Can FSU performance match the rhetoric?

Farming Systems Uruguay’s aim was to take New Zealand farming systems to Uruguay.

It sounded good and cheap land had an appeal when farm prices here were soaring. But there are usually good reasons why land is cheap and what works well in one country can’t be transferred directly to another with a different climate, culture and language.

The weather can go against you anywhere and drought in Uruguay is one of the factors which contributed to the company’s $15.6 million loss  in the year to June 30.

FSU had signalled this with a profit downgrade warning earlier this year, followed by the news the company will have to sell $60m worth of land in the next couple of years.

Neither of those announcements surprised us because we visited one of FSU’s farms a couple of years ago and weren’t impressed. Nor was the manager.

He’d arrived from New Zealand in February to find there was no electricity in the house, no hot water, no TV reception, no internet, a problem with the swimming pool’s filtration system so it couldn’t be used and he had to share the only telephone with several other workers.

By the time his wife and children joined him in April electricity and hot water had been restored but the problems with the TV, internet, phone and pool still hadn’t been addressed.

The manager had been given a short course in Spanish when he arrived. That didn’t get him beyond the basics so he had to rely on bi-lingual staff to translate for him most of the time. But it wasn’t just language difficulties there was a huge cultural divide.

Farm owners and managers in Uruguay don’t usually live on the farm and this one was on a dirt road, more than 30 kilometres from the nearest town which had only one small store selling food.

Owners don’t usually do farm work either, they employ others to do it for them and because labour is cheap they often do it with more people and less labour-saving equipment and methods than we’re used to here. Applying fertiliser was a three-man job – one drove the tractor, the other two stood at either end of the paddock with flags to direct the driver.

Most of the staff were married men who went back to their families for long weekends once a month so even if they could have spoken the language the manager’s wife and children had few other women or children to talk to.

The manager resigned soon after we were there. It’s possible huge improvements have been made in the couple of years since then and the company may be putting much more effort in to inducting their managers and families.

However, financial and farming performance have yet to match the rhetoric.

The company blamed drought, falling prices and a delay in raising capital for this year’s loss. I think the problems go deeper than that. Grass isn’t always greener on the other side of the ocean.

Land was cheaper in Uruguay than in New Zealand but there’s much more to successful dairying than cheap land. Developing dairy farms and getting them to show a profit isn’t easy here, it is even more difficult when there’s a language and cultural barrier.

Taking New Zealand farming systems to Uruguay might pay off in the long term, but I don’t think financial performance will match the promise in the short term.

3 Responses to Can FSU performance match the rhetoric?

  1. Farmer Baby Boomer says:

    Interesting post HP. I have thought that Uraguay, along with Argentina and Chile could provide some stiff competition for us if they got their act together. Dosen’t sound like Uraguay is at that point yet.

  2. homepaddock says:

    FBB – if we grew soya I’d be very worried about Argentina and Uruguagy – they do that very well.

    We’ve also seen some very good dairy farms in Argentina. But from what we saw there and in Uruguay the industry as a whole has a long way to go.

  3. PaddyMcDonnell says:

    You’re right about Uruguayan dairy farming. All but one of my neighbours here in Colonia departmento have given up on milk production over the last 18 months because of lousy prices and the rocketing cost of land and labour. Only the bigger enterprises are surviving.

    On the other hand, I grew a champion crop of soya last summer and was very well paid for it 🙂

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