After writing an article almost every Tuesday since July 2022, we have summarised the most critical takeaways for the sustainability of farming. But before we dive in, after on-ground practice and experience, the one way farmers can survive and live better financially, is by determining their annual cost of farming, this is both for part-time and full-time farmers.
After that, create a plan of selling, say livestock or your crop to reach that annual cost calculated, take that amount place in a savings account, and instruct your banker to pay your account on a monthly basis based on the annual balance.
For example, if say your annual cost of farming is N$350 000, this would mean your monthly payment will be the N$350 000 divided by 12 months, which is N$29 166.67. This will help you manage your monthly farming expenses and perhaps help avoid having to sell your livestock every month or every other time.
Below are tips to always take cognisant of in farming:
Develop a farming plan and budget: Determine what you want to achieve and what your farming goals are, both short-term and long-term. Identify the crops or livestock you want to raise, the scale of your operation, and the resources you have available and perhaps create the necessary capacity according your objectives. These factors can then be used to create a detailed budget that covers expenses like seeds, fertilizers, equipment, labor, and marketing. Ensure that your budget is as realistic as much as possible and make sure that your account for potential risks and fluctuations in prices.
Check and adjust plans and budget: Ensure that you review your actual expenses and progress against your budget and plan regularly. In cases of any deviations, analyse the reasons behind them and take corrective actions. This is important due to unexpected weather conditions, market changes, or operational challenges in the agricultural industry.
Separate farming and personal finances: Create separate bank accounts for your farming business and personal expenses. This separation is imperative and will help you track your farm’s financial health, ensure accurate record keeping, and simplify tax reporting.
Determine annual farming costs: Calculate all the expenses associated with your farming operations for a year, including both variable and fixed costs. Variable costs change with production levels (for example seeds, and fertilizers), while fixed costs remain constant (for example equipment maintenance).
Manage farming working capital: Working capital is the difference between current assets (cash, inventory) and current liabilities (operational debts). Ensure you have enough working capital to cover day-to-day farming expenses, even during off-seasons, especially in draught seasons, when you may need to hold stock. Good management will help you prevent disruptions in your farming activities.
Debt management for farmers: Carefully consider the interest rates, repayment terms, and how the debt will impact your cash flow when seeking financial assistance. Excessive debt should be avoided as this may lead to financial strain.
Emergency fund for farming: Just as I always highlight when I provide financial literacy training for personal finance, having an emergency fund is essential for farming. Make sure to set aside a portion of your earnings to create a buffer in times of unexpected events such as crop failure, draught, equipment breakdowns, or market downturns.
Diversification in farming: It’s important that you don’t solely rely on one crop or product. Diversification spreads risk and helps you adapt to changing market conditions. This may involve several ways of farming such as growing different crops, raising various livestock, or even integrating agro-tourism or value-added products. However, consider what you may have the capacity for.
Importance of training for farming: We posted an article on this recently. Continual learning and training are vital in modern agriculture. Farmers need to keep themselves updated on the latest farming techniques, technology, and sustainable practices. Training may help improve efficiency, yield, and the overall success of your farming operations.
Remember that farming is fundamentally dynamic, and each farm has unique circumstances, however, there are a lot of options and points where one can seek help from. Collaboration is key in farming, ensuring you are part of a community, and farming can be profitable and sustainable if treated like any other business. In conclusion, farming is us, farming is who we are as Africans, and we can take it much further. As they say “Green is the new Gold”.
Mekupi Kambatuku:
Managing Consultant at Simpli Business Advisory