In our fifth visit to Adam Henson’s Gloucestershire farm, Ian Ashbridge looks at how the arable enterprise has had to change dramatically in recent years in a bid to achieve sustainability.
Adam Henson and Duncan Andrews have been friends for decades and business partners since 1997. And as Adam’s TV work has flourished, Duncan’s business management skills have helped steer the arable business into a major joint-venture farming operation.
“When I came into the business in 1997, all the machinery was owned or financed on hire-purchase agreement – and there was a significant amount on HP,” says Duncan. “This was also a time when we had seen wheat prices go from £120/t to just £80/t.”
At this time, the arable business employed one full-time tractor driver on about 1,300 acres – the cropped land at Bemborough Farm and the nearby, much smaller, Tinker’s Barn. “This was before our Environmentally Sensitive Area agreement began to take marginal land out of production and into arable reversion.”
Like many arable farms of a certain size, Duncan found that the Henson and Andrews business was limited by the range of kit. Its soils, size, topography and climate meant it needed to own. “Our power and machinery costs were about £250/ha at this stage.”
Everything was ploughed and most of the kit was fairly traditional, although the farm did have a 6m KRM air seeder. A 2000l sprayer, three relatively small tractors of 110-120hp, and a John Deere combine completed the fleet. “That was when commodity prices collapsed,” says Duncan.
“So I sat down and crunched the numbers. We had an opportunity, with the stewardship scheme, to take less productive areas out of our cropping. While prices remained around £115/t, and bearing in mind this was, at best, 3t/acre-ground, we were better off making that choice.”
Over the next three years Adam and Duncan put about 120ha (300 acres) of the worst-performing land into arable reversion, dramatically reducing their costs on this ground as well as activating the £290/ha ESA payment.
“Over the past 10 years, there have probably been only two or three occasions when we could have beaten that on that land – 2008 being an obvious one. So as a risk management exercise it was the right decision – it’s kept our business sustainable over that time.”
Tackling fixed costs
But while this decision avoided the risk of losing money on marginal ground, it significantly reduced the overall arable acreage – effectively raising fixed costs on the remaining hectares. “Therefore we had no choice but to reduce overheads.”
This downsizing, in an effort to return to profitability, also meant the business could no longer support a full-time tractor driver. Duncan and Adam sold almost all their existing machinery except the John Deere 6600 tractor, the sprayer and a fertiliser spreader.
“The reason for retaining these machines was because we wanted to retain control over the timeliness of those operations, and it would also give us the opportunity to take on contracting work if we could find it.”
To keep the home fires burning on the reduced acreage, they agreed a “menu” of operations with local contractor Henry Righton. “Also, working with Henry and his kit meant we now had the flexibility to plough and power-harrow one field and direct drill another. It also meant that Henry’s contracting fees became part of our variable costs. Therefore if the gross margin a crop was going to deliver, above contract charges, wasn’t good enough we had a choice. And in one or two cases we did decide not to grow oilseed rape and in fact had a fallow instead.”
Some farmers are perennially wary of relying on contractors who have many other customers to keep satisfied, particularly when a farmer might decide timing was critical for a spray application or to combine a fit crop. But a good working relationship and being able to provide the contractor with a reasonable acreage of work meant Duncan and Adam lost little sleep over the quality of the farming. In fact, cereal yields grew by about 20% over the 10 years under this arrangement. “And previously, we were carrying all those power and machinery overheads whether the machines were sat in the yard or out working,” says Duncan.
By August 2009, the commodities bubble of 2007-08 had faded and most arable farmers faced the prospects of about £110/t at best for the 2009 harvest, grown with expensive inputs purchased a year earlier. It was a chance conversation with local farmer Hamish Campbell about this bleak situation that led Duncan on to the next stage in the arable business’ transformation.
“We were combining a field next to a main road and Hamish stopped for a chat. At the point wheat was worth just £80/t, and we talked about our relative costs and the need to replace machinery. So we decided to look at models of shared ownership.”
Although Hamish Campbell and father Robert do not share a boundary with Bemborough – they are two miles away at the closest point – the soils and ways of farming were similar enough for the idea to progress. Between them, Duncan and Hamish approached accountant Gary Markham at Grant Thornton, who’d advised other farmers on similar, joint-venture projects.
“Hamish is a progressive and entrepreneurial guy and we decided we could work together. And it helped that we were taking on another 600 acres of arable land at Ditchford under a contract-management arrangement, plus 750 acres of contract-farming at nearby Guiting Grange estate,” says Duncan.
The total farmed area between the Campbell and Henson and Andrews businesses, plus the additional acres managed or contract-farmed, provided the critical mass to make a joint-venture viable. But skilled labour was now the missing link. “In June 2009 we took on Martin Parkinson as arable manager and it’s his attention to detail and ability to concentrate solely on the arable enterprise that means we can farm 3000 acres between us,” says Duncan.
With Grant Thornton’s help, Hamish and Duncan began to assemble the Limited Liability Partnership that would effectively be their jointly owned, but third-party, contracting firm.
“First of all, we had to decide what kit we needed. Hamish already had a proportion of this, which the LLP bought. We had three valuations done on our kit. Both businesses then transferred into the LLP what was needed and sold the surplus.”
The LLP was equipped with a Kverneland five-furrow reversible plough with slotted mouldboards. “The plough we ended up with had to be the right one. We’re only ploughing six inches deep a lot of the time and we were having difficulties completely inverting the furrow – which meant we ended up with rows of brome exposed on stale ground.”
But the joint-venture’s primary tillage tool is a Kverneland CTC stubble cultivator. A 6m Horsch Sprinter drill, a 3000l self-propelled sprayer, an Amazone variable-rate fertiliser spreader and a John Deere Greenstar guidance system mean the joint-venture business is up to the job. The LLP owns only one tractor – a 220hp John Deere 7930.
Unusually for such joint-venture contracting partnerships, Adam and Duncan chose to retain their own combine. “We’re growing a lot of milling wheat and malting barley, so cutting the crop at the right time is critical. And 3,000 acres, spread over a large area with an average field size of only 6ha, is a big ask for any one combine. Plus there are the limitations of our grain storage to factor in – a big Lexion producing 40t hour is way too much for us to cope with.”
As well as spreading costs over a wide area, the joint-venture contracting business has two other main advantages to its parent operations. Unlike a commercial contractor, there’s no one taking a profit out of it, so work is carried out at cost. And the joint-venture doesn’t employ anyone – the two partners contract their labour into the JV at agreed rates.
“The question people continually ask us is: Are you block cropping? Well we’re not at this stage – we’re not sharing gross margins and we’re not farming jointly. We’re partners in a business that carries out most operations for us,” says Duncan. For instance, the two businesses retain separate agronomists.
“It is only 12 months in and we’re still trying to strike a balance. The sense of collaboration and working together is something we’ve both gained and we feel is very important. Has it made our business more sustainable? Yes – already we feel we’ve done the right thing.”
Adam Henson is Lloyds TSB’s 2011 Farming Ambassador
Adam Henson farms 1,565 acres near Kineton, Gloucestershire with business partner Duncan Andrews, but is better known for presenting BBC TV’s Countryfile programme.
He is a customer of Lloyds TSB Agriculture and is their 2011 farming ambassador, working with them to promote a better understanding of financial and environmental sustainability in a farm business context.
In this role Adam will attend a number of events including Scotland Beef Event, Beef Expo 2011, Cereals Event, the Royal Highland Show, Royal Welsh Show, the Dairy Event and the South West Dairy Show. He will be pleased to meet farmers and rural professionals on the Lloyds TSB Agriculture or Bank of Scotland stands at these events.