DAVID RICHARDSON
DAVID RICHARDSON
Spreading your
interests or
simplifying?…the
latter was always
the best path to
decent profits
Advancing age has compensations. Not many, its true. But experience is one – provided your memory doesnt fade. In any event Ive been remembering events that took place 45-or-so years ago and comparing them to current trends.
At that time, before my late father took me into the farm partnership, he had problems maintaining viable farming profits. That may sound unlikely given that it was so soon after the 1947 Agriculture Act and its well documented guaranteed prices. But I assure you we had hard times then as well.
My father had struggled through the 1930s on a few scattered fields. He had been able to do rather better during and after the Second World War. But by the mid-1950s he was still farming only 170 rented acres and to be frank, he was trying to do far too much on them.
We had a herd of 50 Friesian dairy cows; the heifers were reared as replacements and the bull calves taken on to beef. There were a couple of hundred breeding sows with all the progeny going for bacon. There was a flock of free-range hens producing eggs for a local hatchery, plus a couple of sheds full of deep litter hens producing commercial eggs. He grew wheat, barley, oats, potatoes, sugar beet with mangels and kale for the cattle. And as well as himself – he was a working farmer – my father employed eight men.
All that sounds crazy now, of course, when 170 acres barely qualifies as a part-time smallholding. But back then it was considered a fair size. The one thing my father didnt do was enterprise costing. The phrase had hardly been invented. And it was at the very start of the concept of gross margins on farms like ours.
It goes without saying that my father had little idea which enterprises were paying and which were not. He was, in any case, working far too hard physically to have the time or the energy to calculate such things. He thought if he worked hard and produced as much as possible, he would come out on the right side. Please dont think I am ridiculing my dear father. I am not. Almost every farmer operated like that in the 1950s.
But when I finished my education and began to get more involved with the farm it soon became obvious to me that something was going wrong. The farm was making a profit, but a small one, and it was clear that while some of the myriad enterprises father ran might be doing well, others were losing money. The problem was to identify which was which.
With my fathers permission I called in the local NAAS (later ADAS) man. Together, using the new methods of gross margin analysis, we got to grips with sorting it out. And within a few months we were able to present evidence to my father that the pigs and cows were making money but the hens and the bullocks were not; that the wheat, barley and sugar beet were doing OK but the potatoes and oats were a dead loss. We also calculated that a simplified system would enable the farm to be worked by half the labour.
Sadly, at first, my father bowed to the inevitable. He cut out the loss makers and sacked four men. Later he simplified still further by getting out of milk. Suddenly, as it seems now, the farm began to make real money and my father was able to do more management and less of the hard manual work.
It was difficult for him at first, but he came to realise that doing a few things well was more profitable than doing many things not so well. By simplifying, concentrating and specialising he was able to expand.
All of which probably reads like chapter one of some How to Farm book. But I promise you I lived through it and remember vividly the difference it made to our family business. Many others of my vintage will have had similar experiences.
The reason for recounting this story now is that contemporary advisers, finding simple specialised farms producing a limited range of crops or stock, are saying that is not good enough. You must not rely on such a small production base, they tell us. It is essential to diversify, often out of farming altogether, into enterprises for which most farmers have no training.
Indeed, we have done exactly that ourselves to a limited extent, sometimes successfully and sometimes not. These days we have the advantage of well developed costing systems that we can use to help develop business plans. We can continuously monitor cash-flow and profit on our computers. We can exercise more control than was dreamed possible in the dim and distant past.
But having seen the difference simplification can make, I remain nervous of deliberately getting complicated again. For the danger of not knowing whats what financially is not the only pitfall. There is also the real possibility of spreading your management ability too thinly. So, I do not reject diversification. But I do say proceed with caution. You could end up worse off than you were before you started.