# Preparing for a dry year A free short course from Farm CFO by Clunes Rural. 5 lessons, about 25 minutes in all. No sign-up. Work out your feed, water and cash position, set trigger dates, and line up the bank and support before a dry season bites. Who it's for: Cattle, sheep and mixed livestock families who want a money plan in place before the season turns. You'll be able to: - Count your days of feed and your cash headroom - Set trigger dates for selling or agisting stock - Compare agisting, feeding and selling with real numbers - Know what support exists and when to ring the bank ## Lesson 1: Know your position: feed, water and cash A dry year rarely arrives on one day. The feed goes a bit faster than planned, the dams drop a bit lower, and the bank balance slides. The families who get through best are the ones who count early, while there's still time to choose. This lesson is about three numbers: feed, water and cash. Write each one down, with the date you counted it. ## Feed Count what you have on hand: hay, silage, grain and any standing feed your adviser thinks is worth counting. Then work out how much each mob eats a day. Your nutritionist, vet or agronomist can set the ration. We don't give nutrition advice, but we can turn their ration into a budget. Feed on hand divided by daily use gives you days of feed left. That one number tells you how long you have before you must buy feed, move stock or sell. ## Water For each paddock, note where the stock drink and how long that water will last if it doesn't rain. A dam that is half full in spring can be mud by summer. If carting water is the backup plan, find out what it costs now, not when every carrier is booked. ## Cash Cash headroom is how much more you can spend before you hit a wall. Work it out like this: - Start with your overdraft limit (the most the bank lets the account go below zero). - Take away what is already drawn. - Take away the loan repayments and big bills due in the next six months. What's left is your buffer for feed, freight and lower sales. If it's small, that's not a reason to panic. It's a reason to talk to the bank sooner, which we cover in lesson 4. ## Put it on one page Our [drought money plan checklist](https://farmcfo.com.au/templates/drought-money-plan) puts feed, water, cash and trigger dates on one page. Fill it in while it's still green, then update it every few weeks as the season changes. You can also run your figures through the [season stress test](https://farmcfo.com.au/tools/season-stress-test). It shows what a poor season does to your overdraft, so you can see the low point before you reach it. Counting takes an afternoon. It turns a vague worry into a set of numbers you can act on. ### Worked example **An invented cattle farm.** This farm is made up, and the figures are illustrative. The family runs 300 cows and has 240 tonnes of hay on hand. Their nutritionist sets a ration of 8 kg of hay per cow per day. - **Daily use:** 300 cows × 8 kg = 2,400 kg, or 2.4 tonnes a day. - **Days of feed:** 240 t ÷ 2.4 t = 100 days. Their overdraft limit is $150,000 and $40,000 is already drawn, so the headroom is $110,000. Loan repayments due in the next six months total $36,000. That leaves $74,000 to cover feed, freight and any drop in sales. Now they know two things: about 100 days of feed, and $74,000 of room. Both go on the drought money plan. Try the season stress test: https://farmcfo.com.au/tools/season-stress-test ### Check your understanding 1. How do you work out days of feed left? Answer: Feed on hand divided by daily use. Days of feed is simply what you have on hand divided by what the stock eat each day. Your adviser sets the ration that gives the daily use. 2. What is cash headroom? Answer: How much more you can spend before you hit your limit, after bills due soon. Headroom is the overdraft limit, less what is drawn, less big payments due soon. It's the buffer you have for feed and freight. 3. When is the best time to fill in a drought money plan? Answer: While it's still green, then update it as the season changes. Counting early gives you time to choose. Updating every few weeks keeps the numbers honest as conditions change. ## Lesson 2: Feed budgets and trigger dates A feed budget shows how long your feed will last and how big the gap is if the season stays dry. A trigger date is the day you have agreed, in advance, to act if it hasn't rained. Together they take the guesswork out of the hardest calls. ## Build the feed budget A simple feed budget has four lines: 1. **Feed on hand**, in tonnes. 