Buying groups can be cost-savers in right circumstance
Buying groups can be cost-savers in right circumstance
By Charles Abel
JOINING a buying group to cut input costs is all the rage. But not all buying groups are equal, suggests the manager of an established East Anglian outfit.
Tim Isaac, manager of Strutt & Parkers buying group based at Chelmsford, Essex, says: "With arable margins so tight farmers want lower input prices and it is no secret that the more you buy, the greater your negotiating power. So buying groups can certainly cut costs."
But they can become inefficient, he warns. "The problems come when a group gets too big and the costs of administration and logistics start rising. Membership fees can start to erode savings, which we are starting to see with some groups now."
Early ordering can also limit product choice. "In some cases products must be ordered nine months ahead for the best price. Farmers then find their choice is limited to what is available not what the job needs."
Strutt & Parker claims to avoid such limitations. Best prices for seed, fertiliser and pesticides are negotiated with a range of suppliers and listed for clients, who then order direct to cut administration and ease logistics.
With negligible administrative costs, Mr Isaac is confident he can offer the lowest prices in the country. "For ammonium nitrate we were £4/t cheaper than our strongest buying group competitor locally this year and for Landmark and Amistar we were below our strongest local competitor and a well known national buying group."
Savings of 10% on total input costs are common, he says. A 275ha (680 acre) East Anglian combinable crops farm buying through the group, for example, had total variable costs of £47,500 in 1999. At £173/ha (£70/acre) that was £20/ha (£8/acre) less than a comparable farm buying unserviced inputs alone. "That is obviously worth having, especially in the present climate."
Trust deals are struck for bread-and-butter pesticides like chlormequat, isoproturon, Amistar (azoxystrobin) and Landmark (kresoxim-methyl + epoxiconazole), based on previous year sales. For other inputs best prices are updated weekly or even twice weekly at the peak of the season.
The service is included in the fee for clients taking a full management or full/strategic agronomy service. Others pay £1.23/ha (50p/acre). "But it is not a profit centre," says Mr Isaac.
In five years the group has grown to account for inputs on 12,950ha (32,000 acres). Further growth is likely, says Chelmsford-based farming partner Will Gemmill. "At present we are operating in East Anglia, Kent and Sussex, which suits our distributor contacts. But it is inevitable that we will deal with other areas in future."
AFTER five years of evaluating precision farming techniques on the Felix Thornley Cobbold Agricultural Trust farm at Otley, Suffolk management company Strutt & Parker feels the technology has little to offer farms on good, relatively uniform land.
"It is not the panacea we thought it would be," says Strutt & Parkers Chelmsford-based Matthew Ward. "We havent found anything that is really going to make a difference.
"Initially we were very optimistic. We thought we would be able to increase yield, reduce variable and fixed costs and achieve more accurate input use to meet ICM and environmental goals.
"But weve tried it all, from MFs Yieldstar to Galaxy Precision Imaging, SOYL nutrient maps, Hydros N Sensor and the MagnaScan, and essentially all we seem to be doing is creating soil structure maps.
"With a set of crayons and the willingness to walk you could produce the same maps for a lot less using traditional techniques," he says.
Variable seed rates delivered little benefit, wheats ability to compensate evening yields. Variable nitrogen was also tried, but N Sensor only adjusts second and third splits and never varied by more than 40kgN/ha, says Mr Ward. "After winter we dont really have problems on these good wheat soils."
Now the drive is on to better understand soil physical properties. "It is more than a soil map we are looking for. That is a sweeping generalisation of what is happening in the field. It is what is happening in the intermediate layer between the top soil and the sub-soil that counts. Is that layer 1cm or 50cm thick? Is it the same soil type as the top soil? Is there a layer of impermeable clay after 20cm or just 5cm? That would make the volume of soil available for growth much smaller."
Digging soil pits is the key to improving understanding. Holes dug in one apparently uniform chalky boulder clay field revealed big differences in the intermediate soil layer. "It ties in very well with yield maps," says Mr Ward.
"The question is what to do about it and the answer is not a lot. We can hardly change the soil. But at least we know how the yield potential varies across a field and how the weather will affect it."
In future direct injection sprayers may make variable rate pesticides viable. But for now cost is prohibitive, says Mr Ward.
In the meantime, the MagnaScan is being evaluated to see whether it can map soil characters more easily, accurately and completely than digging soil pits.
"We all got a bit carried away in 1995 with wheat at £120/t and rape at £180/t. With hindsight we would not have pursued it as we have," concludes Mr Ward.
Big savings on input costs for combinable crops have been achieved at Warish Hall Farm, Bishops Stortford, says manager Mike Pilgrim.