26 June 1998

97 wheat is moving out

WHEAT from last harvest, sold for June 1998 collection, is moving from the farm. We have been able to keep most varieties separate in bins, namely Hereward, Consort and Hunter, with the Vivant and Ritmo occupying the floor area together.

Hereward tested well for specific weight and protein but unfortunately had little or no Hagberg falling number and was sold as feed for £74/t this spring. Hunter was sold as feed wheat on a forward contract last November at £82/t, and the Consort on 180 Hagberg contract last September at £100/t.

The large heap of hard feed wheat labelled Vivant and Ritmo, was sold to three homes between last December and now, to average £79/t as feed with a minimum specific weight of 70kg/hl.

The mean selling price for our 743t of wheat harvested was £80.25/t; about 28% down on the previous year which sold for an average price of £112/t. Looking back in my diary, I see that notes taken during discussions with grain merchants last October show that I could have secured £90/t for all the wheat down to a specific weight of 70kg/hl. This would have grossed us an additional £7233, but then hindsight is a marvellous thing.

I was one of those optimists who thought that the £ would weaken and open up a few opportunities for export, or that there would be a shortfall at the end of the season that would allow me to get my money back on the last 100t.

Fix price now?

With harvest just around the corner and the experience of last year under our belt, perhaps we should be considering fixing a price for new crop now. We have two varieties to market this year; Drake, a soft endosperm feed wheat and Abbot, a group one milling wheat.

I have bids for June 1999 of £80/t on a feed specification and a premium of £10/t for a class one milling wheat at 11% protein. Perhaps we should have some cover on the feed wheat at these prices and hold onto the milling premium until after harvest.

We had two visitors from New Zealand last week: One a farmer from the South Island and the other a manager for Tegel Foods who buys wheat on contract to be compounded into feed for the poultry industry.

Robert Saunders, who farms 250ha (100 acres) of cereals and pulses on good land south of the Canterbury Plains, produces 11t/ha of wheat at similar variable costs of production to ourselves – £180/ha (£73/acre). He has just contracted his wheat to Tegel at £70/t for three years. That gives him a gross margin of £590/ha (£238/acre).

Gross margin

If we take a yield of 8.0t/ha and a price of £80/t less variable costs, our gross margin before area aid is £460/ha (£186/acre).

Our forecasted yield for feed wheat, grown after combinable break crops is 8.0t/ha (3.2t/acre), and milling wheat, after sugar beet, is 6.5t/ha (2.6t/acre). The average for all wheats is 7.6t/ha (3t/acre).

For the moment we can add back £240/ha (£97/acre) for area aid to make a gross margin of £700/ha (£283/acre). But for how much longer? Until last year our gross margin for wheat had been nudging £1000/ha (£404/acre). To achieve that today we would need to yield more than 11.5t/ha (4.7t/acre); a tall order for limestone brash.

Survival will come by maximising our overhead costs, attention to detail in the application of our variable inputs and continuing to look for ways of adding value to our output by quality and seed premiums.

Our visitors from New Zealand were on a fact finding trip with specific interests in cereal growing, farmer co-operation and trading groups. Mr Saunders, an avid reader of FARMERS WEEKLY, albeit somewhat dated by the time he receives it, was interested to learn more about A1 Farmers, the six-farm machinery sharing and agronomy group.

At a recent group meeting, directors discussed ways in which members could co-operate to bring down their production costs – particularly labour, power and machinery costs.

"The prerequisite of any group is that the participants should get on well together and respect each other," a quote from Andrew Sharpley our group secretary whose father was a founder member.

Testimony to this must be that the group is nearly 30 years old having expanded from the four original founder members who came together to harvest and haul their sugar beet in 1969.

Small inventory

At present the groups machinery inventory is small, the main function being agronomy and chemical buying.

But with our backs to the wall, we have the framework to be something more ambitious. Re-organising our rotations and reducing combine strength by half could have a big impact. Looking at autumn cultivations, and using two large tractors with dedicated equipment could be another. We have a combined farmed area of around 2700 ha (6670 acres).

With a will to work together more closely we could make real inroads into our overhead costs. The price to pay may well have to be some loss of independence but it could be preferable to a change in the way of life we have all spent most of our adult years pursuing.