What could cattle producers from northern Australia learn from a grain farmer from South Australia?
Plenty, as it turns out.
Seven years ago two Mallee graingrowers sat down with a blank sheet of paper and designed the ideal farm for their area.
They worked with no preconceptions, no restrictions, and focused only on determining what mix of land, machinery, labour and infrastructure would be required to create the most efficient and profitable farming business for their area.
They have since combined their assets and skill base to create a collaborative family farming enterprise with a corporate focus that has enabled them to achieve a level of scale, efficiency, profitability and flexibility that they believe would not have been possible had they remained operating as small individual family farmers.
And – significantly – they have achieved this in a very dry corner of Australia, the northern Mallee area of South Australia where the average rainfall is just 11 inches a year.
One of those farmers, John Gladigau, kept a room full of northern cattle producers captivated for more than an hour at Beef 2015 in Rockhampton earlier this month as he described the journey he and his business partner Robin Schaefer have taken to develop a successful collaborative farming business called Bulla Burra, and why he believes other family farmers in the cattle industry could benefit from following a similar path.
An inspiring rebuff
John’s farming journey began when he returned home from school in the 1980s to work on his family’s third-generation, 2000ha cropping farm at Alawoona in the northern Mallee, about 250km east of Adelaide.
John describes it as marginal cropping country. Dry years are common and erosion is an ever present threat. Back in the days of conventional tillage Mallee farmers would typically plant their crops in April, May or June, and then hold their collective breath until August. If the crop was still intact by then, there was usually a decent chance of some sort of result.
It can also be “very forgiving country” where things can turn around quickly, John says, noting that wheat yields in the region average around 1.2 tonnes to the hectare.
The move into no-till farming has played a big role in helping Mallee farmers to produce better crops, but at a cost. Where conventional farming operations could get away with inexpensive machinery such as a $20,000 air seeder pulled by a $20,000 tractor, no-tillage, direct-sowing implements and the tractors equipped with the technology to drive them can cost hundreds of thousands of dollars.
One day, at a local christening, John explained that he and several other local broadacre farmers were sitting around and lamenting their lack of profitability and sustainability over a few drinks.
After listening to the group come up with possible solutions to their problems, only to then come up with reasons why those ideas wouldn’t work, another farmer who managed a large horticulture operation stood up and laid down the law.
“He stood up and said, look guys, it is not that difficult,” John recalled. “All you have to do is set yourself up a new company, put your farms together to create scale, lease your properties to that new entity, go sell all your machinery, purchase the machinery you need to farm that new business effectively, put yourself into businesses where you add the most value and you’ll be more profitable.
‘He slammed down his glass and walked off and said ‘it’s not rocket science!’
“And he slammed down his glass and walked off and said ‘it’s not rocket science!'”
The rebuff inspired John to go away and delve more deeply into the concept of collaborative farming.
He started talking to other farmers and advisors around Australia, and soon discovered that many studies had been conducted suggesting the concept worked. However, those studies were all gathering dust in drawers and their findings were either unknown or ignored.
(In an interesting footnote the farmer who stood up at the christening and challenged the group has since been headhunted by Bulla Burra and is now the company’s farm manager).
Nuffield Scholarship opens door to collaborative systems
Inspired to look further, John successfully applied for a Nuffield Scholarship and used the $30,000 in funding to visit some of the most innovative collaborative farming systems around the world.
While he found the Nuffield experience “awe inspiring, eye opening and life changing”, John said he did not find a silver bullet solution or a single collaborative farming model that he could simply drop into his farming business back in the northern Mallee and make it work.
But what he did find was the key learning that “there is no model, there are no rules”: in other words, to create a business that works, you have to design a business to suit the business and the environment that it is in.
He was also excited to note that people who had successfully developed collaborative farming models overseas had done so in regulatory environments that were far more restrictive than he would encounter back in Australia.
He also noticed that each of the successful collaborative farming businesses he visited overseas almost invariably shared the same common attributes, which he has distilled down into seven core principles that are now at the heart of the Bulla Burra model.
- Be strategic: “Strategy is actually knowing about where you want to be, and putting in steps in order to get there. Simple as that. Start off with a blank piece of paper and design your future.”
- Differentiate between agribusiness and real estate: “We are actually running two enterprises – a real estate business and an operations business. Both have to get a return.”
- Utilise machinery efficiently: (and labour and infrastructure): “One of the biggest costs especially to cropping is the cost of machinery. We own half a million dollar harvesters that are used for three or four weeks of the year. Look at strategies to maximise the investment in that machinery. It comes down to whether you should be owning that machinery or leasing it or using contractors, and it also comes down to the scale of the operation.”
- Create cells and replicate them: “We describe an efficiency cell or a scaleable unit as the most efficient mix of land, machinery, infrastructure. Once you have determined what that is then you replicate that in order to grow the business.”
- Create an environment of win-win: “Relationships are not something that farmers do really well – we’re always trying to find a way to get a win at somebody else’s expense. We always want the best price for our product, we always want to get something for the cheapest price. It is actually the wrong attitude. We need to build win-win relationships between all of the stakeholders throughout our businesses.”
