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The Farmers Club Private Podcast

Episode 50 - Nigel Kerin on the business of climate (part-2)

April 28, 2026 • Dwain Duxson • Season 2 • Episode 50

0:00 | 1:08:36

In part 1, we spoke about the following:

Weather and trading conditions at Kerin Ag.
The cost of doing nothing. Refer to this article here.
How Nigel tried low-input Farming back in the 90s.
And how they were literally forced into low-input Farming in the 90s.
How you have to replenish what you take out when it comes to production.
How is it that when we want something to work, we will pull out all stops to justify it to ourselves and others?
Nigel gave us some of his learning from a recent trip to New Zealand.
He expanded on what he learnt at the recent Wagyu conference.
We spoke about how conferences need to get better and how they can.
We spoke about Farm inflation.
And about some of the surprises that came from working out his Farm inflation rate.

In part 2, we spoke about the following:

About where the herd and flock size are at
And the opportunities around that
How climate is determining how many Cattle or Sheep we breed.
How they are utilising finance to create a new enterprise.
We spoke about the importance of measuring.
And what the metrics behind a Grass budget mean to his business.
Nigel explained the process they follow when making big decisions about what they do.
One of our subscribers asked for 3 bits of advice to young people.
He also asked about the difference between good and great in business and in life.
Another subscriber asked him why he started a Ram stud, and it was a great answer.
He was also asked if it's either business consolidation or growth. It's an infinite game for them; it has no end.
We spoke about what is frustrating farmers right now.

It was a great chat, and I thoroughly recommend you take a listen to both parts 1 and 2. You can download the MP3 version here.

SPEAKER_02 0:04

Hi everyone, Dwayne Duxon here from the Farmers Club Private Podcast. We do these podcasts in conjunction with our sister business farm tender. Go to farmtender.com.au and sign up from there. We did this podcast with Nigel Karen in two parts. Check out the show notes as we've dot pointed all the main topics that we covered. And there's so much more. If you're an agricultural business, a farming business, or a non-agricultural business, there's plenty in this for everyone. I hope you enjoy. End of message. So let's talk uh herd and flock size. Do you ever think we're ever going to rebuild the sheep flock again? And by rebuild, I mean get it back to say where we were four or five years ago, before 2023.

SPEAKER_03 1:14

Well, I'll ask you a question. Do you think climate is going to go back to where it was with stability 30 years ago? Because if you can tell me what's going to happen to climate, I'll tell you what will happen to the U numbers and cow numbers in Australia.

SPEAKER_02 1:32

Oh well, I don't think it will, and it's changed. We're getting, and I might only speak where we are down in Victoria, a lot more summer rain, you know, which has been taken advantage of by croppers to give them moisture to grow a crop on, you know, that that particular winter cropping season. So and in the past, back then, we wouldn't have got the summer rains we get now. So yes, it has changed.

SPEAKER_03 1:56

Yeah. So when people start talking about herd rebuilt, flock rebuilt, whether they're talking America, Australia, it doesn't matter. We are the way I see it, every time, if you study this and study it closely, every time we look like rebuilding sheep numbers, we get smashed by climate. The last time it was down in Victoria, which was I'll actually I'll go back and give you a better, it's a bit more um bit more to it than just climate.

SPEAKER_02 2:32

Yep.

SPEAKER_03 2:34

And there's a lot of talk about everyone's talking about no one's gonna feed, everyone's selling. Yes. And it's a big concern, but just leave it there, we'll park it. I want to go back to 2023 and what happened then. In 2023, all the so-called professional weather forecasters were forecasting the gonzilla of El Nino. And the farmers reacted by dumping animals onto the market. And what happened was, and it wasn't all to do with the farmers, the result of what happened, dumping animals. There was other things. There was other things, but I'll just put this in a broad term so we can get on with the conversation. Beef, lamb, and mutton, 74% of the value of those three products was lost over a period of four months.

SPEAKER_02 3:36

Yep.

SPEAKER_03 3:37

So if you look at southern New South Wales, Victoria, Tasmania, South Australia, they got flogged with low prices, as we all did. But those areas I just spoke of come out of 2023 with no cash flow because our products are worth nothing.

SPEAKER_01 3:56

Yep.

SPEAKER_03 3:57

And they went straight into pretty much a 15-month drought. So we were, if you look at those southern areas, they were starting to rebuild their flocks and herds, got smashed, and then they liquidated them to bring in cash flow.

SPEAKER_02 4:19

Yep.

SPEAKER_03 4:21

And one of the things that the analysts need to take into consideration when they're trying to forecast if a rebuild's going to happen, if you look at those southern areas, they had the fall in prices for livestock of 23. They went into a 12-15 month drought in 24.

SPEAKER_02 4:43

Yep.

SPEAKER_03 4:44

And then they come out of that uh into exceptionally good prices, and then they did receive a rainfall event, which I think happened in about you know June, July this year.

SPEAKER_02 4:57

Yep.

SPEAKER_03 5:00

And then you look at what's happening in uh central west New South Wales, northern New South Wales, southern Queensland. We are now into a dry period, and we're dumping uh cows and news back onto the market. But here's the thing: why are those cows and news worth so much? In the case of sheep, it's mutton and cow meat. Why are they worth so much money? And why are people selling and choosing not to feed? Because that hangover from 2023 from that, it was basically a miniature recession that lasted for 12 months in the value of our products. This has happened in our business too. That hangover was the 23-24 financial year. We brought that hangover of a lack of cash flow into the 24-25 financial year, and in most cases, we didn't regain that cash flow even in the 24-25 financial year, and we're still lacking some of that cash in the 25-26 year.

SPEAKER_00 6:12

Yep.

