21 June 2002

Cost management key to surviving the crunch

Britains biggest arable farming event of the

year attracted 12,800 visitors to North

Rauceby, near Sleaford, Lincs, last week, the

second highest attendance in the events

history. Economic survival was the theme

and gritty realism the mood. farmers weeklys

arable team reports over the following 13

pages. Turn to page 65 for machinery news

ONLY the best combinable crop producers able to drive down costs and radically refine their business structures will survive if low prices continue.

That was the stark message from industry specialists at Cereals 2002 who warned that far too many farmers are still over-capitalised after the mini-boom of the mid-90s. Many are now living off their assets.

Despite a mild uplift in grain prices from recent currency moves, no one was prepared to forecast a speedy return to better times, though several highlighted the increasing volatility of the market-place.

If world events take a turn for the worse, for example with India and Pakistan going to war, crops drilled this autumn just might be worth twice current levels by Jan 2004, one consultant suggested.

"For the next 12-24 months nobody knows which way the price will go," says the HGCAs Gerald Mason. "You have to accept that anybody who tells you what it is going to do is misleading."

With wheat at £65/t, above average producers should make a profit of about £13/t, calculates Andersons Francis Mordaunt. But in many cases that needs to cover farmers own labour and drawings. "The fact is that the average farmer will probably not make any money on wheat in 2002 at current prices."

Looking ahead, with support increasingly decoupled from production after 2006, profit from wheat at an unsubsidised £55/t would be almost non-existent, even for the best growers, his figures show.

"Arable farmers must begin to think about getting costs low enough to farm profitably without including area payments in gross margin calculations."

Reducing costs to a more competitive level is essential, agreed Velcourts James Townshend. "Given the need for less resource within the industry generally we shall be focusing on ways of reducing the investment per unit of output." There are still real opportunities to improve efficiency by pooling machinery, labour, land and fixed equipment, he believes. &#42

Velcourts James Townshend – There is still scope to cut costs by pooling machines, land, labour and fixed equipment.

HGCAs Gerald Mason – Nobody really knows where the market is going. Those that say they do are misleading.

A packed Cereals event provided the backdrop for some gritty talk about survival in the face of real adversity. Growers and exhibitors alike were as tenacious as ever.

&#8226 Average must strive to be best.

&#8226 Plan on basis of no price recovery.

&#8226 Urgent need to tackle overheads.

&#8226 Improve technical efficiency.