2. **Daily use** for each mob, using the ration your nutritionist or vet sets. 3. **Days of feed left**: feed on hand divided by daily use. 4. **The gap**: the number of days you plan to feed, less the days you have, multiplied by daily use. Plan for longer than you hope. If you think the break might come in 90 days, budget for 120 or more. A budget that runs out early doesn't help anyone. Our [feed budget spreadsheet](https://farmcfo.com.au/downloads/farm-cfo-feed-budget.xlsx) does the sums for each mob and puts a cost on the gap. Get a delivered price per tonne, including freight, because freight can add a lot to cheap hay. ## Set trigger dates A trigger date is a line in the sand. For example: "If we haven't had useful rain by 15 December, we sell the cull cows." You decide the date, the rain that counts, and the action, all before the pressure builds. Why bother? Because without a trigger, it's easy to wait one more week, then another. By then the stock have lost condition, prices may have fallen and the feed is gone. Selling or moving stock earlier usually gives you more choices. Good triggers are: - **Specific:** a date, a rainfall amount and a named mob. - **Staged:** the first trigger moves the stock you'd least want to keep. A later trigger moves the next group. - **Written down:** on the [drought money plan](https://farmcfo.com.au/templates/drought-money-plan), so the whole family and your adviser can see them. ## Check the triggers against the cash Each trigger changes the feed budget and the cashflow. Selling stock early saves feed and brings in cash. Holding them costs feed but keeps your numbers for when it rains. Run each step through the budget so you can see what it does. Your agent, vet and nutritionist know the stock and the market. We help you put their advice into numbers. The decision stays yours. ### Worked example **The same invented cattle farm.** The figures are illustrative. It has 240 t of hay and 300 cows using 2.4 t a day, so 100 days of feed. The family sets a trigger: if there's no useful rain within 45 days, they sell 80 cull cows. - **Hay used in the first 45 days:** 45 × 2.4 t = 108 t. - **Hay left:** 240 t - 108 t = 132 t. - **New daily use with 220 cows:** 220 × 8 kg = 1.76 t a day. - **Days left after the sale:** 132 t ÷ 1.76 t = 75 days. Total feed now lasts 45 + 75 = 120 days instead of 100. The trigger bought them 20 extra days, plus the cash from the cull cows. Download the feed budget spreadsheet: https://farmcfo.com.au/downloads/farm-cfo-feed-budget.xlsx ### Check your understanding 1. What is a trigger date? Answer: A date agreed in advance to act if it hasn't rained. A trigger date is set before the pressure builds. It names the date, the rain that counts and the action you'll take. 2. How long should you plan to feed for? Answer: Longer than you hope. Budgeting for a longer dry than you hope means the plan still works if the break comes late. 3. Why include freight in the feed price? Answer: Freight can add a lot to the real cost of feed. Cheap feed a long way away may cost more delivered than dearer feed nearby. Always budget on a delivered price. ## Lesson 3: Agist, feed or sell: comparing the options When the feed budget shows a gap, you have three main choices. You can buy feed and keep the stock at home. You can send stock away on agistment (paying someone to graze them on their country). Or you can sell. Most farms use a mix. ## Feed at home Feeding keeps your numbers and your genetics. It costs cash now, and that cost grows the longer the dry lasts. Work out tonnes needed, the delivered price and the labour. Ask your nutritionist what ration keeps the stock in the condition you need. ## Agist Agistment can cost less than feeding, if you can find it. Costs usually include a rate per head per week, freight both ways, and checking the stock. Things to sort out first: - **A written agreement** that covers the rate, who checks the stock, water, and what happens if the feed runs out there too. - **Animal health**, such as drenching and any disease risk, with your vet. - **Distance**, because freight and your own travel add up. Agistment works best when you know it will rain at home before the agistment feed runs out. That is hard to know, so build in a plan B. ## Sell Selling turns feed into cash and lightens the load on the paddocks. The catch is restocking. When it rains, everyone wants stock and prices can be higher. So the real cost of selling is the gap between what you get now and what you might pay to buy back later, plus the lost production in between. Sell the stock you'd least want to keep first, while they're still in good condition. ## Compare them side by side For each option, add up: 1. The cash cost or cash in now. 2. The cost over the feeding period. 3. What it might cost to rebuild later. Our [agist, feed or sell calculator](https://farmcfo.com.au/tools/agist-feed-or-sell) does this for one mob at a time. Use your own quotes and your agent's price guide, not ours. No option is right for every farm. A mix often works: sell the culls, agist the young stock and feed the core breeders. The numbers help you choose, and they give you something solid to show the bank. ### Worked example **An invented mob of 100 steers.