SPEAKER_03 6:13

So commitments are these businesses have got to have cash flow, and that's why they're selling. We've got mutnet record, never been dearer, ever. And our cow price has been driven by the by the American grinding beef market, yes, which has been driven by a lack of beef produced in the US because of climate. So climate now owns the market. And I cannot see every time we look like rebuilding U numbers and cow numbers, we get smacked somewhere on the east coast of Australia by climate. And I just cannot see it happening. And if I had my father's climate to manage today, I can guarantee you we'd be back up to record U numbers and record cow numbers. But do you want to go there? No. I don't. No. It's never been easier to make money, even with climate uh fighting against us. It's never been easier to make a bob than what it is now out of livestock. Um, and for me, you've got to develop a farming system that fits in beautifully with climate. And that's why I say when it's on, it's on, because yes, you can make 80% of your profit in 20% of the years. Because the the climate now has such a big impact on the pricing of these animals. Um I'd rather be buying a black steer at$6 a kilo and Ford selling him at$6 when the market is booming than buying a black steer for$3 and Ford selling him for$3. Because every kilo I put is twice as much. So the earning capacity of our farms when it's good is twice as powerful as what it is when the cattle and the sheep are worth nothing. So everyone thinks they make their money buying cheap animals. Well, that only sort of works to a certain degree. For me, it's when the markets are booming, is when you'll get a booming forward price to go with it. And it gives the earning capacity of your farm twice as much. And the difference between a$1,000, say, black steer and a$2,000 black steer is only the interest bill, which is about$23 for us. And if you work that out to weight gain and a good forward sell price, which if they're worth$2,000 ahead, you're getting a really good board position. It's about four days of weight gain to cover that interest, four to five days to cover that increase in the uh interest bill from 1,000 to 2,000. So I'm trying to think of what the question even was. Now it's been about the flocks of that size. It's driven by the question.

SPEAKER_02 9:33

Do you reckon costs that have a um costs and cash flow would also have a bit to do with, you know, we need money, let's go and sell off a few ewes or sell off a few cows, which they mightn't have done in the past as well.

SPEAKER_03 9:49

So what was the question then? Well, you talked about it exactly. This is this thing I I said we'd come back to it, inflation.

SPEAKER_02 9:59

Yep.

SPEAKER_03 10:01

We've been smacked, and all this is all business, it's town and city base. We've been smacked by this was happening before um this blow-up in the um in the Arab states happened. Yeah, we were getting smacked by increases in direct costs, and most of it was driven by the increases in wages. Now we've got the increase in fuel costs. So yeah, it's it is getting you it is getting more. You just constantly got a bit get better with the way that you use available moisture, turning that into the best cash flow that you possibly can. And and as for the herds rebuilding, I cannot see it because we need cash flow from selling animals to keep up with the increase of inflation and the increase of direct costs.

SPEAKER_02 11:11

And an undersupplied market, which we've proved um with in the grains industry, it's been oversupplied and prices have tanked somewhat. Um, an undersupplied market is is where farmers want to be, isn't it?

SPEAKER_03 11:25

Yeah, and and you know, I remember there's nothing wrong with something becoming a cottage industry just as long as you're a plan scale in the cottage. And scale is governed by revenue, not hectares.

SPEAKER_02 11:44

Yeah.

SPEAKER_03 11:45

So that that sort of leads to specialization. And yeah, I just there's gonna be a big shake up in there'll be a big shake up in how we view and run our farms into the future. Um, it has to change because if you don't adapt to the new world we live in, I you'll find it very difficult to exist.

SPEAKER_02 12:18

And analysts like Simon Quilty, um, pretty bullish on prices for the next couple of years, both sheep and cattle. Um, I think he said$12.50 for lamb in August, you know, things like that. Um do you share that optimism?

SPEAKER_03 12:36

Absolutely, but ask yourself the question, absolutely believe in that. But what's driving it? Climate. Climate is driving these prices. And you know, I asked you when we started this conversation, can you see the climate going back to where it was 30 years ago, where it was very predictable where we lived, and very predictable in the Mediterranean climate down in Victoria and South Australia? To me, climate now owns the market, and can I see these good prices continuing? We're already, you know, lamb, there was lamb 10 days ago, three weeks ago was up at 1350 a kilo. Can we stay there? We don't need 1350 at the moment.

SPEAKER_02 13:25

No.

SPEAKER_03 13:26

But if prices keep going in like they are in the for the next one or two years, we will need$13.

SPEAKER_02 13:32

Yeah, exactly.

SPEAKER_03 13:34

But just at the moment, the reason I presume that they were paying$13 a kilo or$12.50 was supply. And the supply wasn't there because it was choked by climate. So that's why I keep nagging and nagging about you're gonna have to build a farming system that instead of fighting climate, climate, I believe, is one of the biggest profit drivers that we can use in our business, providing we develop systems that fit into it. And I think when you look at your business and you look at you know, your goal setting and where you want to be in your business and life at one, three, five, and ten years, you don't actually rise to the level of your goals. You fall to the level of your systems, and that systems design that you're gonna have to put into your business to fit in with this will be the secret to the growth and success of your farming business, regardless of what enterprise you're in. It's the systems and the guardrails that you put in place that create the discipline to stop you being taken off track by a motion of something that might have bells and whistles attached to it that are highly attractive. I don't know what that is at the moment, but there's always something popping up in our there is.

SPEAKER_02 15:07

Um, and talking about climate, you use grass budget budgets or um grazing charts and things like that. How important are they to your business?

SPEAKER_03 15:20

Um well, when you know what's in your grass bank and the size of your grass bank, you know what's going to be coming into your money bank. It's as simple as that. And the reason we're so anal about that and knowing is if you've got a business that's geared for growth and expansion, you have to feed the finance bill that goes with that. And in our case, it's a grazing business, so we just need to know what's in our grass bank. And you know, at home, we're we peaked out this year in October at 70 odd thousand DSEs. That's on farm. When I do my grazing chart up at the end of April, I reckon we'll be back to 12, 12,500 DSEs.

SPEAKER_00 16:18

Yep.

