Farmers can cut costs further

MANY FARMERS have cut their costs sharply in recent years, but some can still improve efficiencies, according to accountant Tenon.

Clients on mixed farms, but with arable predominating, slashed their overheads between 2001 and 2003, with an average fall of £37/ha (£15/acre) to just over £640/ha (£260/acre).

Over the same period, the farms cut labour costs by more than 10%, ending up below £200/ha (£80/acre).

“But there are some people who have not yet done anything,” said director Ian Sharpe.

“Unfortunately, with incomes under pressure a lot of farmers are living off depreciation, which is not sustainable.”

He urged farmers to calculate their minimum costs and evaluate whether their outlay was entirely justified.

Overheads could represent over half the total farm costs, said Mr Sharpe, and could be reduced by spreading them over a larger area.

Collaboration with other farmers was another valuable cost-cutting tool, whether through buying groups, sharing machinery or contracting.

Often joint ventures allowed capital to be released from the farm, but farmers should beware potential tax pitfalls when considering any structural change to their business, he warned.

 “Concentrate on minimising your peak workloads rather than maximising your gross margin.”

Off-farm income was becoming increasingly important in agriculture, but diversified ventures should also be properly thought out.

“It’s amazing how many people have diversified blind, without considering the costs or tax implications. If you are thinking about diversifying, look at what it’s going to cost you.”