PROSPECTS FOR 99
How should farmers manage
their arable enterprises in
1999? Caught between the
rigours of a difficult 1998
and the uncertainty of life
under Agenda 2000 there is
only one way to go.
Charles Abel reports
GROWERS should treat 1999 as a year of recovery and transition.
After last years poor profits and difficult field conditions the next 12 months should be used to correct damaged soils, refocus crop husbandry and ready the business for farming under Agenda 2000.
So says Mike Calvert, general manager of CWS Farms Group, which manages over 32,000ha (80,000 acres) as CWS Agriculture and Broadoak Farming throughout the UK. Having been awarded an OBE for services to agriculture in the New Year honours Mr Calvert is well placed to give such advice.
Bearing down still further on the cost of producing each tonne of grain must remain the goal, he says. Even though systems feel severely squeezed already, further improvements must be made. Last years difficult season proves that.
Grim lessons of 98
"If there is one good thing from 1998 it showed us how bad things can be. Now we know just how far we need to tighten our belts and how to tackle this years crops with a clearer focus on getting value for money from inputs."
Admittedly many crops have got away poorly and price pro-spects are not good. "It is going to be very difficult this year. But at least we are approaching it from a different perspective to last spring, when there was no expectation of how difficult things could get.
"After two or three good years many of us had forgotten what life can be like. There was a feeling that arable farming was bomb proof. But budgets for harvest 1999 look strikingly similar to those for 1992. Sometimes we forget how tough things looked in the early 90s, with MacSharrys CAP reforms proposed and forecasts of wheat at £80/t. It was only Norman Lamont pulling us out of the European Monetary Union that saved us."
So, with memories of last year still fresh in the mind a more rigorous approach to management is clearly needed. And that means more than just cost control. "Cutting costs can all too easily reduce output and efficiency. What is needed is better focusing of expenditure, to get the best from the money that is spent."
Most growers would say they have been doing that for years and there is little room for further manoeuvre. But Mr Calvert disagrees. "A year ago we would not have believed we could do more, but after a season like 1998 we know we must. And we can."
Alternative approaches are worth considering. Round-the-clock operations to stretch output and improve timeliness can pay dividends. "We have been doing it with pea viners for years. Now we need to look at it more with spraying, spreading, cultivating and drilling," says Mr Calvert.
Crop establishment also offers tremendous scope for improving margins. "We have got to reduce the number of passes we are making across the field and we have got to reduce it dramatically. Some of the newer equipment not only allows you to do that and so cut establishment costs, but it will also give better crop establishment, so boosting yield potential."
This chance for a win, win outcome is one of the most promising developments being looked at within the CWS Farms Group, Mr Calvert says. "We are getting fairly tight on our variable spend, but there is still good scope to reduce establishment costs. Through integrated crop management principles we have achieved a lot in the past two years, but we always need to be cautious about a wholesale switch, when there is the potential of the entire crop being put at risk."
More creative use of contractors can also pay. "On some of our bigger cereal units contractors now cart grain at harvest. We have done it for several years and it works well. There are some very efficient contractors available which many businesses can certainly benefit from using."
Know your neighbour
Smaller units need not miss out, Mr Calvert notes. "Sharing equipment and labour with neighbours can really cut costs. Admittedly, it raises issues of who gets the work done first and last, but those can be resolved. And many farmers would say they want to retain their independence. But there is a real need to take the emotion out of decision making and look at what will do the business the most good."
Cropping changes also need considering. But Mr Calvert urges caution. "Agenda 2000 suggests wall to wall wheat, but the impact on overheads needs bearing in mind. Could you harvest it all and get next years crop drilled in time with existing kit, especially in a season like last years?"
Many CWS farms have pursued a policy of one cereal, one break, putting them in a good position to expand cereal output, he admits. But a seasonal spread of crops is crucial to keep overheads low. "It is essential to look at the net return from the whole rotation when budgeting, not just from individual crops."
Unsupported crops expand
In any case CWS has expanded its production of unsupported crops like vining peas, potatoes and vegetables, in anticipation of Agenda 2000. But that does not diminish the need to know the outcome of the negotiations as soon as possible, he says.
"The sooner we know, the better, so we can plan next years cropping. Discovering what the package is in June would be far too late."
Indeed, alongside the correction of field problems caused by last years difficult conditions and a strict refocusing of crop management, discovering what Agenda 2000 requires of UK arable farming and planning a response is one of the key tasks for 1999.
"This time next year I hope we will be able to look back and say 1999 was not easy, but at least it gave a half reasonable result. More importantly I hope our businesses will be in a position to cope with Agenda 2000, whatever that brings. Then perhaps we will be able to look forward to a period of relative stability in which we can plan and manage the business," Mr Calvert concludes. *
Marketing trickier than ever
Increasing vulnerability to world market forces makes crop marketing trickier than ever, Mr Calvert says. "Until a few weeks ago traders were telling us strong demand for vegetable oil would see good rape prices for years. Then the market collapsed totally. And in cereals the impact of a large crop carryover and potentially high output from the UK and the rest of the world make for real uncertainty. Added to that are currency factors. The strength of the £ has to come down if the UK is to join the euro, but it is obviously not going to happen as quickly as we thought. That means price expectations can not be as high as we had hoped." In that environment prudent, phased marketing to achieve a good average price must be the key. For budgeting purposes and to help guide input decisions, Mr Calvert uses the futures price less the cost of delivery to a futures store. "That is the most realistic price we can get, but it still leaves an awful lot of uncertainty."
• Difficult 1998 season.
• Use 1999 to correct problems.
• Tighten management further.
• Prepare for Agenda 2000.
• Reconsider techniques, especially for establishment.
• Use contractors and work with neighbours.
• Assurance a must, but schemes need unifying.
• Lower input prices help, but look at whole package, including service and support, especially for new machinery and novel chemicals.