28 May 1999

A HANDSHAKETHAT TURNEDNEIGHBOURS INTO PARTNERS

Not all machinery and labour mergers are based

on formal contracts.

Amanda Dunn visits

Hertfordshire where a

handshake between

neighbouring farmers over a

decade ago has developed

into a progressive working

partnership

TEN years ago Ian Welch and neighbour Peter Sapsed farmed two individual 240ha (600 acres) units at Nuthampsted. They almost completely duplicated equipment and had a total of five full-time staff.

Today the fixed costs of the two farms are managed jointly, work plans are structured 18 months in advance and labour requirements and machinery ownership split between the two businesses.

"It was a very gradual thing," explains Mr Welch. "It started out as a little bit of co-operation with contracting, helping each other out when we were behind."

Then pressure to reduce fixed costs and a desire to benefit from economies of scale led to a gradual merging of total labour and machinery requirements.

"There was so much total duplication – combines, balers, sprayers, everything was duplicated. It was the obvious thing to do to manage with one machine," says Mr Welch.

The change was carefully planned. "A profile was worked out as if it was one farm. Then, as and when the situation arose, because of age or advances in technology, the decision was taken for one of us to replace a machine."

A similar approach was applied to labour. A target profile was agreed and numbers gradually reduced to half. Salaries are paid by the farm that employed the staff originally. Any work carried out is then charged to the other farm at an agreed rate.

No formal arrangement was entered into, no legal partnership established, the whole thing was done on trust alone, confirms Mr Welch.

Both farmers now devise cropping, rotations and work plans for the total area eighteen months in advance. Work is then carried out as agreed by the relevant party and charges invoiced bimonthly on an hourly or area basis.

"The emphasis is to look at it as a single farm, to make sure theres no preferential treatment," says Mr Welch.

"Working out cropping and rotations together can sometimes lead to disagreements. But it is no different to growing a crop of seed beans on your boundary when it might be necessary to compromise with your neighbour," explains Mr Welch.

"Obviously there are other alternatives such as share farming or contract farming, but we both wanted to run our individual businesses and farm practically. This way gives us all-round flexibility, which you dont get with other systems.

"A further advantage is that we maintain our own assets, we have a reasonable balance sheet and dont have a business devoid of capital. If you start shedding labour and machinery, its difficult to accumulate capital back again.

"Being a heavy land farm our fixed costs have always been high. Our intention was to maintain them at or below the average and thats what we have achieved."

"We have also released capital which we have been able to invest into an on-farm bakery which now employs 15 part-time workers. If Id stayed in the farming operation full-time theres no way we would have been able to develop the bakery operation."