SPEAKER_03 16:19

So basically back to a hobby farm. And a lot of those DSEs will be going into containment at the end of May. And that's that's a good place to be, because I would I don't want to be right up. Um so how often. So to know to know what's in your grass bank, it's linked to your finance bank. And it's a bit like a grain grower.

SPEAKER_02 16:51

Yes.

SPEAKER_03 16:53

When he knows what his soil profile is at planting, he can he can pretty much forecast some yield. He might be able to forecast when he's at early tillering that he's covered direct cost.

SPEAKER_00 17:07

Yep.

SPEAKER_03 17:08

And that information just mentally makes him happy or her happy. And that's a good place to be, being in control. And for me, being so, as I said, anal about knowing how much is in that grass bank makes me happy, but I'm never sad when I run out because we've already managed that.

SPEAKER_02 17:30

Yeah, yep, yep. And you know what's gonna happen at some point.

SPEAKER_03 17:33

We're managing ahead of time how we're gonna go. And there is no surprises. I haven't got, you know, I'm not I haven't got the poops because it's dry as buggery, and we've only received um 32% of our rolling rainfall for this financial year. We made our money back when we had the when we had the moisture there. And thank God we put our foot down and really took advantage of that and threw the absolute sink at stocking rate. Um, and the reason we did that because there was such a gap between restock of heifers, there was a dollar twenty cents a kilo difference between our buy and our forward sell price, and that never happens, and it happened because climate was driving it when all the southern New South Wales, Victoria, and South Australia were rapidly destocking because of that drought, and it also the association with the commodities being worth nothing in 2023, it was also driven by the need for cash flow. And now they're taking advantage of what's happening in central western northern New South Wales. So it what goes around comes around.

SPEAKER_02 18:46

Um I'm just assuming here that not many would be doing farmers would be doing grass budgets. So just a just a bit of an insight of what you do. How often do you do them and what's the process with you know coming up with a grass budget?

SPEAKER_03 19:01

Yeah, in the growing season when uh in the growing season, every 10 to 14 days.

SPEAKER_00 19:07

Right, yeah, right.

SPEAKER_03 19:08

And then in the dry, like it is now, pretty much only every three weeks, four weeks. Uh, and that's got to do with stocking rate as well, because if you've got bugger all on, they're eating bugger all as well.

SPEAKER_00 19:21

Yep.

SPEAKER_03 19:22

And like we we pretty much had finished destocking most of it had gone by the end of January, and uh and a bit in February. By the 8th of February, the bulk of what had to be de stocked had gone.

SPEAKER_02 19:40

Yep. You'd planned it that way though, haven't you? Hadn't you?

SPEAKER_03 19:44

Yeah, absolutely. Because the one good thing about taking forward positions and contracts is you get really, really good at knowing you can fill them. The more you do, the more experienced you are, and the better you get at fill it filling the contracts. And it's a bit like I use the analogy: what's the difference between a professional athlete and an amateur athlete? One gets paid a heap and the other one gets paid nothing.

SPEAKER_02 20:16

Yep.

SPEAKER_03 20:18

And that's that's how I view taking. It's also I use the same analogy for paying principal back to your bank.

SPEAKER_00 20:26

Yes.

SPEAKER_03 20:28

Paying principal makes you a better business person because you're you're you're in the realms of being a professional athlete running your business that has enough turnover to pay principal.

SPEAKER_02 20:42

Yep.

SPEAKER_03 20:42

If you don't have to pay principal, you just get fat and lazy. And you're not fit anymore to play the game. Um so I think an OptiWay had a lot to do with that as well. Over seven years of using OptiWay, we can look at any grass now on our farm and know exactly what weight game we can put on with those sheep or cattle. Yep. And if we need to manipulate that through the use of urea-based loose licks to change the bugs in the rumen as the feed dries off and changes, we now know exactly what weight game we want to do by using those loose licks, and where that's something we've been using for a long time. But if you go back to Grassbank, we had paid off our borrowings in our livestock facilities by the uh 6th of February. Really? We had our facilities, finance facilities sitting there paid off doing nothing. And I thought about we can't make money at home. And I looked at adjustment.

unknown 22:00

Yep.

SPEAKER_03 22:01

And it had a certain amount of risk associated with it.

SPEAKER_02 22:05

Can't control a lot of things.

SPEAKER_03 22:07

Can't control a lot of things. And this adjustment was a long way away from home. Like you took 900 Ks away, and you're in an environment that you know nothing about, and that environment can change incredibly quickly as far as grass quality compared to home.

unknown 22:23

Yes.

SPEAKER_03 22:23

So I stay out of that. But what we did do was started hunting around trying to find space in feedlots to custom feed animals. So we did find that space. And we've been buying animals out of sale yards, trucking them straight to the feedlot, taking a forward position to um with a processor to process those cattle after being on food for a hundred days. And it's something we've never done before, custom feeding. We've backgrounded a lot of cattle for feedlotters. But we're going to learn something there along the way, and we're going to form a really good relationship with that feedlotter. And our intent will be to get more space permanently with that feedlotter, whether it's a good season or a bad one, permanently have space and actually have a um a passive income coming from having permanent space in the feedlot. But the secret to that relationship will be both have got to make money there. The feedlot has got to make money, and we've got to make money out of that. And we'll work together to make sure that happens. And that's so important that in a setup like that, you create a win-win for both people, no both businesses. And also something we don't know. We've done it, put it through a spreadsheet, we've done all our costs, we've taken a fourth position. The first two pens that went in there, um, we took a price on, and then we had the uh the um the war started overseas, then we had an added cost of freight into the feedlot for all their feedstuffs, as well as the cattle in and out of the feedlot. So the next forward contract we took was 30 cents a kilo dress weight more than the first one, and that covered the cost of added costs of freight. Um so yeah, no, it's just something we've never done before.

SPEAKER_02 24:35

So so it's sort of like a an a new enterprise or a or a side hustle to an existing one that you've dreamt of here. Utilised, yep.

