UK farmers ‘spend too much on equipment’

Consultancy says collaboration an alternative

UK farmers are spending too much money on equipment, claims leading farm consultancy Andersons.

The company has warned farmers against using better returns, which are predicted for the 2017 and 2018 harvest years, to buy new machinery and equipment because often these purchases are not as well thoughtthrough as they need to be.

“Purchase decisions are often driven by the desire to avoid tax or the health of the bank balance rather than the fundamental requirements of what the business needs,” said Richard King, a partner at Andersons.

“Such investment often increases costs of production rather than decreasing them and the effects can be long-lasting.”

He said analysis by the firm showed UK agriculture had a depreciation charge on machinery and equipment of £153 on every productive hectare in 2016, or £62 an acre.

“This is a 23% real-terms increase over the figure a decade previously,” added Mr King.

“Although prices of agricultural equipment have risen in that period, the level of spending is too high.”

He said an alternative to buying new machinery was collaboration, either through a very informal agreement or a full joint-venture company.

Such investment often increases costs of production rather than decreasing them and the effects can be longlasting. RICHARD KING

“The savings from working together can be massive. Unfortunately, without the external pressure of low returns, the industry does not tend to embrace such arrangements,” added Mr King.

Another cost farmers needed to apply caution to was acquiring land, paying high rents, or rent-equivalents under farming arrangements.

Mr King said some of the figures paid in recent deals were “highly dubious” and prospective tenants and contractors must ensure they do their sums prudently.

“If this means walking away from opportunities, and letting others be ‘busy fools’, then so be it,” he added.

Looking to the impact of Brexit, Mr King said the prospect of support and trade arrangements remaining the same during a transition period could lead to many farmers operating a “no change” policy and building even more cost into their business.

Instead, Mr King said farmers should be taking advantage of opportunities to improve their productivity and reduce their costs of production.

“Crucially there is no need to wait until the effects of Brexit begin to bite to start this process,” said Mr King.

“Undertaking such changes now in a measured and considered manner can both boost profits in the short-term and set a business up to be resilient into the future.”