** The prices are made up for the example and are not market figures. The family needs to get them through 120 days. - **Feed at home:** 100 head × 9 kg × 120 days = 108 t. At $400 a tonne delivered, that's $43,200. - **Agist:** 120 days is about 17 weeks. At $4.00 a head a week, that is 100 × $4.00 × 17 = $6,800. Freight both ways is $5,000, so $11,800 in total. - **Sell now:** 100 head at $1,100 brings in $110,000. Buying back 100 later at $1,300 would cost $130,000, a $20,000 gap. Agistment looks cheapest here, if they can find it and the feed holds. The family books agistment and keeps selling as plan B. Try the agist, feed or sell calculator: https://farmcfo.com.au/tools/agist-feed-or-sell ### Check your understanding 1. What is agistment? Answer: Paying someone to graze your stock on their country. Agistment means your stock graze someone else's land, usually for a rate per head per week. 2. What is the hidden cost of selling stock in a dry year? Answer: What it may cost to buy stock back later. When it rains, demand for stock can push prices up. The gap between the sale price now and the buy-back price later is the real cost. 3. What should an agistment agreement cover? Answer: The rate, who checks the stock, water and what happens if feed runs out. A written agreement avoids arguments later. It should cover the rate, care of the stock, water and a plan if the agistment feed fails. ## Lesson 4: Talk to the bank early and find support Two calls make a big difference in a dry year: one to your bank and one to the support services. Both work better early. ## Ring the bank before you need to Banks deal with dry seasons all the time. What they don't like is surprises. If you ring after you've gone over your limit, the conversation starts on the back foot. If you ring three months before, with a plan, it's a different conversation. Take three things: 1. **Your feed budget** showing days of feed and the gap. 2. **A monthly cashflow** showing when the account hits its low point. 3. **Your plan**, including trigger dates for selling or agisting. Ask what options the bank has, such as a temporary limit increase or changing when repayments fall. We can't promise what any bank will do, but a clear plan gives it something to say yes to. If you need to explain hardship in writing, our [hardship letter template](https://farmcfo.com.au/downloads/farm-cfo-hardship-letter.docx) is a starting point. ## Support that exists Programs open and close often, so check each agency's page before you apply. - **[Rural Financial Counselling Service](https://www.agriculture.gov.au/agriculture-land/farm-food-drought/drought/rural-financial-counselling-service) (RFCS):** free, confidential help for farmers in or at risk of financial hardship. Counsellors help with budgets and cashflows, an action plan and talking to lenders. Ring 1300 771 741 to reach your nearest office. - **[RIC Drought Loan](https://www.ric.gov.au/drought):** the Regional Investment Corporation, a government lender, offers up to $2 million over 10 years, with the first 5 years interest only (you pay just the interest). You need your bank's support and a drought management plan. Our [RIC loans guide](https://farmcfo.com.au/guides/ric-loans-explained) explains it. - **[RIC Drought Hardship Loan](https://www.ric.gov.au/drought-hardship):** up to $250,000 over 5 years for farms that have been in drought for at least 24 months. Nothing is paid for the first 2 years, but interest builds up. - **[Farm Household Allowance](https://www.servicesaustralia.gov.au/farm-household-allowance):** a fortnightly payment for farmers and their partners in financial hardship, for any reason, with a case officer and an activity supplement of up to $10,000. - **State schemes:** for example, the NSW Rural Assistance Authority's [Drought Ready and Resilient Fund Loan](https://www.raa.nsw.gov.au/loans/drrf) lends up to $500,000 until funding runs out. See [state government farm loans](https://farmcfo.com.au/guides/state-government-farm-loans) for other states. Our [drought support guide](https://farmcfo.com.au/guides/drought-support-for-farmers) has more detail. ## Look after the people Dry years are hard on families. If it's getting heavy, ring Lifeline on 13 11 14. The RFCS is also a good first call. It's free and it's there for exactly this. ### Worked example **The invented cattle farm again.** The figures are illustrative. Its overdraft is $40,000 drawn against a $150,000 limit. Over the next six months the cashflow shows: | Item | Amount | |---|---:| | Feed and freight | $64,000 | | Loan repayments | $36,000 | | Running costs | $95,000 | | Less stock sales | -$50,000 | | **Net outflow** | **$145,000** | The overdraft peaks at $40,000 + $145,000 = $185,000, which is $35,000 over the limit. The family rings the bank in spring, not at the peak, and asks about a temporary limit of $200,000. That would leave a $15,000 buffer. Download the hardship letter template: https://farmcfo.com.au/downloads/farm-cfo-hardship-letter.docx ### Check your understanding 1. When is the best time to ring the bank about a dry year? Answer: Early, with a feed budget, cashflow and plan. Ringing early, with numbers, gives the bank a plan to work with instead of a surprise. 