SPEAKER_03 24:52

Utilizing finance. And and that's the way I look at it. You've got this thing. If you look at finance as fuel, also, finance is it's a fuel that grows business. If you're not using it, then why? You use it to buy animals and trade animals, we use it to grow business, we use it to put our crops in. We use finance to expand, say, our irrigation, if that's where you live.

SPEAKER_02 25:21

Grow more grass.

SPEAKER_03 25:22

Grow more grass. I just looked at it. We're sitting there, and our business is sitting there idle and doing absolutely bloody nothing because we literally can't because of season. It was just another outlet that could develop into the future into something big. But if we look at reshaping and remodeling our businesses, and I really want to go back onto this climate thing, and I want to look at the US.

SPEAKER_02 25:57

Yes.

SPEAKER_03 25:58

The United States has a massive feedlot industry in sheep, even though they don't run a lot of sheep, they feed a lot of sheep, and a lot, most of their cattle are fed. The question is why? Why is the feedlotting industry so big in the US? And this is very simple thinking. The US is covered, most of the US where the breeding herds are run and flocks, are covered in snow for five months of the year. They built feedlots to take the young animals to put them into the feedlots.

SPEAKER_02 26:32

To grow them out.

SPEAKER_03 26:32

To fish them. Why did that happen? It was climate that dictated that. The climate was there's three or four feet of snow and they can't find the bloody. And if you look at America, the uh big breeding homes and flocks are in the low rainfall zones that have these cold winters.

SPEAKER_02 26:55

Yeah, in the Colorados of the world.

SPEAKER_03 26:57

So I'm sort of scratching my head thinking of America and then thinking of Australia, climate is gonna reshape the future of Australian animal production systems, and guess where it's gonna go? It'll be more, it'll be more feedlotting for sheep and cattle. And I think in five to ten years' time, it'll be very, very common for most farms to have a modern professional, modern day design and technology built feedlot for sheep and cattle. And it might and it may fit in beautifully in the mixed farming areas where they grow crops.

SPEAKER_01 27:43

Yep.

SPEAKER_03 27:44

They're actually value adding those crops to go back in and value add cattle, which is a value add to climate, rather than being sellers when the market's getting flooded because everyone's destocking because of dry. They're actually value adding their animals and stabilizing their cash flow, putting more stability into their cash flow. Let's see how wrong I am. We do a podcast in five or ten years to see how much climate is going to shape what happens in Australia with our animal production.

SPEAKER_02 28:22

Simon Cooldy said there'd be a lot more feedlots built on the Murray. Um the it's all concentrated up in the you know, southern southern Queensland and northern New South Wales will be a lot more built on the Murray because you know the the markets are in the south more so now, he said.

SPEAKER_03 28:39

Yeah. But if you look at why are most of the capacity feedlots on the Darling Downs?

SPEAKER_02 28:47

Um, supply of grain and hay and things like that.

SPEAKER_03 28:53

Yes and no. Yes, you're right. They can be anywhere, they're not. But the fact of the matter is, if you look at climate, you can't, it's very, very hard to finish young animals in a climate where you have a tropical type wet and dry season. The wet happens, you get the green grass, then if the grass finishes before the animals are finished, though. The reason there's so many food lots in the Darling Downs and in Queensland, they need the feedlots to finish the animals to supply into where all the abattoirs. But in the southern, if you look at central west New South Wales, hardly any foodlots in the central west. Why? Because we pretty much get rainfall all year round in the central west. Go down to Victoria where a few feedlots pop up, it's a Mediterranean climate. It rains in the cool months and buggerall in the hot months. So see how feedlots pop up where the need is. There's not that big a need for feedlots in the central west because our climate seems to rain all through the seasons.

SPEAKER_02 30:01

Yep.

SPEAKER_03 30:02

Traditionally.

SPEAKER_02 30:04

Traditionally.

SPEAKER_03 30:05

So it's just something to think about. The battle test world, what I'm saying is actually correct, right, wrong. I've put a lot of thought into why everything is like it is. And the humans are doing everything they can across the world to build animal production systems that are fitting in with climate.

SPEAKER_02 30:27

I just thought then a title for this podcast, The Business of Climate.

SPEAKER_03 30:36

Building that business could be one of the most profitable enterprises you've ever come across that's very specific to livestock.

SPEAKER_02 30:45

No, interesting. Um, so getting back to the grass budgets, how do you do them? And you're I think you're involved with an organization that's building an app for doing these grazing charts slash um grass budgets. How do you do them now and and what this new app is that going to change things?

SPEAKER_03 31:07

The app will when it's finished being produced because they're putting a lot of time and effort into developing it and doing it properly, and most importantly, using satellites. But the thing with satellites, they've got to be validated. So that was our input was validating the satellites.

SPEAKER_00 31:22

Right, yep.

SPEAKER_03 31:23

But you know, everything you want to do these days is on YouTube.

SPEAKER_02 31:27

Yeah, yeah.

SPEAKER_03 31:28

Not know how to do a grass budget, go and sit on YouTube for God's sake. Your DPI does a lot of stuff. MLA's even got a lot of stuff on grass budgeting progress, which is a you know, department of ag type thing. There is no excuse. Go and pay a dairy farmer 500 bucks a day to come farm every month and teach you how to do a grass budget. Go and get a kiwi. New Zealand sheep producer, cattle producer, they all know how to do grass budgets. And in Australia, it's you know, it's just not it's not normalized behaviour in the grazing industry in Australia, other than the dairy industry.

SPEAKER_02 32:14

Um someone in your family comes to the board meeting and says, We what we've got to build a feedlot, right? What's the process that your organization goes through to battle test that?

