Business Clinic: How can I check my arable costs of production?

Whether you have a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help. Here, Stephen Lockwood, food and farming director at Savills, advises benchmarking to identify areas for improvement.

Q: With the likely loss of my basic payment following Brexit, I’m concerned that my arable costs of production are not as good as they could be. What can I do to check this?

A: Despite current high commodity prices, price volatility, the loss of BPS and uncertainty around post-Brexit trade is focusing producers’ attention on the detail of farm performance.     

Understanding the costs of growing a tonne of crop is essential. By benchmarking and monitoring costs of production you can see how your performance compares to other businesses of a similar type and size.  

See also: Business Clinic: Should I switch from sheep to deer?

The two main online benchmarking tools available free to farmers are the Farm Business Survey benchmarking and projection tool and AHDB’s Farmbench. 

Both are worthy of consideration and treat the privacy and anonymity of your data as paramount. 

These enable you to compare financial and physical performance data with the average results from data collected nationally. 

Having identified the elements which need attention, you can then focus on making changes to improve them and overall performance.

This doesn’t always mean a complex or radical change is required, it can be something as simple as altering your approach to buying inputs to make cost savings. Also, consider rates and types of products used, as these also affect costs.    

Don’t look at one year in isolation – comparing a number of years’ performance provides a better overall indication of how your business is doing.  

This will help to build a useful picture of performance, both good and bad.  This will enable you to implement any necessary changes to try to improve efficiencies and performance, for example switching to a hire tractor for the peak harvest period and collaborative sharing of machinery. 

Alternatively, consider dropping unprofitable crops from rotations.      

Whichever tool you try, one vital element is the accuracy of the data submitted. Take time to gather all the relevant facts and figures well in advance from the various sources (eg, accounts, agronomist, grain merchant).  

Finally, consider joining or starting your own local farmer discussion group to share best practice. You are likely to learn more about your own business performance in a peer-to-peer setting.

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