Benchmarks on the way for big joint ventures

An ambitious project to define average costs of big joint venture operations is nearing completion, with the first results due early next year.

The Joint Venture Farming Group, comprising 10 big joint venture farming companies covering about 16,000ha (40,000 acres), embarked on this project three years ago, aiming to rate their costs of production against each other.

“We wanted to create a forum among the group’s members, to identify problems and successes members had come up against and look at how the firms could learn from each other,” says group consultant Jamie Gwatkin.

To handle the breadth and depth of data the project would need to collect, the JVFG commissioned a tailor-made computer program. Mr Gwatkin set about drawing up the specification with software engineer Richard Green.

“We wanted to report in detail on the groups’ physical as well as financial performance; to compare work-rates and identify what machinery combinations best suit a particular operation,” says Mr Green.

“The data are drawn from a number of sources. Using workers’ timesheets, we can plot what an individual was doing with what machinery on what crop and which farm.

“And on that basis we can track all maintenance costs against individual machines, knowing their working conditions by field, crop and soil type,” he says.

This means the group can compare different enterprises’ management policies, such as owning or hiring a combine.

The program also allows the group to track machinery depreciation, based on purchase prices, projected sale prices and any gains or losses on sales.

“The program combines data from all the farming groups and ranks them, allowing us to directly compare one with another,” says Mr Green.

This means they can also track costs on individual farms within any of the joint-venture groups. “For example, we can look at costs on outlying farms and measure it against income. Is farming that outlying land making the group any money?” asks Mr Gwatkin.

Another crucial difference between this project and a traditional farm budget approach is that there are no additional, spin-off benefits to measure, such as use of a farmhouse as accommodation. Those involved charge their time to their businesses directly as self-employed people.

“For the first time, there are no non-commercial activities in there,” says Mr Gwatkin. “We can compare operating costs with total transparency.”

The first milestone for the JVFG will be to complete the mammoth task of entering all data for the 2005 harvest year from all members of the group.

“Then we can circulate a report showing how members have performed against each other on specific tasks in that window, such as autumn drilling,” says Mr Gwatkin.

So far, only a few of the companies in the group have their data completely recorded in the program. But table 1 shows some early results.

Edward Hitchcock of Pelham Farming, in Herts, one of the group’s members, says: “Measuring costs in this way moves the job from an accounts-based, annual approach to looking at our costs in real time.

“It identifies efficiencies, often only worth a few pence per acre, but they add up into a pretty substantial sum and, ultimately, the ability of that business to survive.”

But the project has other, wider implications, too. “In the light of the growing issue of climate change, the programme allows us to run a report measuring diesel usage by machine, cultivation and technique, and DEFRA has asked us to provide this information,” says Mr Gwatkin.

The Joint Venture Farming Group’s benchmarking project is to continue into 2009, and other joint venture farming operations are needed to help make the final data as comprehensive as possible.

For more information contact Jamie Gwatkin on 01284 701 045.

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