Family farm looks secure
17 March 2000
Family farm looks secure
In our latest article looking
at the restructuring of
arable farm businesses
Amanda Dunn speaks to
Gary Markham of
accountant Grant Thornton
and a family farm that
remains confident of survival
NO borrowings, low overheads and attention to detail are the reasons Robert Lane believes he will be able to survive the current fall in agricultural incomes.
"For some people, big may be beautiful," says Mr Lane, who farms in partnership with his father at Ravenstone, Bucks. "I would rather walk round the yard and know everything I see belongs to me."
Ten years ago Mr Lane and his father, Roger, sold their Chilterns farm and bought 193ha (479 acres) of heavy land at Parkfield Farm, Ravenstone.
"Our chief objective at the time was to move on and farm without borrowings," says Mr Lane.
"The farm was bought outright, renovation work carried out on an overdraft, since repaid, and with no borrowings, it means we can all sleep at night," he says.
That is the opposite to many farms, which used high profits from the early 1990s to invest in expansion and may have high borrowings as a consequence, highlights Gary Markham of Grant Thornton. "By following these instincts Mr Lane has put the business in a strong position for the future."
Farm overheads are kept as low as possible with family members supplying almost all labour.
"We do need to take on a couple of harvest helps, but apart from that we supply all the labour ourselves. We are a typical family farm; when there is work to be done everyone helps, even mother does the odd bit of field rolling," says Mr Lane.
Mr Markham believes family labour is often one of the main reasons smaller farms can remain so profitable. "The Grant Thornton average labour cost for a farm size of less than 500 acres is just £10/acre, which undoubtedly helps keep fixed costs down."
Dependency on key members of the family may arguably make the business vulnerable. "But we do have an insurance policy to cover us in case of sickness or accident, so we could pull in a contractor if we needed to," says Mr Lane.
Machinery is mostly bought second-hand, with much of the servicing and repairs carried out on farm.
"We have opted for some new machinery, such as the Claas 203 bought on lease purchase four years ago. I am not happy buying something second-hand that I rely on so heavily. But by looking after it well, we hope it will last.
"We are a traditional farm and still tend to plough a lot. We hire in a 180+hp ploughing tractor for six weeks in the summer and own two smaller ones, bought secondhand, for corn cart and field work."
Although depreciation on the combine places fixed costs at £395/ha (£160/acre), that is still below Grant Thorntons average of £402/ha (£163/acre) for farms below 200ha (500 acres) and is likely to reduce in line with the depreciation.
Mr Lane believes one of the businesss greatest strengths is the farms ability to yield so well. Higher yields from harvest 1999 saw profits up by 23%.
"When we came from the Chilterns we were used to 3.25t/acre. Our five year average here across first, second and milling wheats is 3.7t/acre," says Mr Lane.
"First wheats will yield 4.25t/acre, milling wheats 3.3t/acre and second wheats are very variable, largely because of take-all, at anything from 3.1-3.8t/acre."
An independent agronomist provides advice across all areas of the farm. "Our agronomist doesnt just look at chemicals, he will walk across a seed-bed and tell us what seed rate to put on. I find his advice invaluable," says Mr Lane.
Good advice is a key attribute to many businesses, agrees Mr Markham. "All of the farms in our top 10% employ agronomists who provide them with advice on what I call the five variable costs: seed, fertiliser, chemicals, machinery or cultivations and labour."
Mr Lane then buys variables through a buying group.
"We know our chemical costs are high, it is not an easy farm to manage with blackgrass, wild oats and slugs. We are also hot on pgrs, we are growing big crops, so we like to keep them standing. I do not think variable costs are something you can skimp on."
With an arable gross margin of £600/ha (£243/acre), considerably higher than the Grant Thornton average, yield more than compensates for additional inputs.
Attention to detail is also an area Mr Lane believes contributes to success of the farm. "We are a small farm, so we know it inside out. I know where to put my slug traps down first, where to harvest part of a field, and where to vary seed rates."
Field maps are retained in the cab for Mr Lane to make notes on as work is carried out. Home modifications to the drill mean seed rates can be varied on the move. All operations are logged on a computer record system.
"I have my own spreadsheet which records costs on a field-by-field basis. After harvest I can enter the yield taken from the yield monitor and a breakeven price a tonne is calculated."
Add to that the amount of money needed for drawings and a minimum selling price is determined.
"To be able to come in from harvesting and know what price you need to sell your grain at is very shrewd management," says Mr Markham. "Although there is an increasing minority of farmers calculating their breakeven price, Mr Lane is almost unique in being able to work this out so soon after harvest."
"With our current costs and management structure, we hope to be able to survive todays prices," confirms Mr Lane. *
PARKFIELD FARM
• 180ha (445 acres) cropped.
• Hanslope series soil.
• 33% continuous wheat, plus w wheat/w OSR, OSR on set-aside.
• Yields: t/ha (t/acre) 1st wheat 10.5 (4.25) 2nd wheat 7.6-9.3 (3.1-3.8) Milling wheats 7.6 (3.1) OSR 3.0-4.3 (1.25-1.75)
• Grain marketed through pools, funds, forward and spot.
• The Future:Home saved seed?Take-all seed dressing?Direct drilling of OSR?Alternative income from investment in property?
KEY STRENGTHS
• Arable GM £600/ha.
• Overheads £395/ha.
• Break-even price spreadsheet.
• Borrowings cleared.
• Independent agronomy.
• Family labour.
• Sickness/accident insurance.
• Mostly second-hand mach.
Confident their business is fit for the future – Robert Lane (right) and father, Roger, used profits from the mid-90s to eliminate borrowings and drive down overheads rather than expand the business in a bid to spread costs.