SPEAKER_03 32:30

Um so yeah, you you you don't discount it. We actually go and run it through a very, very simple process, and it's pretty much if we go ahead and do this, say we're going to build a sheep feedlot. And the good thing about building sheep feedlots, they're very cheap compared to cattle.$300,000 goes a long way to building a state-of-the-art sheep feedlot. And it pretty much goes nowhere with cattle. So if we go ahead and we've we've allocated, we've done the design and we've worked out we're going to spend X amount of dollars. Let's just say it's$300,000 to build this very labor-efficient, uh, very good technology, modern-day feed lot for sheep. Does it address the weak link in our business right now? So is our issue weak link in our business growth? Well, if it's us and our business right now, no, growth's not an issue. If we go ahead and build this feedlot, do we have the people to manage it before it's even built? Do we have the skill set? That'll be yes or no. And if it's no, then what are we gonna do to build that skill set? And that's that doesn't need a lot of funds, a lot of money. It's just finding that person. If you if you're not gonna be doing it yourself, it's just finding that person and this that has the skill set to do that. Is the best use of that$300,000 looking at the infrastructure we haven't got on the farm?

SPEAKER_00 34:34

Yep.

SPEAKER_03 34:35

Is there a better use for the for the infrastructure spend on our farm? Like is the wool shed stuffed? Yep. Cattle yards absolutely shocking to work in. And it takes all day, you know, it can be machinery. So you're looking for where the choke points are in your business right now, of where you spend. Do can we spend that 300 grand somewhere else that'll have add more efficiencies and help with more turnover in our business other than a feedlot?

SPEAKER_01 35:10

Yep.

SPEAKER_03 35:11

And then the last one we look at if we go ahead and build this sheep feed lot right now, will it address the weak link in our business, which right now in our business is cash flow? Yep. So the cash flow one's a good one because right at the moment our cash flow's dropped off debugger all, other than we've got wool sales coming up. Yes. And basically there's no trade animals to sell. Um, there'll be bull sales. And when we looked at cash flow, that's why we took the opportunity to do custom feeding. So if I look at, I'm just doing the numbers now,$300,000 multiplied by 7% interest is$21,000 a year. Now, if I divide net profit of say your net profit from feeding lambs is$30, I need to feed 700 lambs to cover the interest bill.

SPEAKER_02 36:14

Yep.

SPEAKER_03 36:15

Straight away, does that feel comfortable to you? It did to me. So when I look at the weak link in our business now, building a$300,000 feedlot that that costs$21,000 in interest a year, if I pay no principle, will it address cash flow in a business? The answer is yes. So I would think in that particular case that you threw at me, that is a wise investment at the moment. It also fits in with climate. That feedlock can become your containment pens for your uh use.

SPEAKER_01 36:54

Yeah.

SPEAKER_03 36:55

So one of the considerations when you're investing and looking at um investing either borrowed money or excess funds or a profit, what should be kind of mind is does this investment fit in with climate, managing climate? And my answer is yes, yes, and yes on this one.

SPEAKER_02 37:19

Right.

SPEAKER_03 37:19

Um does that mean you're gonna do it or um I would say in our case, no, because the lacking thing would be right at the moment would be um people.

SPEAKER_02 37:39

Yes, very important.

SPEAKER_03 37:42

And right now we've got our labor where we're managing everything at home. And if I then went to what are the negatives of sheep feeding is the availability, and what is the risk of sh sh uh lamb feeding is the available non-availability of consistent forward pricing into a processor. Yeah, so then I go, well, how do I mitigate that risk? That's where relationships come into it. Yeah, I can tell you now, certain agents will get offered prices by certain processes that no one even knows are happening. Because they've built the relationship and they've built trust with one another, the relationship between the agent and the processor can also be with the grower.

SPEAKER_00 38:32

Yep.

SPEAKER_03 38:33

So that's where you've got to look at the uh have you established good relationship with a very proactive agent that works as hard in his business as you do in yours. And as I said, there is forward pricing that is released to certain agents that no one even knows is happening because those agents are good to deal with for the processor to deal with, and they deliver, and they're most important, they do not break contracts. And their agency is big enough so they can pull lambs out of a wide part of the landscape to fill the contract if things go a bit silly.

SPEAKER_02 39:14

And and they'll go to those people, uh farmers that have the best relationship first.

SPEAKER_03 39:20

Yeah, and the ones that have a can-do attitude that makes shit happen, and they don't break their word, and they are the difference between an emateur athlete and a professional. The professional athlete gets paid, and the emateur athlete does doesn't get anything. And that's that's yeah, it also goes with having a very pro positive mindset.

SPEAKER_02 39:43

It does. We opened up to our subscribers for a few questions, and this one's from Caleb Swartz, he started writing with us. He's a he's a yeah, he's he's gone places, this kid. He's only 22, and he's he's um after all the information. He asked Nigel what were the top three pieces of advice might be for a young person today? And let's let's refine it or keep it in the in in agriculture.

SPEAKER_03 40:11

Know your numbers. Yep. You can't run any business unless you know how to run your numbers.

SPEAKER_02 40:18

Yep.

SPEAKER_03 40:19

And what the numbers mean. And I don't have a hang up if you don't know the numbers, just as long as you employ a bookkeeper who knows who manages the numbers for you and gives you those reports. So that's a it's a skill you can outsource while you're learning. But the most important thing is um know your numbers. The other big thing is you don't have to be very smart or very clever to get ahead in any just as long as you surround yourself with a good group of mentors that have actually have actually got a lot of experience in the industry that you want to be in, and lots of experience, and they've actually built businesses that have gone good to great. Ask ask good questions of good people and they'll put you in a good position. Um yeah, I just and don't master one enterprise before you even think of going to another one. And my advice is get to one enterprise and do the lots of it. Um and I think another thing, you've got to commit to having a highly adaptive mindset. Yeah, no matter what you're throwing at you, you don't get the poops and spit the dummy and chuck the toys out of the cock. You can quickly have a mindset where you reset your sails to the wind very quickly. And for me, that adaptive mindset is so bloody important because it can be a lot of fun, and it doesn't cost you money to have an adaptive mindset. You're just resetting your sails to the wind, and the quicker you do it, the quicker you get yourself out of a lot of times out of a not so good a situation. Um so yeah, you know your numbers, mentors, yep. Um you got in your phone book as a resilience um that help you making decisions. And me, that's been one of the major things that when I have an issue I can't work out, I just give it to there's four different people and they always come up with the same answer. So, yeah.

