Decision making in the face of El Niño

Seasonal weather forecasting is a tricky thing – forecasters don’t necessarily have a great track record. This year is interesting as international researchers and the Crown Research Institute NIWA have provided clear, early forecasts for a strong El Niño event. Rezare Systems’ Farm Systems Analyst Graeme Ogle explores the implications for farmers and tactics they should consider below.

El Niño is a warm phase in the Southern Oscillation that results in a dry westerly wind pattern. This may cause dry weather in many regions in New Zealand – normally eastern areas but it can be more widespread. Sometimes this is called a dry spell and sometimes it is called a drought; one develops into the other.

As I write, farmers are reporting low soil moistures and declining pasture growth. Faced with a shortage of grass, farmers need to decide how to fit in with this declining feed supply. Here are some principles I use when helping sheep and beef farmers minimise the impact on revenue.

Droughts don’t just happen, they evolve over a number of weeks and months. Decisions can therefore be made progressively. The common mistake I see is not making decisions of the right magnitude early enough. Selling some dry ewes early makes you feel you are doing something but it only decreases feed demand by 1-2%. The greatest number of options are present at the start of the dry period and then diminish as the dry sets in.

Measure regularly even when it hurts, assessing pasture cover and stock condition regularly – even if the results are disheartening. How much pasture are you able to carry forward? How many low condition score animals need priority feeding? This is a time to get real.

Always have a feasible plan: Feed budgeting is paramount. This includes tactics and targets such as “if pasture cover is at this level I will do this, if it is less than that I will do that”, and “these are the important dates for me to make the necessary decisions”. Farming with an infeasible feed budget is farming for failure.

Be clear about the scenario you are working to: In your feed budget you need to forecast pasture growth rates. This may seem an unknown, but don’t lose heart. Know your soil moisture content and use the 10 day forecasts for rainfall – if you are already dry and the next 10 days has no significant rainfall use a low forecast for the month. For the next month use average pasture growth rates. This is the base scenario where you are expecting the next month to be dry but then returning to normal.

Make deliberate decisions and avoid fretting: What if the next month does not return to normal? This is addressed by frequently revising your feed budget. Focus on the important dates to review and consider, so that you can avoid daily fretting, which is a key reason farmers become stressed during drought. As the dry bites in you will have dates scheduled to review things. Make sure you have measured data for those dates, and then make real, deliberate decisions. From there you can concentrate on implementation – wake up in the morning knowing what you need to get right rather than worrying.

Accept that risk aversion creates its own risk: As dry spells evolve into drought, farmers who are risk averse sell early and achieve higher prices (per kg). Accept that selling early also carries a risk – that the stock truck may go down the road as rainfall comes up the road. There may be some costs to early decisions but in my experience an understocked farm has more options than an overstocked one.

Sell stock that will lose the most value: As dry spells become prolonged, stock that require high levels of feeding to achieve value will suffer the greatest decline in price – as neither you nor other farmers can turn a profit. For example:

–          Small lambs and thin ewes are of low value now, but delaying the decision may mean they become unsaleable.

–          Finishing cattle where it may be better to accept lighter carcass weights or sell store. Feeding finishing cattle supplements with a declining meat schedule is rarely profitable.

–          Cows lose condition when feed is scarce and may not get back in calf – calves are weaned light. Sell cows with calves at foot early.

There is no taboo in selling capital stock: After selling finishing stock you may need to go further and sell capital stock to make your plan feasible – so do it. Calculate from your feed budget how many capital ewes and cows you can run and sell the rest. Restocking will be expensive but holding on to capital stock using supplements or grazing only to lose valuable stock condition is far more expensive. It is more resilient to have money in the bank and grass than to have a large debt and a farm with no pasture cover.

Every drought breaks, be ready: Think through how you can get your farm back to full operating capacity as quickly as possible. If possible, hold supplements aside to take stock off pastures when they are recovering, as grazing pasture before the three leaf stage will exhaust pastures and will affect the whole next year. Nitrogen should be considered for all pasture, even hill country, to reduce the time to a safe grazing state.

Value professional advice: Drought options can have significantly different financial outcomes. In my experience on an average sheep and beef farm, there can be a $30,000-$40,000 advantage with the best option. Feasible plans are complicated – so now is the time engage a professional, even when you are closing the cheque book. A consultant may cost you 7 bales of baleage.

You will make some mistakes – just learn from these. My experience is that the most successful farmers develop skills for dry conditions and treat a dry with the same zeal as their good year. In both cases there are big margins to be made and they are in to win.