- Engage specialist services: “My father always said he was a jack of all trades and a master of none. The trouble is today, you actually need to be a jack of all trades and a master of everything. There are all these expectations. You can’t be everything. You have areas that you are passionate about, there are areas that you specialise in, but in the areas that you aren’t as proficient in you need to bring in others who are. Really, really important because they can add enormous value to your business.”
- An independent voice is needed: “With every place I went to, I asked what is the biggest threat to this business? Every single one of them said: ‘Emotion and personalities is the one thing that can destroy this business, especially in a collaborative business where we are bringing together families.’ We believe that the one way of getting around that, the one silver bullet, is that you need to have independent people involved in your business. You need a board with an independent chair, some sort of independent voice to actually see through the emotion and ensure that everything stays on a professional and accountable level so you can see past the emotion, and help people to work things through.”
John returned home and shared these key learnings with other farmers via the Nuffield speaking circuit, but said that in his own operation he quickly lapsed back into the old routines and farmed the way he had always done.
That was until he received another direct rebuff. One day a finance broker, Jeff McDonald, who had been following John’s journey with interest sent him a no hold’s barred email, telling him it was time to ‘stop talking and start doing’.
“Otherwise you will have completely wasted Nuffield’s money, wasted your sponsor’s time, wasted the industry’s time, and you will have completely disrespected your wife and kids who sat at home and slaved away while you went on a 16 week holiday around the world,” Jeff’s email said to John.
“Pretty harsh” John said. “But that was the point where I knew we had to do something.”
(Another footnote – Jeff McDonald – the sender of that action-inspiring email – is now the independent chairman of Bulla Burra. Noticing a trend here?)
Bulla Burra is born
Stimulated into action, John sat down with good friend and nearby landholder, Robin Schaefer, with whom he had been having similar discussions for a long time.
They pulled out a blank sheet of paper and began designing what they saw as the ‘ideal farm’ for their area.
They asked questions such as what would be the most efficient mix of land, machinery, labour and infrastructure for their region, what the most effective business structure would be, what capital would be required and how it could be accessed, what roles each individual would play, and how would they go about bringing corporate principles into what was essentially a family farming operation.
They arrived at the following conclusions: An ideal “efficiency cell” for their area was 4000ha of cropping land, with these specific machinery requirements – a 300hp tractor, a 40ft seeder, a 40ft harvester, a sprayer, three labour units, two utes, and one chaser bin.
As a matter of simple coincidence, the Gladigaus already owned 2000ha, and the Schaefers already owned 2000ha nearby, so they effectively already had a 4000ha efficiency cell between them.
They also determined that adding a second 4000ha efficiency cell through sharefarming and leasing could achieve even greater efficiency from the outset.
The second cell meant they could use a single sprayer across the entire 8000ha operation, and, instead of farming a 4000ha area with three labour units, they could farm an 8000ha area with five labour units.
The Gladigaus and Schaefers set up a new company called Bulla Burra and leased their individual farms to the new company.
They sold every bit of machinery they owned between them, and purchased the precise machinery that was required to fit the new operation.
Reflecting their different skill sets, Robin became the practical operations manager, and John became the business and grain marketing manager.
They also established a board with an independent chairman (Jeff McDonald), to ensure decision-making processes remained professional, accountable and transparent.
Under the Bulla Burra model, John and Robin both receive income from multiple streams:
- As landowners they receive a flexi-lease payment for the land they each own that is leased to the business, based on the production that is achieved from that land each year;
- As shareholders they receive income as a distribution of profits;
- They both receive a commercial wage for their management and labour roles within Bulla Burra.
Collaborative farming principles at work
During his presentation at Beef 2015 John provided several examples of how the principles of successful collaborative farming enterprises distilled from his Nuffield Scholarship experience now underpin the Bulla Burra model.
For example, the team holds regular strategy meetings to look at where Bulla Burra is going, where it should be in five to 10 years time, and how it should get there. A strategy called “Bulla Burra Better” has been adopted to improve every facet of the operation by 5-10pc. As the business has grown in efficiency so has the size of the ‘efficiency cells’, which have now been refined and expanded to 4500ha each. This year – its sixth year of operation – Bulla Burra will farm an area of about 11,000ha.
Machinery is utilised efficiently by choosing not necessarily the biggest machines but those best matched to the area being farmed, and running them around the clock. Bulla Burra’s 300hp tractors “effectively don’t stop”. As soon as they come off a seeder they go onto a spreader, then at harvest they go onto chaser bins. The sprayer runs on two eight hour shifts for most of the year. “We push (the sprayer) to the max, it is worth $500,000,” John said. “Why have a second one as a back up, why not just utilise it to the absolute max?”
“Buy your own flaming ute”. “So I bought my own ute. It’s about having a business approach.”
