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An unproductive farm can be prevented

March 2021

Marius Greyling, Pula Imvula contributor. Send an email to mariusg@mcgacc.co.za  

You are farming to make money by producing products to sell at a profit. If, by poor management, the physical soil becomes so damaged that it cannot support financially viable production anymore, or if the finances of the farm are mismanaged, a farm can become scrap. 

When referring to soil, see it in a broader sense including all that is above the soil – veld, lands, water and even the rainfall, and all below the soil – water, plant roots, soil organisms.

In its natural form soil is continuously subject to erosion or weathering. The process of weathering of soil is accelerated by our standard soil tillage practices (emphasis on ploughing) because it lays the soil bare. Worldwide research has proven this.

Bare soil is exposed to wind and water erosion which removes the topsoil (the good soil). Contrary to this, soil covered with vegetation of any kind and/or even old plant material is far less prone to weathering. The vegetation and plant material absorbs the force of water or wind and slows down the process of weathering. Those with livestock remember your grazing management – or lack thereof – will also enhance erosion. Over-grazing is especially problematic, laying soil bare.

The formation of new soil is a continuous but very slow process whereas soil weathering can be much quicker. It has been widely accepted and proven that permanent covering of soil is the greatest counter strategy to the continuous erosion of soil. 

Soil with insufficient soil organisms is unfertile and requires more artificial fertiliser to maintain production. The result, a point will be reached where it becomes financially unviable to produce. Because of this, there has been an emphasised promotion of conservation farming in our country.

South Africa is prone to erosion because of erratic weather conditions and difficult terrain. It has been calculated that our country loses on average some 17 t soil/ha/year, 75 mm rainwater due to runoff and 2 t organic material. Theses loses together with other losses such as hail equates to a crop loss of some 10% annually.

Sound management of all the areas of management is needed to prevent your farm, big or small to become a scrap farm. Financial management is an important area of management as it is the link between all aspects of the farm business, and also ‘oils the wheels’ that allow the business to function more effectively. If you do not have enough finances available to purchase the required production inputs your business cannot function effectively.

Financial management
Certain aspects of financial management are important of which cash-flow management is the most important. However, you cannot manage your cash-flow without a proper budget. The first important step to sound financial management is compiling a proper budget.

The greatest sin regarding cash-flow is unplanned, unnecessary and on the spur of the moment buying. Pay special attention to capital expenditures (expenditures to buy another tractor or implement, machinery, and so forth). Do a feasible study before any actual capital expenditure is done even if you have budgeted for it, things can change during the year. If you have budgeted to purchase another tractor and the budgeted income is not realised, it is going to put pressure on your payback capability and cash-flow.

Be very careful of increasing debt just because it may be available, especially short-term debt such as a bank overdraft. Extreme weather conditions, droughts, flooding, hail are not uncommon in South Africa. These all influence income negatively, and should you then still have to repay unnecessary, unplanned short-term debt you will be in trouble.

You must also distinguish between your farming business finances and personal finances. It is highly advisable to have two separate bank accounts and to pay yourself a salary to kept in your private bank account. Having only one account could give you a false impression that you have funds available, especially when considering personal expenses.

A financial and physical analysis of your business is a must and needs to be done at least once a year. To be able to do this you do need proper production and financial records. If you do not measure, you cannot manage.

A last consideration. The degeneration of soil to a state of unproductivity occurs over a long time and therefore requires time and extra input of capital and thorough management to reverse. Thus, prevention is better than cure. Contrary, financial degeneration normally occurs over a much shorter time and the cure is proper management.

To prevent your farm becoming a scrap farm, pay special attention to your production practices and your finances.

An example of severe erosion in South Africa. (https://sundayexpress.co.ls/villagers-take-matters-into-their-own-hands/donga-art-3/)

Publication: March 2021

Section: Pula/Imvula