FARMING AS BUSINESS

Press, Volume XCVIII, Issue 28992, 5 September 1959, Page 9

FARMING AS BUSINESS

Investment Must Show Profit

On the process of pushing up carrying capacity, production and net profits Mr P. M. Falconer, field officer to the Lauriston Farm Improvement Club, had some pertinent remarks to make to club members at their annual meeting. “A successful business is judged on its ability to pay a profit while maintaining its assets,” he said. “In considering this success we must look at alternatives to which the available capital and labour could be put. Money invested in gilt edged securities will earn five per cent, and it is poor business as such to improve the production on a farm if the increase does not earn five per cent, or more on the capital expended.

Stock Numbers “When meat and wool prices were high greatest profits were obtained from highest stock numbers, but with lower prices any capital outlay to increase stock numbers must be carefully examined. .'.... Increases in stock numbers and cash cropping are only instrumental in achieving the ultimate aim of maximum net profit, maintenance and improvement of the capital asset and a rewarding and satisfying life to the farmer. “Speaking generally there are two ways of improving the net profit—by increasing gross return and decreasing expenditure. The lower the cost of production the greater the margin for profit. Anything we can do to lower expenditure without lowering income or to raise the income without raising the expenditure is most significant. Thus if a farmer can save £lO by lowering seeding rates, for instance, without lowering production it is much more significant than if he grosses £5O more by spending £45 on better seed.

“Better management with the present capital outlay is likely to give the greatest future improvement. In particular ths better untilisation of feed rather than more feed is the immediate problem.“If a farm (land buildings and other improvements) is in a well maintained condition and more capital invested would not increase the profit at five per cent.' or more, the money is better invested elsewhere. In these days of high rates of both income and death duty taxation the handling of the surplus left after income tax is deducted is very important. Improvement in lambing percentages and wool production in terms of five to 10 per cent, are not very significant, when it is considered that up to 60 per cent, of that increase may be lost later in taxation.”