Nine of out 10 Scottish producers did not know their costs of producing a tonne of wheat, before using the HGCA’s benchmarking system Cropbench.
More than 1,700 farmers in Scotland and England, including 30 arable groups, are now using the HGCA’s online tool.
They input their own variable costs, labour, machinery, rent and other figures, to help pinpoint those areas of their business that can be improved.
In Scotland the Cropbench model has been taken to a deeper level – HGCA arable monitor farms, which are supported by the Scottish government.
Ex-arable monitor farmer, Hugh Broad from the East Lothians, said that he had found the discipline of identifying costs meant he could manage them.
“The group of farmers involved in these monitor farm projects are far more important than the host themselves,” he said.
For his business, the biggest impact of helping to manage costs was not in the variables and technical details, but in reappraising his marketing and managing fixed costs.
“The impact of fixed costs on profitability is far more dramatic than variable costs” he said. Yet many producers spend more time agonising over how many litres and which product to apply to control a disease or weed.
Mr Broad’s monitor group reviewed machinery ownership and rental figures. He was surprised to find that hiring machinery was actually very cost effective when the figures are scrutinised.
He didn’t take this option for his own business, due to lack of operational flexibility, but has instead instigated a strategy of buying second-hand premium brands and investing on maintenance. And the net impact on production costs has been significant.
Another major impact to his business has been focussing on a marketing strategy to reduce the risk of price volatility. He currently sells about 25% of his crop forward: “There are 3 years to market a crop even if you have only 1 year storage. Yet the price can, and has, fluctuated from £180 to £80/t in that period,” he said.
For more on this topic
See our Cereals 2012 event page