Opinion: Know your end game and work back from there
What is the definition of a “big” farm?
The average dairy herd in England has 145 cows, so with more than double that number, are we big?
This actually isn’t very meaningful, as large and small farms can be successful in different circumstances. Perhaps a more useful question is: “How big do we need to be?”
People farm for a variety of different reasons – passion, family tradition, lifestyle, but fundamentally farms are businesses which need to make profit, although this is easier said than done, and does depend to some extent on scale.
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The Andersons Centre has collated data which suggests to make a living you need 1,200 sheep at £25 profit a head, 670,000 litres of milk at 4.5p profit/litre, 700 acres of combinable crops at £43/acre profit or 300 beef cows at £100 profit a head.
Liz Haines and her husband Nick milk 320 spring-calving cows in a contract-farming arrangement in north Shropshire.Assuming no subsidy and £120/acre rent, making a total profit of about £30,000.
Easy or impossible?
First, how achievable are these figures in today’s marketplace? For some businesses, easily, and for others, impossible.
Second, and more importantly, is £30,000 enough?
Can this level of income give you the lifestyle you want today, allow for reinvestment in the business and a secure future when you choose to retire? It all comes back to why we are farming in the first place.
The average UK salary in 2015 was £27,000.
To realise this you need some degree of qualification or skill, and to commit at least 39.5 hours a week.
But you would be guaranteed at least 20 days holiday a year, and you may also receive other benefits such as a pension.
Tied up capital
As farmers, most of us work far more than 40 hours a week, many of us don’t take 20 days holiday, we have significant amounts of capital tied up in our businesses, and possibly debt on top, yet unfortunately for all our efforts not all of us are even making a profit, let alone £27,000/year.
All my money is tied up in my farming business but largely due to the milk price, I am not necessarily earning any more than I could if I was employed elsewhere with none of the risks of business ownership.
Perhaps the question is: ‘How big do we need to be?’ Liz Haines
So you could say all I have done is bought myself a job.
Hopefully this is temporary – milk prices are rising, and the business is still developing.
But in the long term, I want to do more than just earn an average living from the farm.
Comfortable living
One day, my husband and I would like to take more than 20 days off each year, to be able to choose whether it’s us who gets up each day to milk the cows, to retire from the daily physical work before we are 65 and feel confident our business will still provide a comfortable living without us being there every day.
Our herd, which is already more than double the average size, is still not big enough to achieve our goals.
We chose to run an extensive grazing system is because it is simple and replicable.
Our solution is to take on another farm alongside our current contract farming venture, enabling us to employ more staff and step back from the daily routine.
On the grow
My husband worked for a couple in New Zealand who went from owning two modest residential properties to owning 3,000 cows over five farms (with significant borrowings).
Both are under 50, and they show no signs of stopping yet.
How big will be big enough for them?
They are already easily able to do all the things I listed above. Again it comes back to personal goals.
The most important thing is knowing what you want to achieve, and how big your business needs to be to get there.