Triple merger improves yields & profit margins
In the latest of our articles
examining the changing
structure of arable farm
businesses Amanda Dunn
revisits Therfield Combined
Farming Company, a year
after we reported progress
as three farms merged
A RESOUNDING success for all three parties is how Edward Darling, co-ordinator of the Therfield Combined Farming Company, summarises results of the merger of three neighbouring farm businesses.
Improved timeliness, greater flexibility and added security have all helped boost yield, profit margin and job satisfaction for the three farms based around Greys, near Royston, Herts.
An alternative income has been generated by investing released capital elsewhere and above all independent farm identities have been retained, Mr Darling says.
"Every aspect of the merger has not only worked, but has been enhanced. It started working right from the outset. As combines were still rolling, ground was already being prepared for the next season, and crops drilled. Previously we would have had to choose between operations, we could not have done more than one at a time."
This led on to greater timeliness, which meant reduced seed rates could be trialled and, with all crops comfortably in by October, establishment has been excellent.
Field work has also improved. Previously we used an outside contractor for spraying at Greys, so timeliness here has improved beyond all recognition."
Greater security has been added by a second member of the team becoming qualified to act as relief operator.
During harvest combining ran smoothly with storage restrictions on some farms being the main determinant of where the combine should cut next.
"The standard question we get is who decides where the combine goes. We have a range of crops and varieties and managed to maintain a reasonable balance through the harvest programme until we reached the wheat. At that point selling and movement of grain on two farms made it sensible to concentrate on the third. But even in a difficult year we were still able to complete harvesting by the third week in August."
Cost savings have also been made on some inputs. The combined farming company buys liquid fertiliser in bulk and each individual farm is charged at the year end, while savings were also seen in joint purchase of some seed.
However, retaining individual agronomists has made it impossible to benefit from joint sourcing of chemicals.
Like many farms in the area harvest 1999 yields were up dramatically. But Mr Darling believes this is more than a seasonal variation. "On 500 acres at Greys we averaged 3t/acre across the whole lot, barley, oats and winter wheat, and for the first time ever we not only achieved a 4t/acre wheat crop, but averaged it. Although there have been record performances from occasional fields in the area this year, to improve so dramatically right across the board in terms of physical output is very exciting."
On the overheads side labour and machinery have remained as budgeted, seeing reductions of between 35-55% for the two participating farms whose accounts are handled by Peter Homent, of Hardcastle Burton.
But loan repayment to each business for capital invested in machinery was slightly lower than budget because of a drill and tractor upgrade, says Mr Darling.
"By the end of year two we should be back on schedule for loan repayment and will continue as planned, reinvesting depreciation back into equipment each year."
Mr Homent says capital invested has reduced by half for two of the farms.
"Here at Greys we are now able to utilise freed capital to convert some of the barns into industrial units and benefit from an alternative source of income," says Mr Darling.
"Therfield Combined Farming Company intends to spend the next 12 months consolidating its position. But considerable interest already shown by other farms across the country means we could see the establishment of more Parish companies during the year, bringing with it further benefits to all participants." *
Edward Darlings 229ha (565 acres)
Single Greys Part of 525ha Therfield
unit in 1998 Combined Farming Co 1999
£/ha (£/acre) £/ha (£/acre)
Output 647 (262) 779 (315)
Var costs 170 (69) 166 (67)
Overheads 250 (101) 195 (79)
Misc 72 (29) 72 (29)
Net profit 155 (63) 346 (140)
Total net profit 30,300 67,816
Capital in machinery 100,000 50,000
Cost of capital 8000 4000
Return after interest 22,380 63,816