LOVE THEM OR HATE THEM, but the agricultural boards were wonderful training grounds. I was in the Sundays River Valley when a job advert caught my eye. The Citrus Board were looking for field officers, and what pricked my interest was the six-month training period, including three months overseas on the fruit markets. Apart from travelling abroad and exploring the citrus industry in SA, Swaziland and Mozambique, the board gave me my first experience in drawing up a budget.
ABC of budgeting
The first step in budgeting is to estimate the next year’s revenue. For this you need to know how many items of each product you will be producing. This is relatively simple in manufacturing, but in farming it’s a much tougher call. In the fruit business it means you must estimate, many months before harvest, the number of fruit of each cultivar and crop size you will produce. Getting these numbers seriously wrong will mislead your business plans and create tension with your banker.
Fruitless budgeting
In the early days, the Citrus Board prepared a budget headed by scientists who decided that estimating the national citrus crop was a simple statistical exercise. They decreed an infamous system called frame counts, which forced us to count fruit by peering at citrus trees though a standard metal frame. We counted until we were goggleeyed. We waited with bated breath for the statisticians to announce the crop estimate, and were flabbergasted at the enormous figure. It ended in a 25% overestimated disaster, which had ships lying at berth for weeks on end waiting for fruit that never arrived. End of frame counts.
Budgeting optimism
A reasonably accurate crop estimate is an essential step in the annual management cycle. It may be easier with other farm products, but with fruit we seem to get it hopelessly wrong most of the time, but fortunately it’s always on the upside. The propensity to be chronically optimistic is deeply embedded in the farmer’s psyche. Sure, we are optimists, but why do we always forget that abnormal weather is actually normal and that pest and disease damage is inevitable? Call Peter Hughes on (013) 745 7303 or e-mail [email protected].
Golden rules of fruit budgeting:
- The actual yields of past years are always the benchmark.
- Yields may move marginally up or down but quantum upward leaps are rare, and must be treated with great suspicion.
- Always, always, reduce your calculated yield by 5% to 10% for unforeseen factors.
- Use gut feel to tweak the number, but never by more than 1% or 2%, and always downward.
