitability.

How much of a difference? Forty per cent or more, suggests a recent study from Quebec.

The province is a leader in promoting better farm management, with farm management clubs that date back over 30 years. In 1982, the club leaders set up a federation of management groups called the Fédération des syndicats de gestion agricole du Québec, which is affiliated with the Union des producteurs agricoles.

There are now 40 agricultural management pools (AMPs) within the federation, each one consisting of 20 to 200 members and assisted by one or more agronomists working exclusively as management advisers.

Recently the federation analysed the financial performance of 366 farms in the 1998 fiscal year. Three-quarters of those studied were long-time members of AMPs, averaging more than 10 years. The other group was made up of relatively new members, averaging just 2.4 years. To compare apples to apples, only farm operators who became established between 1985 and 1989 were selected for the study.

The difference in economic performances of these two similar groups of farmers was startling. Both groups had similar revenues, but the net income (gross revenue minus both variable and fixed expenses) was 43 per cent higher for the long-time members. And although both groups had about the same level of debt, the long-time members had built up more assets and therefore had an equity level that averaged $150,000 more than those farmers who had only recently joined an AMP.

“It’s not a miracle,” says Bernard Belzile, secretary of the Fédération des syndicats de gestion agricole du Québec. “It’s a lot of small, and sometimes big, decisions made each year. After many years, you see the results.”

For more information on farm management, visit the Canadian Farm Business Management Council at www.farmcentre.com.

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