Machinery costs take a tumble following merger

21 April 2000




Machinery costs take a tumble following merger

How can new entrants to

farming hope to survive at

todays low prices?

Amanda Dunn discovers

how one couple restructured

their business to do just that

NEW entrants to agriculture Andy and Elisabeth Keam thought it would take years to raise the capital needed to kit out their unit, finish with the contractor and farm in their own right.

But two years after purchasing 120ha (300 acres) of chalky boulder soil near Royston, Herts, a merger with two neighbouring farmers means they can now work the land themselves with machinery owned by the contracting company they have invested in.

That brought Horseshoe Wood Farm a 55% increase in profits between harvest 1998 and 1999.

"The results of the change have been dramatic," says Peter Homent, of accountant Hardcastle Burton. "Labour and machinery costs have fallen from £153/acre to £109/acre, although there is some trade-off against this by the increase of fixed costs from £28/acre to £41/acre.

"Additional income of £36/acre is received by the partnership from the combined farming company in respect of their own labour input while further co-operation in the form of joint purchasing of some variables has seen a 6% reduction in cost of variable inputs.

"All this, together with share of profit from the contracting company, has significantly benefited the partnership, with profits increasing by 55%," he confirms.

It is a long way from February 1996 when Mr and Mrs Keam bought the land with outline planning permission. "Although we wanted to farm it ourselves, at the time we didnt have enough capital to equip the farm. So we employed the services of a local farmer to act as contractor," says Mrs Keam.

"While we were very pleased with the improvements and returns made by the contractor, we still aspired to farm ourselves," says Mrs Keam. "Eighteen months after wed started, we were approached by the farms accountant to consider a joint venture with two neighbouring farmers."

"We met the two other farmers, were all of a similar age, easy going and found we got on well," says Mr Keam.

Therfield Combined Farming Co, a contracting firm supplying a fixed price stubble to stubble service for each of the farms, was subsequently formed (Arable, Apr 14).

Each grower committed capital in the form of cash or machinery to equip the new company, with all labour now engaged by Therfield Combined Farming Co.

"It would have taken us years to have raised the capital needed to equip the farm ourselves. With CFC weve been able to start farming in our own right much sooner," says Mrs Keam. &#42

BUSINESSGROWTH

&#8226 1996 purchase 120ha (300 acres).

&#8226 1996-7 land contracted out.

&#8226 1998 combined farming company formed.

&#8226 1999 55% profit increase.

&#8226 Labour/machinery costs down £108/ha (£44/acre).

&#8226 Fixed costs up £32/ha (£13/acre).

&#8226 Net saving £76/ha (£31/acre).

1999 yields

t/ha (t/acre)

W OSR Contact 3.08 (1.25)

WW Consort/Claire 10.62 (4.30)

WB Regina 7.56 (3.06)


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