12 May 1995

Cost of labour and machinery is key to competitiveness

By Tim Relf

UK FARMERS will have to pay more attention to labour and machinery costs if they are to remain competitive in the world marketplace.

That was the message David Turner, senior manager with Touche Ross, gave a recent meeting of Stamford-based A1 Farmers.

"Labour, power and machinery costs often offer scope for reduction," he said. "Over capacity is an insurance policy. But it is an expensive one. And equipping a farm to handle its own requirements in all circumstances may be a case of putting pride before profit."

Based on the 1993 harvest year, Mr Turner pointed out that the top 25% of winter wheat growers in a sample of eastern county farmers had overhead costs of £43/t. For the bottom 25%, the figure was £55/t.

Three key areas form the starting point for an examination of costs. These are:

&#8226 Combine harvesters.

&#8226 Main cultivation tractors.

&#8226 Manpower.

"With appropriate planning, we could probably cut the number of combines in the industry by more than one third," he said. And he pointed to the use of contractors, machinery rings and combine sharing as possible options.

But the members of A1 Farmers present believed that, in addition to economic criteria, personal factors were also a strong consideration, especially when it came to staffing levels.

Variable costs were fairly consistent between farms. For the top 25% of the sample the figure was £24/t, while for those at the bottom, it was £26/t.

"We need to take a whole-farm approach," said Mr Turner, "also taking into account other on-costs such as tax, depreciation and drawings.

"The cereal sector boom looks set to stay until the end of the century. But any strengthening of sterling and the price of grain quite quickly begins to fall. So minimising the cost of production per tonne must be a continuous objective."

David Turner: The number of combines could be cut by one third.