Group power pays off
Buying fertiliser at the right time can save £s. In this
special focus, we examine how the market looks to be
shaping up this season, both for home-produced and
imported material. Suzie Horne starts with a report on the
services and savings offered by specialist buying groups
GROUP buying of inputs can bring significant financial savings, thanks to the negotiating power of pooled orders.
There are other attractions too. Not having to shop around for prices is an important benefit for many group members. And being backed by an organisation which does a large volume of trade with one supplier also means quality or supply problems are quickly sorted out.
Despite having to supply group members at cheaper rates, merchants and manufacturers also benefit by doing business with groups. The arrangement offers the chance to shift significant volume of product for relatively little effort compared with the cost of servicing individual farmers.
However, some merchants regard group business as a necessary evil, since it may deny them entry on to a farm to sell other goods and services.
Confidentiality is key to many groups. Members are usually under an obligation not to discuss prices and other business outside the group. But chief executive of Norfolk-based Loddon Farmers Ian Miller says that members who did not use the group for nitrogen last year could have been £10 or £11/t out of pocket.
"Some were honest enough to tell us what they paid and they timed it wrong. Were in the market every day of the year," he says. "I dont think individual farmers can be expected to know what is going on in the markets unless they sit on the phone all day – they need a professional and unbiased service."
To an individual, a price might seem good if it is cheaper than last year, but it may still be relatively expensive for the season.
Loddon members buy 35,000-40,000t of fertiliser a year. Keeping track of the individual requirements of 320 members becomes a nightmare if soil sampling and customised blends are involved, so members have the option to do business on two levels.
They can either order direct through the group, or they may deal direct with the supplier. Those choosing the latter method can still put the business through the group to receive the price benefit.
Loddon Farmers sends out commitment forms about three times a year to identify members requirements and establish a negotiating basis, though fertiliser trading continues throughout the year. Members are asked to state a brand preference on their commitment forms.
The cost of belonging to Loddon, founded in 1962, is a £200 annual fee plus a levy charged on goods bought through the group. For feed, fertiliser, chemicals, fuel and seed, this is 0.85%. Machinery spares, batteries, tyres and similar kit are charged at 1.85% and all other goods 2.5%. The rate averages close to 1% across all commodities, says Mr Miller.
Members must pay by monthly direct debit. Loan facilities are also available through the group, often on better terms than bank overdrafts. Those joining since the beginning of this year are asked for a 100% commitment on nominated commodities.
With a turnover of almost £27m, Loddon maintains a large enough reserve to give suppliers the confidence they will be paid.
Stephen Wright farms 500ha (1235 acres) of arable and 400 ewes from M D Wright and Partners Morley House, Moulton St Mary. He puts "99% of everything" through the group but has found the most significant savings on fertiliser and fuel.
"I am also able to be in constant touch through Loddon – at the moment its so volatile that unless you have someone like Loddon which is non profit making and working solely for the benefit of members, you could be way out."
Mr Wright saved around £7000 on his mainly liquid fertiliser bill when he joined the group about eight years ago. "I pride myself on buying quite well, and I thought I was in touch," he says.
• Membership: 320.
• Fertiliser sales: 35,000-40,000t/yr.
• Cost: £200 annual fee + 0.85% commission on fertiliser purchases.
• Payment terms: monthly direct debit.