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#053 - Could Your Farm Survive El Nino? Run This Test. · Dollars In The Dirt

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  Most producers think the worst cash pain is the year the drought hits after
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  helping hundreds of farmers secure over a billion dollars in finance. I
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  can tell you that the cash often spikes when you de-stock and the
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  hard part is usually the next two years when your numbers are down and
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  the banks are more conservative. So in this video, I'm going to show you
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  how to model a dry period properly, set your strategy, map
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  your cash flow, check your facilities, and put a drought plan in writing that
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  you can stand behind. The first thing I'd look at is the next 12 to 18 months.
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  Droughts can be strange from a cash point of view. A lot of producers get
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  a big cash injection early, and that happens because they destock. The
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  money lands in the account, and for a while, the bank account looks
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  stronger than ever. And here's the issue. That cash can hide the
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  real problem. The real problem often shows up later, but
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  then the herd's smaller, the turnoff's lower, the income's
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  lower, but the business still has the bills, the fuel still needs
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  paying, wages still need paying, the interest still needs
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  paying, and maintenance, well it still needs doing, and the place, well
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  it still needs to operate. Say you carry 1,000 head in a normal
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  season, then it turns dry. You decide to cut back your
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  herd, and you might sell a large portion pretty quickly. And
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  that can put a lot of money in your account. And at that point, you
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  feel like you're fine. But then the rebuild starts. You've got
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  fewer breeders. You've got lower income for a while. And even if
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  it rains, the income doesn't bounce straight back instantly. So
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  to map it out quarter by quarter, what stock numbers will you carry? What
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  numbers will you sell? And what income should that create? When
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  will that money actually arrive? Then look at what happens after your
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  first e-stock. That's where the forecast becomes useful.
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  You're not trying to make it perfect. You're trying to see the shape of the
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  year. And if the numbers are down, income will be down. And
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  if income's down, cash flow changes. And if cash flow changes,
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  well, your repayments and your facilities matter. So don't build the whole
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  plan on a best case prices. Use the numbers you
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  can explain. Use numbers you'd be comfortable showing your
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  lender. And once you can see it, you can plan. And
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  that matters if you have the bank involved. and a clear forecast
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  does. So by the way, if you're looking at buying a property or growing a
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  business and you want to talk through what the finance could look like, book a
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  free call. The link's in the description. they
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  might have another arrangement available. All of those options can
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  work. And the important thing is to choose the path early, then
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  price that path properly. Say you're looking at adjustment, where
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  are your cattle going? And what does it cost per head? And what does
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  the freight cost? How long can they stay there for? And
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  what happens if that country becomes dry too? And how will
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  you bring them home? And what income will still come in while you're away? These
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  questions matter. Adjustment can preserve the herd, but it still
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  needs a lot of cash, and it still needs management. It still needs a
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  plan. Now you say you're selling down. Which classes will
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  you sell first? Which breed is he going to keep? And what does the
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  next year's turnoff look like? And how long will it take to
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  rebuild? What will it cost to rebuild the numbers later? That
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  also matters. A sell-down might protect your cash today, but
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  it can reduce your income later. It doesn't make it wrong, it just
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  needs to be understood. And the thing is, you're not trying to predict the
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  weather. You can't control that. You're setting the rules you
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  can't act on. If it doesn't rain by a certain date, what happens?
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  And if pasture drops below a certain level, what's going to happen? If
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  prices soften, what's going to happen? If adjustment isn't available, what
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  happens? That's what the drought plan is for. It stops
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  every decision from becoming emotional, and it gives you a way to move.
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  Now put the strategy into a cash flow, and this is where the plan becomes real.
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  You need to show lower receipts, you need to show when those
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  receipts are going to land, and you need to show what expenses can
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  be cut. Some costs reduce when you destock, and some costs don't
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  move much at all. And be honest about that. So look at
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  your expenses line by line. The last question matters. Cutting
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  costs is useful, but cutting the wrong costs can hurt later.
