Good farming is
about doing everything right, day in and day out. Otherwise all those “one percenters”,
or
small variances in kpi’s, can conspire to hit the bottom line in a big way.
Using a simple fish farm model and some common assumptions for every
1000mt produced, being off your survival target by 1% can impact margin by
$59,000 (less biomass to spread costs over, less biomass to sell). Harvest weight is down by 50g on a 4,000g
target reduces margin by $66,000. FCR
increases from 1.3 to 1.35 costs $76,000. So on just 3 parameters we have
reduced our margin by $201,000 or $0.20/kg.
On a 10,000mt farm it would be a $2m hit!
We have not touched other variables such as feed price, labor and
overhead cost, yield, selling price, etc.
Hopefully all the parameters do not conspire in the same direction;
hopefully some are positive variances and balance out the negative. But this is a common problem, “the overly
optimistic budget”. For some reason we
often put in “best case scenario” assumptions in our budgets across a wide
range of variables and then spend the rest of the year explaining why they were
not achieved. While it is important to
strive for best performance, being too optimistic can be misleading and take
the focus away from the real issues. More
on this later.
Back to the opening sentence.
For some reason we are more relaxed about issues on the farm than, say,
the issues in the processing plant. The
feeding equipment breaks down on the farm and we lose a few days feeding. The results of this breakdown may not be
apparent for several months when the fish are harvested, so we are not in a
panic. Compare this to your filleting
machine breaking down in the processing plant, you are not able to supply your
customers, and everyone will be jumping around to solve the problem right
now. Then reflecting on how it happened,
what is wrong with the maintenance program, etc. Both scenarios affect your bottom line in a
significant way, but one is screaming at you and the other is not.
We have “big dollars” in our business and small variances can have a
large impact. Knowing what to do and
having a culture of doing everything
right day in and day out can be the difference between profit and loss.