SPEAKER_02 42:50

And approaching the mentor side of things, no, the mentor side of things, like people are willing to share information so greatly these days, aren't they? So no one should be shy and asking the questions.

SPEAKER_03 43:05

And I think they're people you want to do business with. Like, if you look at the seed stock breeding business, both sheep and cattle, you're either a leader or a or a bleeder. And a bleeder means you're sitting on your ass doing nothing, doing nothing for your clients in use of technology, the use of science and technology in breeding animals. And you're costing if that's your attitude in the seed stock business, you're costing your clients an absolute shitload of money. But they'll normally keep doing business with them because that's where the agent does business with them. And for me, it has a it's yeah, it's just you'll see a massive massive. Change in the in Australia in the next 10 years in the seed stock business.

SPEAKER_02 44:06

I agree.

SPEAKER_03 44:07

And that's going to be a great thing.

SPEAKER_02 44:09

Yep.

SPEAKER_03 44:10

And do business with people that can grow your business and help you grow your business if you're dealing with a seed stock producer. And if you don't get that service or motivation, then maybe you're out of the place.

SPEAKER_02 44:28

And the commercial breeders will be the winners.

SPEAKER_03 44:32

Absolutely. Because the way it is at the moment, a ram or a bull with an amazing amount of collected data and genomics and breeding values and all this costs exactly the same as one with none. Yep. And it can't that can't go on for long because I just know if you're dealing with climate, you want a heap of fertility. And in the cattle industry, that's you know, they can only have one calf a year, but in the sheep industry, fertility is your biggest driver.

SPEAKER_00 45:08

Yep.

SPEAKER_03 45:09

Growth and the speed of turnover of product is the next biggest driver. Getting that animal off your farm to a processor or into a feedlot as quick as you can before the climate turns against you, which leaves you more grass to feed back to the females, which influences fetus counts and the percentage of dries. Everything revolves around the speed of turnover. And for me, having in my particular seed stock business that I muck around with in the sheep game, I have the luxury of having all my direct costs paid for and cash left in the bank. And that's been averaged over 10 years from wool production. And that is one of the biggest safety barriers we have in our business is that there's three products come off that sheet production system. And the great thing about um growing wool, they grow bloody near as much in a shit year as they do in an absolute kraken year.

SPEAKER_02 46:15

And that and those three three bits are pretty bloody good at the moment.

SPEAKER_03 46:19

Yeah, and every day in that three-year drought, 17, 18, and 19, every day we were feeding in containment, our wool check that was produced by those years in containment every day was paying for the barley that they were being fed. They were sitting in at net cost of the business basically because the wool check covered it. And if anyone can't get their head around that, then they need to sit beside me in the office and go back through cash books and look at what happened in those three financial years. And it's so easy. All you do is look at your fodder cost transport a fodder in to the business, and then you look at the wool check. So here's the fodder, cost of transport in, here's the wool check. Yeah, it's a simple pretty bloody easy to work out.

SPEAKER_02 47:12

Um Caleb asked another question. Uh what's the difference between good and great in business and in life?

SPEAKER_03 47:25

Control. Control. The same as what I learned. We picked up off the Kiwi blokes over at the Z McDonald ward. And you don't have to go to university to create control. As my kids like to remind me, you're a year-nine dropout.

SPEAKER_02 47:44

Yeah.

SPEAKER_03 47:45

It's and we didn't do much education until we were buddy. Uh we started Kieran Ag at 42-year-old. So it's never too late to learn. And the thing the the difference between a good and a great business is control.

SPEAKER_02 48:02

Yep.

SPEAKER_03 48:03

And control is the one thing that alleviates um, I think alleviates that mental strain that's put upon you by things that happened like in 2023.

SPEAKER_01 48:22

Yep.

SPEAKER_03 48:23

With where we lost so much of the value of animals. It also got us through control, got us through a three-year drought that had never happened in our area. And yeah, a happy, a happy head makes really good decisions.

SPEAKER_02 48:42

Does. We had another three questions from David Sando, who uh farms in the corner country, western New South Wales. What was the motivation to start a ram stud in the first place?

SPEAKER_03 49:00

Um, there was too much low-hanging fruit in the merino industry to ignore it. Yep. And that low-hanging fruit was all science and technology. We already had a very fertile flock. We had a we had a a f a fed income dual-purpose sheep. This is going back 16 years ago now, 17 years. We already had two of the key ingredients that were very much missing in the merino industry: fertility, lamb survival. That was driven by, now it's been driven by 30 odd years of wet and drying every year that lambs and losers gets chucked out. But it was the introduction of science and technology that absolutely blew it out of its skin. And even in the last three years, that growth in the traits that drive profit haven't stood still. Our phenotype now that they're looking at, and I'll probably do a video of the rams come out of the ewes. When you look at the phenotype of our rams now, they are a terminal-shaped marina. The fertility's right up there, lamb survival's right up there, but the growth is you know, it's probably double what it was 10 years ago from for weaning to 100 days, 200 days, to 250 days, and that had to happen to fit in with climate. We no longer have the luxury of having time on our side to turn animals over. So it it was just you couldn't ignore it. The industry was screaming for change, and we had most of the change already in place. And through the science and having outside people come into our business as well. Like there's been two massive movers and shakers in my time in the merino industry, and you were part of one of them. You had the introduction of Jim Watts, which is going back nearly 30 years now, long time. And everyone ignored it, and everyone said, Oh, they're not, he's not going to change our sheep, but there hasn't been a single sheep he hasn't changed, no matter how traditional you were. You cannot find, thank God, the sheep in the merino industry that existed 30 years ago. Except maybe the lines. And then you've had the introduction of Mark Ferguson from Next Gen AGRI.

