In the final visit to HBH Farming in Oxfordshire, Paul Spackman discovers why the partners of the joint venture are upbeat about the future

It’s almost eight years since neighbouring farmers Guy Hildred and Edward Bishop formed the contract farming joint venture, HBH Farming.

In that time, the pair, along with business partner Vaughan Williams, have slashed overhead costs and set both parent farm businesses in good stead to weather future volatility in both input and output prices.

They estimate that total costs across the 6500 acres have been reduced by at least 30% since setting up the joint venture, with machinery and labour across HBH now coming in at around £90/acre, excluding management input.

At Mr Hildred’s 1900-acre home farm at Ipsden near Wallingford, the total depreciation bill, including cars and the grainstore, is now just £10/acre, down from nearer the industry average of £45-53/acre before the joint venture was formed.

“There’s no point kitting yourself up to do every single job on the farm. We are quite happy to hire outside help as and when we need to,” Mr Hildred says.

HBH’s main kit now centres around three 240hp Massey Ferguson tractors, one 300hp Fendt 930, a self-propelled Househam sprayer and two Claas Lexion 600 tracked combines. “Across 6500 acres that’s still only about a quarter of a horsepower per acre, which is nothing really,” says Mr Bishop. “We also have bits and pieces of contracting work each year, which probably adds another 400-500 acres on top of that area.”

Four full-time staff are employed across HBH and others are drafted in at peak times such as harvest. “The guys are all experienced and know both farms well now, so all we really need to do is steer them in the right direction and the job basically runs itself,” Mr Bishop says. “It frees up a lot more of my time and is good for them to know that we trust them to get on with it.

“It also means that one-off problems can be solved quite quickly by putting a team of guys onto them.”

Indeed, a key benefit of the joint venture for both partners is the time that has been freed-up for managing the business and improving the work-life balance for everyone involved. “It frustrates me when I go around the country and see farmers who work all hours and won’t get together and share workloads. It’s not wrong doing that, but there’s no reason why others can’t do what we’ve done,” Mr Bishop says.

Marketing time

Freeing up management time allows more effort to be spent on improving the business and maximising profits, such as through grain marketing. This is especially so for Mr Hildred, who takes a more active marketing role than Mr Bishop, who relies more on his Openfield agent, Robin Thomas.

“You can tweak input costs all you like, but the most important thing we do that affects profitability is selling our grain at the right time and right price,” Mr Hildred says. In today’s volatile market, that has added significance.

Both partners have sold most of their 2010 crops and wheat prices are expected to average £150/t across both farms, except for the tonnage sold through a grain marketing pool, which will average nearer £120-125/t. The worst price Mr Hildred received was £100/t from grain sold forward earlier in the season, but he doesn’t regret selling it then, “as it was still the right thing to do at the time”.

“Overall, I’m pretty optimistic 2010 profits will be up on last year, but probably not by as much as we’d have hoped,” he adds. “Although prices were up 50%, yields were down 20% and input costs were higher. I expect we’ll be just above average, but not as good as 2008 when we had good prices and good yields.”

Looking forward to next harvest, both partners are optimistic commodity prices should stay relatively firm. Mr Bishop has sold around 20% of his 2011 crop forward already, while Mr Hildred, who grows a large proportion on seed contracts, has committed less than 10% so far. “I reckon I could sell another 10-15% forward, which will mean 20-25% will be committed before next harvest. That’s probably a bit more than normal, but I want to take advantage, just in case the [grain price rally] does come to an end.”

The future

While prices may be up and the cost base across HBH is relatively low, neither partner is complacent about the future and both are keen to keep costs to a minimum.

Nearly all of the inputs across HBH are bought through the Orion Farming Group, of which Mr Hildred is a director. In addition, alternative fertilisers are used where possible to reduce costs.

Nitrogen fertiliser has been bought early and Mr Hildred has again opted for urea as a cheaper alternative to ammonium nitrate. In addition, about a third of his farm has received green waste compost this season – something Mr Bishop has also tried on a small area for the first time. This complements the Fibrofos concentrated PK fertiliser and farmyard manure also used as a source of phosphate, potash and nitrogen.

“All my oilseed rape had 8t/acre of compost before drilling and hasn’t needed any autumn nitrogen or P and K as a result,” says Mr Hildred. “It costs £30-35/t delivered and spread, which isn’t cheap, but we’re also improving the organic matter on the light land, so hopefully it’ll pay off in the long run.”

Both partners acknowledge that there is scope within the existing staff and machinery to increase the farmed area, but are not actively hunting more land yet. “We hope to quietly grow the business and could probably take on up to another 1000 acres without too much trouble, but we’re not looking to go out and quote ridiculous money to get the business,” Mr Bishop says.

A longer term challenge for HBH that they have started thinking about is that of succession planning. “Like us, most of the guys on the farm are 45-50, so there will come a point before too long where we’ll need to make some changes,” says Mr Bishop. “That may mean us upgrading kit if staff aren’t working as long, or we may have to pay someone else to manage the business while we take a back seat.

“We’ve both got sons and daughters, but they’re all under 20 years-old at the moment and we certainly don’t expect them to automatically take on the business – it would be great if they did, but the decision is theirs to make, not ours.”

Both are keen to see more young people get into the industry and hope that by demonstrating a proper work-life balance can be achieved through co-operation, people won’t be put off. Their advice to other farmers considering a joint-venture partnership is shown in the panel below.

“I believe not doing something like this means you’re missing a wonderful series of opportunities to enhance your life and make farming fun again,” Mr Hildred says.

Joint venture advice

• Get the right mix of skills and characters at the outset – beware of personalities that will clash

• Give it 100%. Don’t go into any joint venture half-heartedly

• Be prepared to pool resources and sell machinery or equipment that’s not needed and be open to other people’s ideas

• Be generous to one another – don’t get hung up on small details, such as what time cattle will be fed, or whose field will be harvested first

• Take existing staff with you – the variation of a new business can enthuse staff and bring in new ideas

• Find an advocate within the staff members to allay fears of what the changes could mean for others and report back general feelings or concerns among the staff

• Don’t get hung up on cutting costs – savings will come eventually

• Grow steadily – take your time and don’t rush out to buy the latest big kit just because you’re farming a larger combined area

• Take time to review how the joint venture is working and act on changes that are needed

• Be prepared for the business to evolve over time – work out how it can be made as flexible as possible

More information on HBH Farming Ltd

More information on other Management Matters farms