22 March 1996

Sentry cuts costs to record low

ARABLE farms managed by Sentry Farming have achieved their lowest ever cost for producing a tonne of wheat.

A small rise in the price of seed, sprays and fertilisers to £97/acre this season was easily offset by a significant increase in yields from 2.91t/acre to 3.24t/acre, explains managing director Andrew Mason.

As a result, variable costs on the 34 farms included in the Sentry costings fell from £32/t to £30/t.

Combined with a 9% drop in overheads (including finance, depreciation, labour and repairs), total costs fell from £62/t in 1994/95 to £57/t. "This is far removed from the £80/t that was more typical in the 1980s," says Mr Mason.

Given the higher price of grain this season and the increased level of area aid, this led to an average net margin of £277/acre, some 44% better than last season. And even if area aid was removed, the Sentry farms would have still managed a healthy profit for farmer and landowner from cereals.

In addition to the yield gains, Mr Mason points to the companys grain sales policy. By the time the first combine entered a field of wheat last harvest, over 40% of the crop had been sold forward. Another 50% went in the autumn, much of it during the peak month of November. The remaining 10% had gone by the end of February.

But Mr Mason is quick to warn that the record results from 1995s harvest are a one-off and will not be repeated in the next few years.

For the coming season, his companys farms are budgeting on a 10% increase in fertiliser costs (even though most of Sentrys requirements were booked last summer) and a similar rise for sprays. Drying charges are also likely to be higher.

Similar rises are expected in 1997 – not helped by the introduction of royalties on farm-saved seed this autumn – leading to a 15 to 20% squeeze on margins in the next two years.

To try and counteract this, some 20% of the companys 1996 wheat harvest had already been sold by mid-January – all of it at over £110/t – and 25% of the oilseed rape crop had also been traded. For the first time, Sentry farm managers have also made some forward sales of pulses.

In preparation for a tougher marketplace, the group is also launching a new quality assurance scheme for the coming season. This will establish a fixed code of practice for its managers, covering such areas as spray and fertiliser use, record keeping, storage arrangements, sampling procedures and traceability.

"When world prices return to more normal levels and GATT starts to take effect, we are going to have to fight harder to maintain our place in the market," says Mr Mason. "This initiative is one step in that direction." &#42