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  Then look at your debt repayments. If there's a principal payments are
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  due, don't ignore them. This is where timing is
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  important. You might need to talk to your lender early, and you might
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  ask what options are available. You might discuss whether the
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  principal can be deferred for a period, and you might discuss whether
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  the structure still matches the season. And this is not personal advice,
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  it's a reminder to have a conversation early. Don't wait until
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  your account is already under pressure. And that's usually when things become
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  harder. Banks generally respond better to early contact. They
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  respond better when you can explain the numbers. So show them the
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  forecast. Show them the lower stock numbers. Show them the lower
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  income. Show them where the tight months are. That makes
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  the conversation more useful. The point of the forecast isn't
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  perfection. It's about seeing pressure before it arrives. Next,
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  check your facility headroom. Know exactly what room you've got.
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  Don't just remember the overdraft limit. Look at the drawn balance, look
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  at what's actually available, look at seasonal lines, look at
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  your term loans, look at redraw if it's applicable, and look
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  at your review dates, look at your loan expiry dates. Those dates
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  really matter. A facility review in the middle of a dry period
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  can be quite stressful. A limit that looks fine today might
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  be tight later. And that's why you compare facilities against the dry
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  year cash flow. put them side by side, where does
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  the cash get tight, where do repayments fall, and
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  where does the income drop, and where does the overdraft peak, and
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  where does the facility review sit. That gives you a clearer picture,
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  so it's usually easier to line up things earlier. It's
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  easier before the drought is fully underway, it's easier before the
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  business is under strain, and it's easier when you show a
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  plan calmly. Say your forecast shows pressure
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  in six months, you might still have options now. You
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  can speak with your funder, and you can explain the expected stock
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  numbers. You can explain the expected risk speeds, and
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  you can explain the expected cuts. You can explain the drought strategy,
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  and then you can ask what information they need. And that's a way
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  better conversation. So your facility headroom has to
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  cover the whole period, not just the first few months, not
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  just the destock phase. The rebuild needs attention too. If
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  extra headroom makes sense, look at it early. And if a restructure might
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  help your cash timing, raise it early. If a review date needs
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  planning, start early. Again, this isn't about penning, it's
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  about removing surprises. And surprises are what create pressure.
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  A clear plan gives everyone more confidence. It also gives you
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  breathing room. Once the plan is built, write down your triggers. And
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  these don't need to be complicated. They just need to suit your place. It
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  might be a date. If there's no decent rain by then, you act. It
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  might be if pasture condition gets to this. If feed drops to
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  a certain point, you act. It might be about cash flow. That trigger matters
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  because pressure changes decisions. Before long, options
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  will narrow, and the written trigger helps you act on them earlier.
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  Alongside triggers, write down your fallback options. If adjustment disappears,
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  what happens next? If prices are too soft, what are you
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  going to sell first? And if you sell down, how do you rebuild? If
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  you access other country, who's going to manage it? And if cash gets
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  tight, who do you speak to first? It's better to change
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  a plan than invent one late. The worst time to design a
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  plan is the worst day. Then look at water. For
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  longer term resilience, water is a big one. So take a hard look
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  at your water setup. Will it hold up in a hot, dry spell? Are
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  the watering points reliable? Is reticulation doing
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  what it needs to do? And are there repairs that should be done, handled earlier?
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  I'm not saying go and spend money that you don't have. That's not the point.
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  The point is to review it honestly. Water infrastructure can be a key preparation
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  investment. For some places, it's one of the biggest issues.
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  And if the current setup won't hold up, know that early. And
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  if you can address it, price it properly. And if you can't address it now, understand
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  the risks. Then include that in your plan. That's a
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  plan you can stand behind. It doesn't promise the weather. It
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  shows what you can control. So the real test isn't the first few
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  months. It's often when destocking creates crash. The
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  hardest part is usually the rebuild. That's when numbers are down, and
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  that's when income can be lower, and that's when banks may be
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  more conservative. So map your stock numbers, map your receipts,
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  look at your next 12 to 18 months, and pick a drought strategy that
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  fits your country. and build the cashflow honestly, talk about
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  repayments early, check your facility headrooms, and
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  know your review dates, set clear triggers, and write down
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  your fallback options, and take a hard look at your water, and then
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  put the plan on paper, show your bank how it works. They'd rather
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  see a plan than deal with a surprise. If you're looking at buying a
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  property, growing your business, or making sure the finance structure has
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  enough room for a tough season, book a free call. The free