HBH (Farming) Ltd, Oxfordshire, Berkshire and Hampshire
In fairness, it was the last thing most farm businesses would have been budgeting for – a prompt single payment cheque from the Rural Payments Agency.
But for Edward Bishop, one of three partners in HBH Farming, a February arrival seemed a much more likely arrival date. And the surprise of a cheque in the post in early December was nearly as great as the regret at having sold several loads of milling wheat to support cashflow.
“I sold quite a lot of milling wheat at about £130/t but, in light of the single payment turning up, I should have hung on to it. But there were things like fertiliser to pay for and I wasn’t expecting it until well into the New Year.”
Careful management of farm accounts is more important than ever now, with the effects of higher fertiliser and diesel prices still making themselves felt, not to mention a looming tax bill after the higher prices of 2007 and 2008.
For Guy Hildred, there are few difficult marketing decisions left. “I’ve sold most of my corn now.
“Once it reached my tipping point of £100/t, I stuck to that and sold it. I will probably average somewhere round £105/t, and I’ve probably sold 80% of this last harvest in the last month.”
Like most arable businesses, HBH partners must prepare to give the Chancellor his share of the better returns seen in 2007. “Even after prices rose in 2007, yields were higher in 2008 and we saw some good returns.
“This year has been the exact opposite – yields were down and variable costs – particularly fertiliser – were up.”
But, while Mr Hildred has committed most of his grain, Mr Bishop is playing a waiting game with the balance of his harvest. “I’m still sitting on some oilseed rape. The majority is still in the store and I’m gambling with it. I’m hoping its going to come in line with soya prices, which are supposed to be the base in the market.”
Cash flow is important to the three farms involved in the HBH joint venture – the contracting business, which provides labour and machinery services to the three partners, makes a monthly charge on the parent businesses, and the books have to be balance every thirty days.
The individual partners handle their own seed, fertiliser and chemical costs, mostly through Oxfordshire buying group Orion.
Cash is equally important here – part of a buying group’s strength lies in being able to commit to purchasing decisions on a massive scale, which it needs members’ funds in place to allow it to do.
While the open market provides opportunity to speculate, at the heart of the partners’ marketing strategy is making sure milling wheats return an acceptable premium.
Cordiale, a group two milling wheat introduced as a replacement for Soissons, offers the opportunity to fix a minimum-maximum premium over feed wheat, depending on market movement. Mr Hildred is aiming for a £15/t premium. “And if feed wheat climbs to £110, I will be tempted to fix the base price on a small amount of the total crop of 1500 tonnes.”
Similarly, he has fixed the premium on group one milling wheat Solstice at a £30/t premium over feed wheat. But he is reluctant to lock any significant tonnage into forward feed wheat prices as they stand at the moment.
“I think there is scope for the pound to weaken again. In one sense, I hope I’m being too pessimistic, but if a weaker pound leads to more export business it could be positive for grain prices. And also there will be an election next year.”
In the meantime, regular conversations with a grain trader from Openfield will seek to find bespoke homes for individual loads of grain. “It’s about looking to add value to grain where we can, not just lowest-cost production, says Mr Bishop.
Cost per acre
HBH partners resist the temptation to make decisions solely on farm budgets. But accurately calculating production costs is important. “I think you can only really try and work it out on a per-acre basis,” says Mr Hildred.
“Due to the extreme variation in yields – and we can range from 2.2t/acre to over 4t/acre on some of the soils we farm – it’s difficult to work out any meaningful production costs on a per-tonne basis alone.
“Some of our gravels will struggle to better 2t/acre as they are so prone to drought, while some of our river silts will be up to 4t/acre,” he says.
“Our variable costs – seeds, fertiliser and sprays – are somewhere around £55/acre,” says Mr Bishop. “But that’s before rent and finance, or interest on capital is taken into account, and before the £200/ha contract charge that the joint venture company makes.”
“I’ve bought about two-thirds of my total requirement at around £200/t,” Mr Bishop says. “But some second wheats will receive sewage sludge and I have about 400 acres of beans as well. But it is only worth trimming costs so far before it has an adverse effect.
“For example, we don’t set our agronomist a budget and expect him to be hemmed in by it. Not to do a T3 spray for cost purposes alone is insanity. Agrochemicals are such a negligible cost compared with others on the farm.”
The two worst offenders – fuel and fertiliser – are at least offering some respite from the punitive prices of 2008 and 2009.
“Fertiliser prices have nearly halved from 2008, and diesel is now in the low forties- compared to nearly 80p/litre at its peak,” says Mr Bishop.
With key inputs more manageable, cropping for 2010 is mostly based around maximising wheat yields. As well as the partners’ own farms, HBH contract-farms a substantial acreage for a number of local clients, including Mapledurham Estate near Reading.
“At Mapledurham, the majority is all first wheats, with Cordiale coming in for the first time. It’s an earlier variety, coming to fruition in July, hopefully before our lighter soils start to dry out. Solstice is out other main milling wheat, which has yielded better than Hereward,” says Mr Hildred.
Part of the cropping plan for next year will be the thorny question of Entry Level Stewardship.
Woodhouse Estate, the third partner in HBH Farming, is signed up to the scheme and Mr Bishop says he plans to join it again. Mr Hildred flirted with the scheme in 2005, but became so frustrated with the bureaucracy that he abandoned the paperwork but left his buffer strips in place. But things could be about to change.
“I can see that with the launch of the Campaign for the Farmed Environment, I’m going to have to get on board and do my bit for that. Hopefully it will be a light touch rather than arbitrarily imposing measures on us, which seems the alternative.”
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