PRUDENT PLAN BRINGS
NEW VENTURE SUCCESS
Investing in a new venture
to trade out of the arable
downturn can seem
fraught with risk. Here,
Edward Long finds out
how one Norfolk producer
made the transition and
relays the advice of a
leading business consultant
TO cope with a tough economic climate many arable farmers are having to invest to meet changing market needs. But one Norfolk arable and fruit farming business has spent around £660,000 and spurred further business expansion.
A new freezing line is to not only handle home-grown soft fruit and vegetables but added-value produce from other farms too.
That reverses a 20-year trend to reduce freezing capacity and opens up opportunities for farmers wishing to diversify and freeze commercial quantities of produce.
Soft fruit has been grown on R & JM Places Church Farm at Tunstead near Norwich since the mid-1960s, when strawberries were introduced to supply jam and canning factories.
"That was diversification from what was a traditional arable farm growing cereals, sugar beet and potatoes," says the companys Trevor Reynolds. "Initially fewer than 100 acres were grown, but it was not long before the crop was expanded and a few raspberries were tried."
The canning side of the business was threatened by the sharp decline in the number of UK canneries, down from 20 in 1977 to just four by 1982. "That year we decided to install a replacement freezer to double capacity and enable us to freeze everything to add value to produce."
The policy switch paid off and the company soon became a major supplier of frozen soft fruit to manufacturers of value-added food products such as gateaux and dessert puddings.
In 1992 a new venture was launched – punnet strawberries for the quality fresh market. "Now in addition to growing 150 acres of wheat and 75 each of beet and potatoes, we have 150 of strawberries, 80 raspberries, 40 rhubarb and 30 of blackberries," says Mr Reynolds.
The new freezing line, which can comfortably cope with 3t/hour, was commissioned in the early summer. An old freezer has been retained for back-up cover.
"It was a major investment, but the pay-back is increased flexibility, faster throughput and improved product quality. We are using it for our own produce, but would like to keep it busy during slack periods by offering a contract freezing service to other farmers and growers. It is linked to a modern pack-house and can handle virtually anything, including short runs of specialist produce."
This season the first 4ha (10 acres) of organic strawberries will come on stream – possibly the beginning of another significant area of growth. *
Farmers considering investing to meet changing or expanding market needs need a shopping list of points to help them organise their thoughts in a constructive and objective way, says Bury St Edmunds-based David Bolton of Andersons, the farm business consultants.
"Proper planning prevents poor performance," he says. "This is often overlooked in the push to get on with the job. But it always pays to invest fully in time and thought before committing money to a new venture."
He cites a shopping list of reminder points to help focus attention on the main areas for consideration.
A crop with 52 harvests a year is also being grown at Church Farm. In 1990 the business diversified into bean sprout production to meet rising demand for both fresh and frozen product.
"We were encouraged by existing soft fruit customers to have a go and with a spare building on the farm we decided to try it," Mr Reynolds says. "We started with a weekly production of 10t but have since expanded, we now have capacity to turn out 100t."
The beans are grown in a hydroponic system. They are kept moist, warm and dark and soon chit. After seven days white sprouts measuring 7.5-8cm (3-3.25in) can be harvested.
• What are his real requirements, what extra can you offer him?
• Security of supply, quality and traceability?
• How safe is he as a buyer?
• Who are they, how strong are they?
• How will they and the (mutual) customer react?
• Opportunity, cost of capital, grant possibilities?
• Tax reliefs and timetable?
• Duration of commitment, what is resale value/payback on liquidation?
• How can the risk be ring-fenced?
• Is the risk/reward balance sensible, and can the extra responsibilities be managed?
Above: Switching to a new enterprise demands careful planning to avoid unforeseen pitfalls, warns Trevor Reynolds, who has just invested a further £660,000 in the soft-fruit enterprise which helps bolster profits on his Norfolk arable farm.
• Cropping: wheat 48ha, barley 12ha, sugar beet 30ha, potatoes, 60ha strawberries, 32ha raspberries, 16ha rhubarb, 12ha blackberries.
• New freezing line cost around £660,000.
• 3t/hour capacity.
• 40% strawberries frozen, 60% sold fresh.
• 90% raspberries frozen, 10% sold in punnets.
• 1m 454g strawberry punnets supplied to fresh market outlets each year.
• Up to 32,000 punnets/day packed in peak season.