How Bulla Burra works to achieve win-wins with key stakeholders is illustrated by its approach to transport. When the business was established in 2009 John and Robin committed to giving their entire grain carting work to a single trucking company. Year one was a severe drought year, but despite receiving several offers for cheaper freight from other trucking companies, they stuck with their chosen transporter. Year two was a bumper grain growing year, and farmers everywhere were struggling to secure the trucks they needed. Bulla Burra had no such problem. “It is about building a relationship going forward, it becomes a win-win,” John said. “One big key thing that we have taken out of our six year journey so far has been the value of relationships – the benefits that have come from those have been far beyond what we originally believed were possible.”
John and Robin and have worked out where their skills best fit the business, and they use specialists where required to fill in the gaps.
John stresses the importance of having an independent voice to ensure that all decisions are made objectively and are not ‘tainted by emotion’.
He told this story to illustrate his point: At an early Bulla Burra board meeting, decisions were made about the roles each individual would play and the resources they would need. Robin would be the full-time operations manager and would need a ute to fulfill that role. John would take on the role of business manager for only 50pc of the time (he was also doing some external freelance work at the time) and would also need a ute. “Hang on!” the independent chairman Jeff quickly intervened, as John recalls. If the business was to hire an external employee to fill that role for only 50pc of the time, Jeff asked, would it still provide that person with a ute? “Probably not,” John conceded. “So you don’t get a ute,” Jeff said. “How do I get around?,” John asked. “Buy your own flaming ute,” Jeff replied. “So I bought my own ute,” John said. “It is about having a business approach.”
But is it profitable?
The most burning question of course is how the model stacks up financially.
To answer this question, John explained that when the business started, he and Robin identified that the biggest threat to the fledgling business would be a drought in year one.
After five droughts in seven years, they didn’t expect to walk straight into a sixth. But they did, and Bulla Bulla’s first year produced yields of just 0.6t/ha.
It was a tough time, John recalls, and one where he questioned whether they had made the right decision.
However, after conducting some in-depth analysis comparing their performance under Bulla Burra with how they would have performed in the same year had they still been running their individual farms, John said he felt some comfort.
The analysis showed that had they still being running their 2000ha farms individually, they would have each made a loss that drought year of about $200,000.
Their share of Bulla Burra’s loss in that first year was about the same.
So in the worst scenario they were effectively no worse off.
What gave them more comfort was realising just how much better off they would have been under the Bulla Burra model in an average or above average year due to the scale and efficiency they had created.
Had year one been an average rainfall season, the analysis showed that as individual farmers they would have just broken even, but under Bulla Burra they would have made a $100,000 profit.
And had it been an above average year, the numbers under the Bulla Burra model were significantly better again. “Obviously that is where the scale comes into it,” John said.
In year two – 2010 – they had “the best year in history” and averaged 1.8t to the hectare.
As individual farmers, their costs to produce one tonne of wheat were around $204/t. Under Bulla Burra, their cost of production was cut to $171/t.
“We are now running a highly efficient and profitable farming operation,” John said.
Better technology, more flexibility
The Mallee farmers are also now able to use technology they never previously believed they would be able to afford, such as a $250,000 weedit laser-targeted sprayer which only sprays about 10pc of each paddock and cuts chemical use and costs by 90pc.
Even more importantly, they now also enjoy a level of flexibility that they had once hoped for but had never previously thought possible as individual farmers.
This was highlighted a few years ago when both John and Robin and their families were in the UK – Robin was undertaking his own Nuffield Scholarship tour – and they received a text message with a picture from Bulla Burra showing a newly acquired tractor and seeder in operation. It would sow 1000 acres before either Robin or John returned home.
“It was at that point we realised we had flexibility in our business and that it could operate without us even being there,” John explained.
John said the operation was fortunate to employ great staff. Almost all of their staff have been employed out of the horticulture industry, because they came into the business with more of a corporate mentality and were more used to dealing with compliance issues.
“We believe it is far, far easier to teach skills than it is to teach teamwork and values within the business,” John said.
Take home messages
So what can cattle producers learn from a South Australian graingrower?
John’s take home messages for cattle producers are these:
Be strategic: “Start off with a blank sheet of paper, look at where you want your business to be in five years 10 years, take away the restrictions and preconceptions, and say what could it be like, what do I want it to be like, what are my goals, what are my dreams, what am I good at, where is the industry going and how do I set myself up and structure myself to take advantage of that.”
Focus on efficiency rather than scale: “Sometimes in order to create efficiencies you need scale. But scale doesn’t necessarily mean efficiency. In fact scale can create whole new problems, it can create fat, management issues, logistics issues etc. The focus has to be on efficiency.”
Collaboration takes many forms: “You can collaborate to create scale but you can also collaborate with every stakeholder within your business – with your landholders, with you employers, with your suppliers, with the people you sell to. It is how we can work together in order to get the most benefit, it all comes down to creating effective relationships.”
You need an independent voice in your business: “Even if you are not a collaborative business, the value of having someone from outside to look over your business with an objective view that is not tainted by emotion can add so much value to your business.”
To learn more about Bulla Burra and to see more great pictures from their operation visit their facebook page here
Nuffield Australia is also currently taking applications for 2016 scholarships until June 30 – for more details click here