Joint ventures may have role in dairying

17 September 1999

Joint ventures may have role in dairying

ONE man, one tractor and one feeder could easily feed several dairy herds a day in some areas, drastically cutting labour and machinery costs.

But although joint ventures have proved popular in the arable sector, they have not been widely embraced by milk producers, says Tom Chapman, farm business adviser with accountants Grant Thornton.

"Joint ventures are quite radical for the dairy industry. But, more and more, they are going to prove to be one of the solutions to keeping costs down."

Such schemes are very flexible and can be adapted to suit circumstances, adds Mr Chapman. "Businesses who wish to remain independent but are looking to drive down costs should consider sharing the use and running costs of one machine with a neighbour – for example, a feeder wagon or a muck spreader. From here it is an easy step to move on to sharing labour and other items of machinery."

Others who could join the 14,000 farmers who quit the industry last year should consider more radical action and enter into a full contract farming agreement, whereby one farmer does the work for the second, says Mr Chapman.

"The landlord retains his trading status and benefits from economies of scale, a more powerful position in the market place and often improved management skills being used in the business."

The contractor benefits by expanding his business without a large capital investment. He should also be given incentives to maximise profitability, says Mr Chapman. "It can bring rewards to both parties." &#42

Machinery share savings

Two farms sharing tractor, feeder wagon, muck spreader, fertiliser spreader

Farm Farm


Gross margin a cow 690 700

Herd size 122 130

Dairy gross margin 84,180 91,000

Sundry receipts 5,000 4,800

Gross margin 89,180 95,800

Present costs

Paid labour 18,000 18,600

Power & mach 17,000 17,100

Sundries 13,000 13,200

Property charges 15,000 15,000

Interest 14,000 14,500

Depreciation 14,000 14,300

Tot overheads 91,000 92,700

Net profit -1,820 3,100

Costs after joint venture

Paid labour 12,000 12,500

Power & mach 7,000 7,100

Sundries 13,000 13,200

Property charges 15,000 15,000

Interest 14,000 14,500

Depreciation 7,000 7,000

Overhead costs 68,000 69,300

Shared costs* 13,071 13,929

Tot overheads 81,071 83,229

Net profit 8,109 12,571

*Includes £10,000 paid labour, £10,000 power & machinery and £7,000 depreciation.

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