1 October 1999

Group buying cuts prices

By Amanda Dunn

A GUARANTEED floor price for chemicals plus insurance savings of up to 40% are being realised by midlands farmers after rapid expansion of a Northants buying group.

Formed in 1998 the group is run as a commercial cost cutting venture by farm management consultancy firm Samuel Rose.

"Our suppliers must guarantee to sell at the floor market price," explains commercial manager Neil Simmonds.

Each year selected agrochemical companies are asked to tender. The most competitive then supply the groups chemicals throughout the season.

Invoicing occurs twice a year after research confirms the final price as lowest possible. "Our suppliers are very committed. Purchasing will take place throughout the year, but at the end of the season, when the market price is known, suppliers guarantee to sell at the lowest market price, and our own research confirms this to be the case.

"One of the joys of the system is the twice-yearly invoicing," says Mr Simmonds. "Invoicing and payment is made just twice, in January and July."

All credits and rebates are known before invoicing, making bookkeeping simple, and members enjoy the benefit of an interest-free credit period.

Rapid expansion of the group has increased buying power. Membership has more then doubled in the past year, representing 30,350ha (75,000acres) with a turnover of £3m. "In the last fortnight alone we have attracted a further 4000 acres. And with just one exception, all members have renewed their subscription this year."

A specially written computer programme offers direct comparison of costs on-farm so farmers can assess potential savings before joining. This has helped hugely with recruitment, says Mr Simmonds.

Sister company Farmers & Mercantile, formed four years ago, has more than 350 clients. "Farmers & Mercantile is constantly putting together information and agreements for members which produce substantial savings on their existing insurances."

[TABLE 1]

Example of insurance costs on 400ha (1000acre) all-arable farm * (£)

NFU mutual Farmers & Mercantile % change

Private cars (4) 1355 915 -33

Commercial vehicles (3) 1018 758 -25 Agricultural vehicles (9) 2011 1389 -30

Farm business policy 3734 2076 -45

Home & contents 1711 1027 -40

Personal accident (3) 1023 330 -68

Total 10850 6495 -40

* Diversification to farm shop and b & b, part owned/part tenanted, little outside labour. Source: Samuel Rose.

[TABLE 2]

Spray cost comparison on 180ha (450acres)

Current supplier 8238

S R buying group 6224

Cost saving 2014

Plus credit cost 101

Saving 2115 (26%)

Less membership charge 230

Less service charge 125

Net benefit 1760 (21%)

Source: Samuel Rose.ENDS 554 WORDS

Example of insurance costs on a 400ha (1000-acre)

all-arable farm (£)

NFU mutual Farmers & Merc % change

Private cars (4) 1355 915 -33

Commercial vehicles (3) 1018 758 -25

Agricultural vehicles (9) 2011 1389 -30

Farm business policy 3734 2076 -45

Home & contents 1711 1027 -40

Personal accident (3) 1023 330 -68

Total 10850 6495 -40

* Diversification to farm shop and b & b, part owned/part tenanted, little outside labour. Source: Samuel Rose.

Spray cost comparison

on 180ha

(450 acres) (£)

Current supplier 8238

S R buying group 6224

Cost saving 2014

Plus credit cost 101

Saving 2115 (26%)

Less membership charge 230

Less service charge 125

Net benefit 1760 (21%)

Source: Samuel Rose.