SPEAKER_02 51:41

Yep.

SPEAKER_03 51:43

He took all the learnings from the university days, the PhD days, very much the same as Jim. It was university learning, bought the university learnings out and dropped it into the paddock about adding more resilience to climate in the sheep industry. And that's across all breeds, it's not only merinos by any means. But and that most of that learning comes out of Murdoch University and WA. But when you look at the influence that he's had on our sheep, on phenotype, as well as all the welfare traits, as well as all the profit traits, the biggest threat to the terminal industry now in Australia is the merino. Now that I wouldn't have said that five, ten years ago. For the last 40 years, anyway. And the terminal job. But through the use of science, we've been able to rapidly redesign that animal to fit in with the climate needs that we now have, as well as the cash flow needs that we now have to have in a business.

SPEAKER_02 53:32

And did you also see the opportunity in how others weren't leveraging technology and science?

SPEAKER_03 53:41

Exactly. Exactly. And the great thing about science and technology in the livestock business, you really only buy it once. And if you look in the cropping industry, and this goes back to November or December on Twitter, I was looking at all the screenshots coming of yield monitors in the headers.

SPEAKER_00 54:01

Yep.

SPEAKER_03 54:01

Down in Victoria and across in South Australia, where the guys were saying, we have never ever grown so many kilos of grain from so long in crop rain. And I went, geez, them blokes are doing a bloody good job. They were, but if you look at it, it's the science of plant breeding, being canol wheats, barleys, all their what they grow, is driving the profitability of their businesses. So if I was to go to a modern-day grain grower and say, mate, I've got 10 ton of canola seed here, it's a 10-year-old variety, I'll give it to you for nothing. It's all grated, treated fungicides, ready to all you've got to do is plant it. None of them have plant it if you give it to them because they know it's going to cost them money to use old science and old technology in their grain growing business.

SPEAKER_02 54:51

Yeah, they always call they always call it a you know, the by the variety, never never a wheat or a canola or a barley, it's always the variety they call it.

SPEAKER_03 55:01

Yeah, the variety. They don't grow wheat, they grow varieties, and that's just getting better and better and better. And now that science has crossed through very much into sheep breeding uh as well and very much so in the Wagyu game.

SPEAKER_02 55:18

Hmm.

SPEAKER_03 55:18

Interesting. Um Yeah, it is. It's a really exciting place to be at the moment.

SPEAKER_02 55:23

Another question from David, given that Karen Ag is quite open about its relationship with OPM, which is other people's money, is there an end game in mind through consolidation, or do they hope to keep growing?

SPEAKER_03 55:41

Uh we're going to keep growing and and once again it costs the farmer a lot of money to stay on farm and never leave his farm.

SPEAKER_02 55:51

Yep.

SPEAKER_03 55:52

Never to go to a conference, never to go to sit around the bar, talking to other growers, other professionals.

SPEAKER_00 56:00

Yep.

SPEAKER_03 56:00

And my mindset come from all our rural suppliers come from a business called Agonvet Services. Ag and Vet Services took 80-odd farmers from pretty much the central western New South Wales, southern New South Wales, over to America. I think it was on a 12-day tour, and I was one of them blokes. And the one thing I took out of that trip was we'd visit these farmers and they'd tell us their life story, and they were very open and very honest, and you know, cracking blokes to sit and have yarn to. And their wives were there as well, and kids. And most of those farmers had something that was repeated from each one. And one of the things they said 40 years ago, our parents stopped 40 to 45 years ago, our parents stopped buying country because they believed it was impossible to make money out of it for what they were buying it for back then.

SPEAKER_02 57:09

Right. Yep.

SPEAKER_03 57:10

And those farmers went on then to tell us because we stayed out of the market, and what equity we have in our business now buys us absolutely nothing. We are now peasant farmers.

SPEAKER_01 57:26

Yeah.

SPEAKER_03 57:26

Because we are now either making most of our living out of contracting or share farming or leasing country. And I've never forgotten that. They were very open about their businesses. And if you stop growing and you pull up and you might sit out of a market for 10 or 15, 20 years, the value of the equity in your business depletes and the buying power depletes because you've stayed out of that market. It's like if you're a grain grower, turning your machinery over every 15 years when it's got 15,000, 20,000 hours on it, or keeping a header for 10 or 15 years and actually trading it in, well, no one will want to buy it anyway if it's got seven or eight thousand rotor hours on it. So when you go to get back into that header, a new one, you might have brought that 15, 10, 15-year-old header for 300,000. Now you're going to need over two million to buy. So for me, I don't think you can sit still in business, whether it be off farm or on farm, and not have a growth mindset because inflation will eventually your overheads will eventually choke that business to death. And that's what the Americans told us when we were over there. It was inflation and the cost of their overheads that killed their business because their scale didn't keep up with inflation or the cost of overhead costs. So that's a big decision I think we all have to look at and make. Where are we? What are we going to do? And the other thing that I've noticed is if you've got a business that hasn't grown for 15 or 20 years, and mum and dad want to retire, and let's say the business is worth if it was sold up$10 million, and mum and dad are retiring at 65, and they've been in a culture where they haven't put money away into superannuation to pay for their retirement, that farm will have to be sold to mum and dad's retirement. And that hasn't been the way we've done things in the past. So you have the option of mum and dad staying on farm and drawing a wage, which has been very common. So there is ways of getting around it, but I'm just looking now. If it's an eight or ten million dollar asset, mum and dad are retiring at 65, you're going to need that asset for them to have a comfortable life.

SPEAKER_00 1:00:16

Yep.

SPEAKER_03 1:00:18

If they haven't invested money off farm or if they haven't actually put together a good self-managed super fund. And that was the smartest thing we did was actually starting our own self-managed super fund. And it works in beautifully with agriculture. So yeah, I that was a trip to America that sort of you had the choice of not going on that trip. It was a great trip. And the highlight of it was three or four days in Vegas, I must admit. But it's shaped how we do business, our attitude to how we do things in agriculture from just one trip in America had an influence on that.

