Some bold moves are going to be needed on many arable farms in 2016, says farm business consultant Andersons.
These could include changes to the way labour and machinery capacity are organised to ensure a structure and approach which can withstand the shocks that the market and the weather might deliver.
Cropping policy too needs to come under scrutiny to reduce risk and deal with some of today’s big agronomic challenges.
Andersons cites the example of a review carried out recently on a 445ha farm on medium to strong land.
Establishing such an area of autumn crops to a high standard demanded that the business complete the task in what was often a very narrow time window.
“Depending on the season, this can be a big challenge,” says Mr Graff-Baker. “The only way this business could hope to achieve this was to deploy a high horsepower system that came at a very high cost in labour and power.”
- Budget for a further year of low prices
- Consider break crops’ contribution to profit across rotation
- Secure contracts that maximise potential returns before planting break crops
- Consider not cropping unproductive areas
- Assess rented land’s contribution to profit
Much-reduced output prices contributed to a fundamental reassessment in 2015.
The farmer was also looking ahead to the increasing, and potentially very serious, challenges of grassweed control, particularly blackgrass, “Although the business is spared the worst effects of this problem, the owner wished to be pre-emptive.”
Key changes were:
- Approximately 30% of the arable area switched to spring cropping
- All primary cultivations contracted out to a local team
- One fewer full-time member of staff
- One fewer casual team member for the harvest/autumn period
- Four front-line, high-value machines were sold.
All major change usually requires some kind of catalyst. In the case of this business, it was that the full-time employee wished to retire and had given in his notice.
The benefits foreseen from this change are:
- Labour costs saved
- Capital released from machinery sales
- Reduced machinery depreciation
- Significant reduction in machinery repairs and fuel (clearly offset to a degree by new contract charges)
- Risk reduced by shrinking the autumn establishment requiremen
- Reduction in fixed costs allows the business to be more agile and responsive in its cropping (and not cropping) decisions.
Timeliness of operations remains the key and of course it is recognised that contract relationships need careful management,” says Mr Graff-Baker. “Time will tell, but the early signs are good.”
This was a bold policy change, which required the business to challenge an established set of assumptions, he adds.
“In the face of lacklustre market prospects, other arable farms may need to fundamentally review their operations.
“Some thorough discussions will be required, with creative, imaginative and innovative thinking to find ways of reducing costs of production.”