Various operating systems for a dairy farm are conceivable. Pure Graze brings a “low input, high output” system to the market with “PG NxT-STEP® Farming”. Most conventional and organic dairy farmers follow the “high input, high output” system.
From a business point of view, a farm has two functions; wealth accumulation and source of income. The wealth of a company is mainly formed by the value of the land.
The capital in land in the Netherlands is fairly stable in value due to the great pressure of housing and road construction. That is why it is lucrative for a bank to lend land. By taking out a loan, the livestock farmer places a mortgage on the land, which puts his land on the bank's balance sheet.
Good for the bank!
The fixed value of another person, with them the possession side!
And the best thing is; the other one pays for it too!!
The livestock farmer receives a loan in return; a bag of money that he can use and pay back after a certain time. He pays a fee for the use; interest.
In the “high input high output” system, the aim is to maximize production. The law of diminishing returns is applied. The livestock farmer uses the bag of money borrowed from the bank to purchase tools to increase production or ease labor.
In both cases, the farmer assumes that there are so many additional returns that not only are all costs reimbursed, but there is also a nice additional return for him and his family.
But is that really the case?
Or is your capital being used (by the periphery) to fund their coffers?
It seems a good thing for the income function of the farm, because there will be more turnover. But it is not always favorable for the farm's capital function, after all, the bank establishes a mortgage and is therefore entitled to the value of the land, the family's assets. In many cases, the investment adds costs to the profit and loss account that put pressure on profits.
In retrospect, the return and the pleasure of an investment often turn out to be disappointing. Does the investment involve costs, work and pressure to perform.
Interest, repayment, depreciation, maintenance, energy, labor are items that come with almost every investment.
The world is changing so fast. To prepare the family business (read; family assets) for the future, very different matters are important than 5 years ago. Consumer acceptance, sustainability, work pressure, margin, capital return, income are the touchstones that are current to further develop the company.
Is the “high input high output” system still the best system? Or is a system that does everything as much as possible with nature, better suited for the future of your company? Pure Graze is expert in low cost livestock farm. Contact us for an enlightening conversation.
Contact us for a low cost price, low work pressure and fun at work!
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