SPEAKER_02 1:01:01

So it's a for you, it's an infinite game, it never ends.

SPEAKER_03 1:01:06

Pretty much.

SPEAKER_02 1:01:08

Um last or second last question from David and second last question. Is there a place uh in some sheep country for non-marino sheep?

SPEAKER_03 1:01:21

I think we've Australia's already answered that.

SPEAKER_01 1:01:24

Yeah.

SPEAKER_03 1:01:25

The high rainfall zones are suited to high production systems, and the low rainfall zones are more suited to if you choose to go down the shedding way of things, as in Dorpas, then they may suit. But if you choose to stay in merinos in the low rainfall areas, one of the cheat sheets you've now got with a merino that you didn't have in the past is genetic fat and muscle, which which has a lower cost of production and makes that sheep more resilient to those pastoral zones. You've still got the wool market there doing what it does. You have the choice to forward sell that wool for a lot of years ahead, right at the moment, if you want. So the reason I guess you could say the shedding sheep got a big run 15 years ago, because we didn't have the merino genetics we have access to now. And what happens if the reproduction, as in lambs born when those ewes were under pressure, compared to the resilience that a dolper had under seasonal pressure, they could still reproduce. But now with the merino, we're just we're designing those things now that do act really well in the pastoral zone as well. And we've got clients proving that.

unknown 1:02:57

Yep.

SPEAKER_03 1:02:57

Um having good conception, good feeders count, and good weaning rates in those bloody tight seasons. So yeah, the reason the Dorpers got the run or the shedding sheep got the run that they did. That was the only alternative back then at the time. So it's horses for courses, whatever you love doing, just lots of it.

SPEAKER_02 1:03:22

And the last question what do you have farmer fatigue over right now?

SPEAKER_03 1:03:30

Yeah, I and this isn't farmer fatigue, this is business fatigue in Australia. All businesses, small bills businesses, restaurants, can any business you can think of. Everyone's had a gut full of the government we've got pissing money up the wall from our taxes for no growth in the actual business of Australia.

SPEAKER_00 1:03:55

Yeah.

SPEAKER_03 1:03:56

And I blame the Liberal National Party as much as I do the Labour Party and presented the opposition to fight against that. So the sooner we get a party that puts a peg in the sand and starts talking about building dams, the Brackford system, infrastructure, about putting a tunnel underneath the bloody blue mountains from um the Nepean River right through to Lithgow.

SPEAKER_02 1:04:25

Yep.

SPEAKER_03 1:04:26

That starts to like the NDIS, it's gonna make the pink bat systems from Rudd's days look like a walk in the park.

SPEAKER_02 1:04:36

Out of control.

SPEAKER_03 1:04:38

Out of control. And what are we doing for? The ones that are seen to be raping, pillaging it, are all the migrants that have come here, really got their heads around how to milk this system. And that's coming up. We've been fed that free podcast and facts and figures. So for me, fatigue is business fatigue across Australia, is we're just had a gutful. It's harder and harder to make ends meet. And we have a government that's on a champagne diet, but on a beer income, and the beer income's coming from our taxes, and they're just pissing money off the wall. The money that's not growing Australia, that's the issue. It is not growing Australia. And guess what? When you stop growing Australia, it's a bit like stop growing your farm asset. You'll find Australia won't have the funds to grow Australia when we do get decent leadership. And if you look at the Liberal National Government at the moment, with the leadership that's there and a lack of policy and a lack of future direction, I will not be voting for them this election unless they have a radical change, because they haven't come up with anything that tells me that they want to grow the business of Australia. And everyone will put their shoulder to the wheel doing that in business to help grow Australia through their funds in tax. Where right at the moment our taxes are going into woke, non-income producing, tax-producing enterprises in Australia.

SPEAKER_02 1:06:20

And and people are smart too. They know how to manipulate the systems, you know, to do you know, return a lot of money for doing nothing.

SPEAKER_03 1:06:30

Yeah. Every industry. We um uh we went out to a restaurant last night, and there was a 37% loading for public holiday at the end of the bill. 37%.

SPEAKER_02 1:06:48

Shit.

SPEAKER_03 1:06:50

Um yeah, and guess what? It's not like they're doing it to gouge it. They're doing that to stay in business. They're not actually gouging, they're trying to run a business and break even. And when you look at electricity prices and all that sort of stuff, what's happened? This focus on net zero is choking a country to death.

SPEAKER_02 1:07:15

Yep.

SPEAKER_03 1:07:16

The more you drive it in to blackout Bowen, the more he digs his heels in, goes harder.

SPEAKER_02 1:07:23

So government stay out of the way.

SPEAKER_03 1:07:26

Yeah, I don't. Yeah, you're never going to have a change until you have a change in leadership that has the balls to draw a line in the sand and said, enough's enough. So we go back to Hawkin Keating era, we go back to Howden Costello era, and we haven't had any leadership like that since because they're all getting elected for four years, making decisions on staying elected at the next election.

SPEAKER_02 1:07:48

And it's all adding to our inflation, farm inflation.

SPEAKER_03 1:07:52

Exactly. It doesn't matter what business you're in, inflation's just got you by the throat at the moment.

SPEAKER_02 1:07:57

Well, that's been a wonderful chat. Thanks, Nigel, and you have a great day.

SPEAKER_03 1:08:04

Right. Hope everyone gets something out of that. By all means, if you want something clarified, give me a ring. Um, or if you're heading up our way, by all means drop in and go for a look around the farm. And also, if you want to if you're that way inclined, I'm more than open if you want to have a look at our books as well. Thanks for the opportunity to talk about the business of agriculture, Duane.

SPEAKER_02 1:08:27

It's a business of climate now, Nigel.

SPEAKER_03 1:08:30

Right, I'll whatever you want. It's your podcast. End of message.