North Queensland sugar cane producer Andrew Cross has been awarded the Rabobank ‘Dr John Morris’ Business Development Prize, from a field of some of Australia and New Zealand’s most progressive farmers, for a strategic business plan which is already delivering tangible returns for the farming business he manages.
Mr Cross was presented with the annual award in front of fellow graduates of the 2017/18 Rabobank Executive Development Program at the program’s graduation dinner.
Receiving the award from Rabobank Australia CEO Peter Knoblanche, Mr Cross said the program – which focuses on the latest business management thinking in agriculture – had triggered a significant shift in mindset, from being someone resistant to change and worried about the ‘what if?’ scenario, to having the confidence to “pull the trigger” and make changes to the way things are done.
After completing the first module of the Executive Development Program last year, Mr Cross returned home armed with new ideas and tools to develop a strategic business plan for the sugar cane operation, forming the basis for his winning management project.
Mr Cross said the business plan had delivered benefits “straight away”, with the plan providing a “clear, go-to manual” for the business, with measurable goals around profit targets including return on assets (ROA), cost retention and labour efficiencies. The plan also includes modelling and sensitivity analysis to ensure profitability in ‘roadblock’ years, such as the current situation with sugar prices at decade-lows.
“Having the goals down on paper gives them accountability and kicks us into gear to move and where to put our resources and efforts,” he said. “It also shows how we can buffer price risk through production gains.”
Mr Cross manages an aggregation of irrigated farms for MH Premium Farms (MHPF) in the Burdekin around Ayr and Giru, with the 770 hectare operation focussed on sugar cane production, but also soybeans and corn.
Since starting with MHPF in 2011, Mr Cross has been integral to the expansion of the company’s North Queensland sugar business, with six farm acquisitions over the past seven years, and the subsequent re-development of the properties with water recycling systems.
“We haven’t brought a ‘turn key’ farm yet, and it has taken time to get the farms up and running, as we are aiming to have all land under management with water reticulation systems,” he said. “Currently 95 per cent of the irrigation water we use is recycled, and we are working towards 100 per cent by the end of 2019, so that all water used on the farm, is kept on farm.”
Water-use efficiency is just one of the objectives Mr Cross has been concentrating on, with an overarching focus on “keeping the business simple”.
“The course highlighted the need to simplify the business and focus on the primary income drivers, rather than being distracted by those that have little financial gain,” he said. “And this has seen us concentrate on sugar cane production, which has put its hand up as the ‘best one’ for our business, while scaling back winter grain production.”
With the business plan centered on the key drivers of profitability, Mr Cross said the key aims were to increase Return on Assets (ROA) from around three to six per cent by 2020, to lift labour efficiency from one full-time equivalent employee (FTE) for every 170 hectares to 225 hectares, and increase cost retention.
“The first thing I did was look at ways to better utilise the lazy capital,” he said.
After returning from the first course module, Mr Cross said he “came home, and we straight away built a new machine with ‘five rows’ of swath width for in-crop irrigation and land preparation, such as ripping, fertilising and furrowing”.
“We had talked about it before I did the Executive Development Program and I was probably the one to be holding back on it,” he said, “but a comment by one of the presenters, “fail quick, fail cheap” stuck with me, and I realised we should have built the machine five years ago.”
With three new machines now in operation and two more on order for delivery later in the year, Mr Cross said “they had the same number of men, on the same number of tractors, but are now 68 per cent wider, more than doubling their efficiency”.
Mr Cross said labour efficiency was a key focus for the business, with labour accounting for 30 per cent of overhead costs due to the intensity of running a flood- irrigated operation.
“We are currently trialling automation of the irrigation system on one of our small farms to see what savings can be made, how to monitor and schedule watering, and to track irrigation using GPS technology,” he said.
While the business was already seeing cost retention benefits, and they are aiming for a one to two per cent increase in cost retention per year, Mr Cross said the cost savings wouldn’t be at the expense of profits.
“The development phase of the business is now winding down and that is where most of our resources and efforts have been,” he said. “By 2020 we hope to reach the measurable targets in our business plan and then turn to ‘horizon two and three goals’, where we aim to have 1000 hectares under irrigation to harvest 100,000 tonnes of cane.”
Approaching its twentieth year, the Executive Development Program is Rabobank’s flagship program for rural entrepreneurs across Australia and New Zealand. Delivered across two modules, the residential program aims to develop and enhance the commercial business management skills of farmers looking to take their enterprise to the next level.
To date, more than 700 farmers from across Australia and New Zealand have graduated from the program.