Unite together for profit

9 August 2002

Unite together for profit

By Edward Long

SHARING machinery and labour with a neighbour is the modern way to gain economies of scale and cut operating costs without having to buy or rent land. It provides an opportunity to improve economic efficiency without borrowing money and increasing the fixed cost burden.

This is the view of farm business consultant John Holtby of Lincs-based J &#42 Walters who also has an arable farm in east Yorkshire.

"I am advising farmers to look at their cost structure with a new set of eyes as systems in place and working successfully up until 1996 are no longer sustainable on an average sized farm," he says. "Something is needed to help return to profitability. There is a lot of scope for cutting costs without investing in land, or getting deeper in debt at the bank."

He has first-hand experience, for as well as advising other farmers to form joint ventures to share machinery and labour he practices what he preaches.

For 15 years he has used a contractor for cultivation and drilling work on his 376ha (930 acres) farm at Dowthorpe Hall, Skirlaugh near Beverley. But by harvest he will be co-operating with neighbour Chris Shelby who has a similar sized farm and cropping programme.

"I grow 550 acres of wheat, 220 of rape, 85 winter barley, 40 vining peas and 28 acres of spring beans. Chris does not grow peas but together we have around 1750 acres of combinable crops."

A separate umbrella company will contract the work on the two farms, it will buy some of the existing equipment, and unwanted items will be part-exchanged for new kit.

As Mr Holtby has been using a contractor he only has a small machinery fleet comprising two tractors, a four-year old 110hp Massey Ferguson and a 20-year old 160hp Fiat, a mounted 24m Amazone sprayer, and an MF combine that has done just one season.

Mr Shelby has more equipment, and a new combine. The plan is to buy a new 260hp Case tractor, plus a KRM drill, a set of discs and a press.

"We calculate that the total labour and machinery cost will be £85/acre. As I have been using a contractor mine is between £95 and £100/acre so will save £10-£15/acre, but my neighbour should cut more from his costs."

Mr Holtby expects to save more when his one full time man retires in 18 months time. This will not leave the combined business short staffed for as well as the two owners and a son, there are two full time staff on the other farm.

The main lesson to emerge from the new venture is that setting up such a company takes longer than expected. Six months should be allowed between first meeting and finalisation.

"As I have borne the business consultancy costs we have spent only £1000 on legal and valuation fees.

"Farmers may be reluctant to join forces with a neighbour but having suffered on-going losses for the past several years they need to consider sharing machinery and labour with a like-minded neighbour just to stay in business," Mr Holtby says.

Mr Shelby, who expects to save £74/ha (£30/acre), is excited at the prospect of working with his neighbour.

"Over the past few years I have become fed up with farming but the new arrangement has injected some optimism into the job, and adrenalin is flowing again," he says. &#42

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