Machinery ring and low investment mean big savings
In the run up to the European Dairy Farming Event, FW is running a four-part series on coping with lower milk prices.
This will be the focus of a display and competition in the Spotlight on Profit exhibit at the event on Sept 17 and 18, sponsored by the Royal Association of British Dairy Farmers, Midland Bank, Dairy Research and Consultancy, the Milk Development Council and FW.
This week Jessica Buss finds out how to balance machinery and labour costs most profitably.
MACHINERY costs are kept well under control by one Berks milk and cereal producer despite a doubling up of machinery necessary to run two separate dairy units.
Machinery running costs for Duncan Hodges Brocas Lands, Mortimer, Reading, are average compared with other similar units costed by Reading University. It achieves a gross margin of £520 for each £100 spent on machinery, but spending on replacement machinery is only £95/ha (£38/acre) a year compared with the costings £182/ha (£74/acre) average.
Mr Hodges biggest saving is through membership of a machinery ring. This enables him to contract in any equipment used only occasionally, minimising his own investment, or to contract out his own machinery to better justify ownership.
"We used to have a hedge cutter, but now contract one. And our muck spreader is justified because it can be contracted out," says Mr Hodge. There is also access to work for the farms combine that is currently used on its 142ha (350 acres) of cereals and to contract harvest 40ha (100 acres). And the farms own cultivation equipment is basic, with any additional machinery contracted in when it is needed.
DRC consultant Hugh Crooks says that although dairy units with small cereal acreages often keep a full range of equipment, Mr Hodges cereals perform well with minimal machinery which is also used for contracting work.
"Equipment is usually sent with an operator which helps ensure it is looked after. But there is no stress of running a contracting business, and the machinery ring rules guarantee quick payment," says Mr Hodge.
The machinery ring also provides contractors for maize silage and grass silage harvesting.
But where the machinery ring cannot help is overcoming the difficulties caused by running two dairy units of 100 and 130 cows that are 8km (5 miles) apart. Both need mixer wagons, with a tractor and a means of loading feed, and a scrapper tractor. Both units are also on tenanted farms so there is no option to amalgamate them and they are too far apart to share everyday machinery, he says.
But he minimises investment using older basic tractors to run mixer wagons and keeping only one teleporter loader, which must load grain and move straw as well as feeding one herd; the other unit makes do with a loader tractor.
However, labour costs have been high. The farms latest Reading costings show a gross margin of £307 for each £100 labour, compared with an average of £394 GM/£100 labour for similar, mainly dairy, farms. However, labour was reduced by employing one less student last winter.
The workforce now includes Mr Hodge, his son, a tractor driver, two herdsmen, a student and a relief milker one day a week. In the past two students were employed, but one was replaced with a temporary worker for just the winter months last year.
Mr Hodges wife, Kay, runs the farm office. She says that there is always half a man too few or too many. But they prefer to have extra labour because that half man supports their lifestyle. If profits fell labour would be reduced.
That extra labour ensures the farm is kept tidy and fencing is attended to, but it can also lead to owners finding jobs for staff that dont need doing, says Mr Crooks. He believes that reducing the labour force and using contractors instead may make little difference to the state or performance of the farm.
He suspects too much labour is devoted to arable work, with more than one full-time salary currently justified on just 142ha (350 acres) of cereals. But the stocking rate is being tightened to increase cereal acreage, and there are opportunities to contract out labour.
"Ensure labour is used full time and that a contractor is not doing a job that farm staff could by hiring machinery. And when there is no work on the farm ensure staff are contracted out as much as possible," says Mr Crooks.
Membership of a machinery ring gives Duncan and Kay Hodge more flexibility with their labour force, Duncan explains to Hugh Crooks (left). Machinery investment is kept low by using older tractors when possible (inset).
LABOUR & MACHINERY
• Machinery ring membership.
• Increase reliance on contractors.
• Ensure full time labour use.