RISK AVOIDANCE IS THE KEY TO SUCCESS

3 September 1999




RISK AVOIDANCE IS THE KEY TO SUCCESS

TO say the 2830ha (6986 acre) of predominantly prime arable land owned and farmed by Paul Clarke at Nocton, Lincoln, stemmed from a bulb growing business run from a kitchen table in Hants 25 years ago is stretching the truth.

Mr Clarke and his wife Anne certainly developed a profoundly profitable business supplying bulbs and cut flowers to the major UK multiple retailers. And technical skill played a major part in that success. But so, too, did a shrewd business sense that is undimmed by the sale of the original bulb business almost five years ago.

Indeed, Mr Clarke is now showing visitors around a new £2m investment to create the UKs most sophisticated bulb processing facility at Nocton, supplied by bulbs grown on adjacent land during his contractual five-year withdrawal from the market.

On May 4 2000, Mr Clarke returns to the bulb market in earnest. Supermarkets anticipate the day with eagerness, the purchasers of Mr Clarkes original company, Winchester Bulbs, probably feel a very different emotion. As Mr Clarke puts it: "There are 266 days left to run – and I only loaned them the customers."

Such confidence is born of a very clear business strategy. It is one Mr Clarke believes is equally applicable to any other arable crop.

Technical excellence is his baseline. But concentrating resources on key enterprises, striving for maximum efficiency and exploiting market niches are equally important. And over-riding it all is risk management.

"Why expose yourself to risk when margins are wafer thin already? Why not settle for a bankable average rather than risking a loss? When margins are tight you simply can not afford to gamble," Mr Clarke maintains.

And yet over £2m is being spent on re-entering the volatile bulb market. How is that justified? "You just make sure you do it so well that it is no risk at all," retorts Mr Clarke.

Changes made at Nocton in recent years suggest that is not idle talk. Mr Clarkes aversion to risk and inefficiency explains the demise of potatoes at Nocton. The estate was originally established to supply potatoes to Smiths Crisps in Lincoln. But years of tight rotations and changes in the market meant change was needed, he says.

"Potatoes gave us a big cash turnover, but nematode control was costing a lot and we were only getting average to medium yields. More importantly, dry matters were creating too much risk. In 1998 they were very high, causing bruising, while in 1997 they were too low, leading to poor fry colour. You just cant do enough to affect dry matter – the weather has too much of a role."

Worse than that, quality control at intake was too variable. "Youve got to have a level playing field and I couldnt see one. And with the move to washing there was no chance to sell rejected produce elsewhere. I couldnt cope with that. It is terribly demoralising for staff to strive to produce the best quality and then see it dumped."

Potato land and kit is now let to a specialist grower on a three-year contract. "Weve minimised our losses and theyre doing a better job, so we can take a greater return from the crop than before. You really cant be too proud to let someone else do the job better and take a better return in rent."

That is something more medium-sized farmers need to take on board if they are to stay in business, Mr Clarke suggests.

Time and resources freed up from potatoes have been partly reinvested in vining peas. Those offered a quality niche market, prompting Mr Clarke to join other producers to form ASAPeas to supply Tesco via Tendafrost.

"Weve had two bad years and one medium so far. But our customer is extremely pleased with the product. That is a good starting point. And the group has increased in size by 25% this year.

"I feel very strongly that supermarkets are a very well organised medium for producers to market their produce through, in volume. Supermarkets may be ruthless, but they need top quality 100% of the time – they cant make a profit with nothing on the shelves.

"The trick is to find a niche product rather than a commodity so you can work together with the supermarket to solve the buyers problems. Then you are flavour of the month."

The key to vining pea success is being prepared to leave more crop in the field and electronic colour sorting in the processing plant to ensure the product supplied is top quality. "The agronomy really is not difficult. In fact, were now looking at centralised agronomy to complement the crop co-ordination and full traceability we already offer through our pea manager. That allows Tesco to trace any pack right back to the field – automatically," Mr Clarke says.

Beet is a banker

Sugar beet also fits the bill for a low-risk, reliable crop. "Our contract is thought to be the third biggest in the country, at 20,710t, which is a useful bankable cheque. That is just what we want when we are gearing up to move back into the bulb market. Now is not the time for taking risks on commodity crops."

Late-lifted beet leaves a late January sowing slot which is now filled with spring malting barley. "It used to be late sown winter wheat, but that could get very thin and we now use less input to grow a crop with a potential premium," notes Mr Clarke.

The only other crop on the farm is bulbs – the newcomer. Since buying Nocton in a back-to-back deal with Land Improvement Holdings in Dec 1995, mainly using roll-over cash from the sale of Winchester Bulbs, sales of building plots and estate houses have returned Mr Clarke to a roll-over position. Hence the new bulb investments.

Bulbs ready to roll

The bulb facility at Nocton will be fully operational by Jan 2, just one year after work started. "We controlled the sub-contractors ourselves which saved us £0.25m," says Mr Clarke. The experience stands him in good stead for phase two – a similar sized facility in Cornwall and expansion into Scotland.

Commitment in depth is not questioned. "You can always get a supermarket buyer to visit once. It would be remiss of them to miss an opportunity. And you know in 15 seconds if youve got them. That is real risk management – to go in so bold there is no risk of failure. If you are going to enter a race you might as well make sure you are going to win it."

On such principles Mr Clarkes business success depends. &#42

Cost control in arable cropping

Production costs at Nocton are held low thanks to a first wheat only strategy, outside agronomy advice to optimise input use and in-house machinery maintenance.

Most land is disced and pressed ahead of a 6m Vaderstad drill, with a typical sowing rate of 150seeds/sq m for wheat. Most seed is farm-saved. One tonne of C1 seed of eight varieties is sown each autumn and the best performing blocks retained for seed. "Thats 8t of C1 for 2500 acres of wheat," says farm manager Martin Reams. "We generally have 1000 acres of land after peas and set-aside ready to drill from Sept 1, so we want seed to hand. Once we start we can drill up to 100 acres a day."

Early drilled crops get autumn fungicide and spring fungicides include strobilurins split three or four times at low rates according to season and variety.

Nitrogen rates are low thanks to the rotation. On the fen three splits of bulk urea supply 80kg/ha (64units/acre); on the heath rates are up to 150kg/ha (120units/acre). Growth regulators are a must.

Grass weeds are rare and wild oats at hand roguing levels, but broad-leaved weeds must be controlled without sulfonyl-ureas – they pose too great a risk to the bulbs.

Average wheat yield is 9.5t/ha (3.8t/acre) including late-sown milling wheats. "Nocton is so big that we can achieve a good average but are never likely to get into the top 10% of performers. The soils are so variable, ranging from blowing sand to unwalkable clay in the same 50 acre field," says Mr Reams. Some early sown wheat has topped 12.3t/ha (5t/acre), but late December drillings have also struggled to reach 6t/ha (2.5t/acre).

Machinery is serviced on-farm and run long and hard. Four Case Magnums serve as workhorses doing 1500hours/year. A rotational replacement policy sees one move onto lighter work ahead of replacement each year. Similarly, smaller tractors are run hard up to 6-7000 hours then moved onto lighter work.

Three Lexion 460 combines served by a chaser bin and 25t untaxed lorries for grain carting can cut up to 80ha (200 acres) a day. A 6-row Vervaet beet harvester lifts 250t/day.

Agronomy advice for cereals and beet is bought-in from Aubourn Farming.


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