Due Diligence on Land Purchases critical for Long Term Returns
By Ian McLean and Dr. Phil Holmes (more…)
Tax Time Considerations
This article was first published on Beef Central on 8th May 2017 In times of good profits, investments in the business to improve future performance and reduce risk should be considered. The tax deductibility of the investment however should be secondary to whether it is a good investment in its own right. A cost benefit analysis should be undertaken to compare what the investments return, in total and relative to the amount invested and over what time frame. If the investment doesn’t stack up then reducing debt or provisioning for succession or retirement will be a better use of funds, regardless of the tax implications. You can buy a load of fencing gear and fill the bowsers up, but often this just means that once you do it, you have to…
How much debt can my cattle operation afford?
By Ian McLean This article was first published on Beef Central A producer going through the process of succession recently asked us the pertinent question 'how much debt can I afford to take on with the property?'. This is a critical question for all businesses to ask themselves and the answer is unique to each business, however what a bank is prepared to lend you and what debt you can afford will usually be two different figures. How much debt a business can afford will be a function of its profitability, over what period you would like the debt to be paid off, and what funds the business and family needs after debt servicing costs. A further explanation of each of these factors is below. The profitability of a business is…
Big variation exists in producer financial performance, despite high cattle prices
By Ian Mclean (a summary of his presentation to the Young Beef Producers Forum 2016) This article was first published on Beef Central It is an exciting time to be in the beef industry with high prices, increasing demand for our quality product and a positive climatic outlook. But what exactly does this mean going forward for beef producers? What should producers do to capitalise on the current situation, and best position their business for future performance? A discussion on future performance should start with an understanding of current and past performance of beef producers in Australia. The best available data on long term national industry performance is the ABARES (Australian Bureau of Agricultural and Resource Economics and Sciences) farm survey data. Analysis of this data shows that the total…
Tectonic shift or high tide for the beef industry?
Record high beef prices, increasing demand for quality protein, decreased herd size…… are we seeing a tectonic shift for the beef industry, or is this a cyclical high tide that while welcome, is only temporary? This is best addressed by looking at the current prices relative to longer term prices in real terms (with inflation removed), which is shown in the below graph. Two major points can be seen here; there is an obvious cycle in the prices, and we are currently at a high point in the cycle, the current prices are not significantly higher than they were in 2001, This doesn’t mean prices won’t continue rising; what prices will do in the short term is anyone’s guess. However the cyclical nature of commodity prices is pervasive and high…
Queensland Beef Industry Debt
Over the past decade, the Queensland beef industry has moved to a position where it is not making sufficient profits to cover interest costs. Not only has total and average debt increased, but the number of businesses with debt has also increased. Wide variation in business performance exists, with some businesses still profitable in the current environment. Full article