Archive Article: 1997/11/08

8 November 1997

I like someone who will put themselves on the line and take up a challenge. I like it even better when they back their words with actions, especially those that involve money.

The challenge to my agricultural merchant: help me increase my cereal gross margins by increasing yields and/or quality and lowering variable costs – especially for sprays. In return, I will purchase my fertilisers and sprays from you, regardless of price.

The inescapable, painful fact, that led me to make the challenge, was the drastic fall in farm profitability for 1996/7.

The reality of harvest 1997 is unpleasant. For the first time, income from area payments and set-aside has exceeded arable profit.

Cereal prices are down by 25% on the year, winter barley failed to gain a malting premium (selling, under harvest pressure, for £68/t), sugar beet prices are down by 20%, yet both fixed and variable costs are up.

Should I continue blindly, hoping the pound will weaken, prices will rise and everything will be rosy again for next years harvest? Or should I aim to raise profitability for 1998 by improving the gross margins of the weakest area of cropping – cereal production?

I put my cards on the table with a merchant who has previously supplied some of my inputs. I challenged him to improve my cereal gross margins through better yields and quality, linked to more cost effective use of fertilisers and a reduction in costs – at least 20% off the 1996/97 spray bill.

To my surprise, he accepted. Suddenly, my problem became my merchants problem as well. Overnight, the basis on which I deal with him changed. For years, I have kept costs down by keeping up-to-date with prices, arguing for rebates, checking what I am charged, fighting for every last penny.

Its a boring and unsatisfying exercise. I particularly dislike buying sprays when the dealer cannot tell me how much they will cost as the final price has not been fixed.

Now, however, the headache of what each item costs is not an issue. I talk objectives, how clean I want the field, what type of control is required, what the options are, then discuss the best strategy and which active ingredients to use.

Ultimately it is up to my merchant to select the branded product and decide the price I pay. He has to live up to our agreed target spends of £85/ha wheat and £65/ha for winter barley.

They are not easy to achieve, compared with John Nixs guidelines for 1998 of £105/ha for malting barley and £125/ha for wheat, but they represent a 20% cut on my spray variable costs. And they must be achieved, without compromising yield, quality or levels of weed carry over to the following year.

Fertiliser decisions will be based on 10-year yields, soil tests and target yields. My merchant will decide when I actually purchase the fertiliser – and the price I pay. With his superior knowledge of the market, I expect him to get it right, guaranteeing me a good price and himself a good margin.

Its a funny feeling, admitting I might need a merchants help when, as all discerning farmers know, merchants are just out to look after themselves. I am sure it is equally odd for a merchant to be actively involved in finding the best deal around for a customer, rather than selling to the farmer at the highest possible price.

I am glad I found a merchant prepared to take up the challenge. It will be interesting to see, in a years time, if we can both be pleased with the results.

Faint heart doesnt win Norfolk grower Marie Skinners spray and

fertiliser business.

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