9 April 1999

SWOT up on profit

MILK producers must move away from high input/low output systems to survive the squeeze.

At least 3p/litre profit is needed to guarantee survival, Ian Browne of the Farm Consultancy Group told a recent Practice into Profit seminar at Gelli Aur College, Carmarthenshire. But he knew of farmers whose combined variable and fixed costs totalled 17.5p/litre, leaving a profit of only 0.5p/litre to cover drawings and reinvestment.

It has never been more important for producers to identify weaknesses in the businesses, and to take single minded action to correct them, he said. During more profitable times, too many producers had ignored the negative aspects like excessively high fixed costs which now threatened the viability of many businesses.

Realistic cost reduction targets should be set and progress on achieving them carefully monitored. "I suggest carrying out a SWOT analysis to assess the strengths, weaknesses, opportunities and threats that impinge on your businesses.

"A business needs to play to its strengths and avoid weaknesses. The trading accounts should be scrutinised for the areas that seem out of line and wasteful. This does not mean lashing out wildly cutting staff and costs, rather sit back and think what you are trying to achieve."

He forecast that milk producers would either choose high input, high yield systems, or adopt forage based systems with yields of 5500 or 6000 litres a cow. A SWOT analysis would reveal which camp best suited individual farmers. &#42

Co-op invests in bid to lift grain exports

By Robert Harris

SOUTHERN co-op SCATS has agreed to buy Continental Grains UK export business at Southampton. The move gives the company a 10% share of the UK grain export market, and will boost the tonnage of grain it trades by at least one-third.

The deal, for an undisclosed sum, includes animal feedstuffs and fertiliser import facilities and should be completed by early summer, says SCATS managing director Tim Pollock. The existing marketing agreement with Soufflet at Southampton is unaffected.

"Grain exports through the port of Southampton have averaged over 850,000t a year and are of considerable economic importance to our farmer members. This acquisition secures long-term farmer control of the silo facilities and gives direct access to EU and international markets," he says.

Continental Grain exported half that total, though that may slip slightly this year due to increased set-aside and poorer looking crops, he adds. Nevertheless, SCATS will be looking to buy at least 200,000t more grain a year to add to its current exports of about 170,000t.

"Over 50% of the cereals grown in our trading area (from Kent to Dorset and north to the M4) are exported," says Mr Pollock. Wilts and Hants farmers are particularly well placed to benefit. "They should be able to grow grain as competitively as the rest of the world."

Although UK exports have slow-ed, Mr Pollock expects better world grain prices and increased demand will boost prospects before long. "Agenda 2000 reforms will mean the UK should continue to have a good exportable surplus of about 4m t of wheat and some barley. Looking forward, there should be good opportunities for UK growers."

Other farmer-controlled companies in the region will be offered a chance to invest in the deep water facility, says Mr Pollock.

SCATS is also streamlining its trading operation. Grain group marketing and grain selling staff will join existing Continental Grain employees in Southampton, leaving local grain buying operations only at its Micheldever, Hants, and Robertsbridge, East Sussex, sites. "We do not envisage any significant levels of redundancy," he says. &#42


FERTILISER MARKET REPORT

Region Domestic Imported Urea Prills 20.10.10 20.10.10

AN AN Blend Cpd

South east 92-97 78-82 NM 107-110 114-118

South west 91-96 78-83 95-98 107-111 112-117

East Anglia 92-97 78-82 89-94 105-110 115-117

Midlands 93-98 78-82 88-94 103-110 113-116

Wales 95-98 80-87 NM 107-112 115-118

North east 92-97 78-83 89-93 104-110 114-117

North west 93-98 78-84 NM 108-112 114-118

Scotland 93-97 77-84 NM 108-112 115-118

Source: Britannia Fertiliser Brokers and Consultants.

By Mike Stickland

The weather, combined with the hand-to-mouth buying policy of many farmers, has kept the market weak and low.

It is becoming clear now that the total consumption of fertilisers this year must be very much down on previous years, some say as much as 15%. Although imports are dramatically lower, there has been a steady stream of vessels during the past few weeks, most of which have been sold to a number of UK merchants, and there has been no shortage of product to supply. The small increase in price for imported product reflects increased costs rather than increased demand.

The price spread for domestic ammonium nitrate has widened, largely because Terra Nitrogen has been aggressively trying to shift additional tonnage. Hydro and Kemira have been trying without much success to push the market up.

Demand, particularly in the western half of the country, could be strong for another month, but it seems unlikely now that there will be any difficulty meeting it, and little prospect of rising prices.

Should one of the other UK producers be the buyer of Terra N later this month, we could see reduced UK capacity and stronger prices.