2. What does the Rural Financial Counselling Service cost? Answer: Nothing, it's free and confidential. The RFCS is funded by the Australian Government and is free and confidential for eligible farmers in or at risk of hardship. 3. What should you do before applying for any drought scheme? Answer: Check the agency's own page, because rules change. Programs open, close and change often. The agency's page has the current rules. ## Lesson 5: Restocking after the dry It's rained, the paddocks are greening up and the phone is full of agents offering stock. After a hard year, every empty paddock feels like lost income. Restocking is a big money decision, so plan it like one. ## Let the feed come first Buying stock before the feed is there just moves the cost from the bank to the paddock. Give pastures time to recover before grazing them hard. Your agronomist or local land services office can help you judge when the feed is ready. Redo the feed budget for the new season before you buy. ## The cash gap Restocking turns money into stock long before the stock turn back into money. A cow bought now might not have a calf on the truck for a year. A ewe bought now might not give you a lamb or wool cheque for many months. Freight, animal health, feed and interest keep running in the meantime. So the key question is: how much cash do we need before the first sale, and who funds it? ## Your main options - **Buy in:** gets numbers back fastest, but costs the most cash and usually adds debt. - **Breed back:** keep more heifers or maiden ewes. It costs less cash but it's slow, and the overheads don't wait. - **Agist or trade:** take in someone else's stock, or run trading stock, to earn from spare feed without a big outlay. Get any agistment in writing. Many farms mix these. Talk to your vet before you buy, because bought stock can bring in disease, worms or drench resistance. ## Stage the purchase We like restocking in stages. Buy part of the numbers, see how the season holds, then buy the rest. It costs a little more in freight and time, but you keep the option to stop if the follow-up rain doesn't come. ## Show the bank the plan Take a cashflow to the bank before you buy. Show the cash gap, when income returns and what you'll do if the season fails halfway. The [restocking budget calculator](https://farmcfo.com.au/tools/restocking-budget) compares buying in with breeding up. Our guide to [restocking after a dry year](https://farmcfo.com.au/guides/restocking-after-dry-year) goes further, and the [livestock finance guide](https://farmcfo.com.au/guides/livestock-finance) covers borrowing for stock. If you'd like help keeping the plan up to date through the recovery, that's what our Season Partner service is for. ### Worked example **An invented sheep farm.** The prices are made up and are not market figures. The flock fell from 2,000 to 800 ewes in the dry. The family wants to buy 1,200 ewes at $250 a head, with freight of $6,000 for every 600 head. - **Plan A, buy all at once:** 1,200 × $250 = $300,000, plus $12,000 freight, so $312,000 up front. - **Plan B, two lots of 600:** the first lot costs 600 × $250 = $150,000, plus $6,000 freight, so $156,000. The second lot costs the same, three months later. If the season fails after the first lot, Plan B has only $156,000 at risk, half of Plan A's $312,000. The trade-off is fewer lambs from the second lot in year one. Try the restocking budget calculator: https://farmcfo.com.au/tools/restocking-budget ### Check your understanding 1. Why let the feed recover before restocking? Answer: Buying stock before the feed is there just shifts the cost to the paddock. Without feed, new stock need hand feeding or damage recovering pastures. Let the paddocks dictate the timing. 2. What is the main benefit of staging a stock purchase? Answer: You keep the option to stop if the season fails. Buying in stages limits the cash at risk. If the follow-up rain doesn't come, you can skip the second purchase. 3. What is the trade-off with breeding back instead of buying in? Answer: It's slower, while overheads keep running. Breeding back uses less cash, but numbers recover slowly and the fixed costs of the farm keep coming. ## Next step Season Partner: https://farmcfo.com.au/season-partner ## Sources - [DAFF, Rural Financial Counselling Service](https://www.agriculture.gov.au/agriculture-land/farm-food-drought/drought/rural-financial-counselling-service) - [Regional Investment Corporation, Drought Loan](https://www.ric.gov.au/drought) - [Regional Investment Corporation, Drought Hardship Loan](https://www.ric.gov.au/drought-hardship) - [Services Australia, Farm Household Allowance](https://www.servicesaustralia.gov.au/farm-household-allowance) - [NSW Rural Assistance Authority, Drought Ready and Resilient Fund Loan](https://www.raa.nsw.gov.au/loans/drrf) - [Lifeline Australia](https://www.lifeline.org.au/) General information only, not financial, tax, legal or credit advice. These courses are not nationally accredited training.