Friday, August 17, 2018

Six ‘easy’ benchmarks to get ready for Brexit

July 31, 2018 by  
Filed under Property

Arable farmers looking to get their business into best shape ahead of Brexit are being encouraged to look at six ‘easy to calculate’ management benchmarks as a useful starting point.

“For some farmers, the word ‘benchmarking’ conjures up a dry and tedious process they’d rather not undertake – but it can be invaluable,” says Will Gemmill, head of farming at Strutt & Parker, who has devised six simple Key Performance Indicators (KPIs).

These KPIs can be calculated without needing to delve into the depths of farm accounts (see box). When used, they can highlight areas where costs savings might be found and where it might be beneficial to dig deeper into the financials.

Mr Gemmill says: “The figures, which are based on data we have captured from more than 145 farms, ranging from 100ha to 2500ha, will give an indication of how your farm compares in terms of labour and machinery costs and capacity.”

Improve efficiency

Farm businesses need to be as fit as possible to cope with the reduction or even loss of direct support payments – currently worth more than £200/ha. This means cutting costs and improving efficiency is a pressing reality, says Mr Gemmill.

Strutt & Parker recently completed a detailed benchmarking exercise for the AHDB Monitor Farms in England and Scotland. It involved reviewing labour and machinery costs to a level of detail previously unseen within generic farm benchmarking.

To help arable farmers review their current business operations, the firm is now offering detailed arable crop production reviews to other farmers. No two farms are the same, but calculating costs and considering the logistics of making a change can help improve performance.

Searching questions

“Growers can get some answers to some searching questions,” says Mr Gemmill. “Would hiring a machine be more economical for the hours it does? Could a contractor do the same job at the same cost? Or could sharing a combine with a neighbour work logistically?”

One recent arable crop production review carried out on a 400 ha farm in the East of England found that the operational costs of growing a hectare of wheat came to £387/ha – more than average and down to much higher establishment and depreciation costs.

The farm in question is now looking at only ploughing where necessary for agronomic reasons and reducing the number of tractors from three to two – with a hire tractor for use at the peak six-week harvest period, says Mr Gemmill.

Catalyst for change

“A review may be the catalyst for people to consider whether a joint venture would be a better way forward or a continued approach to improve cost efficiencies. We are involved with a wide range of joint ventures from full collaboration to partial and full contract farming agreements.

“Equally, it can also highlight how much of a saving could be made by changing the buying strategy on inputs. For example, looking at the price of three commonly-used chemicals applied during the 2017 harvest we found that growers who bought through our best buys service made a 30% saving compared with those paying a serviced price for product.

“It is interesting to note that our research suggests that there is no obvious relationship between the size of the farm and its costs. We have also seen that farms with the lowest costs do not necessarily have less horsepower available – just cheaper horsepower.

“This might be achieved by operating over a large area, but can also be the result of where machines are being kept for longer and residual values kept high through regular maintenance.”

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