Collaboration ‘the key to cutting overheads’
With the bulk of the differences in farm costs usually lying in overheads such as labour and machinery, great opportunities still exist for the industry to take out costs through increased cooperation and collaboration.
That will be the message given by farm consultants, Andersons, at the Cereals 2018 event which takes place next week in Cambridgeshire.
The company warned that while last year’s harvest might have delivered better-than-expected profits for many combinable crop businesses, this was often be due to external factors, particularly the weakness of Sterling, rather than the fundamental strength of the business:
“Many combinable cropping farms still need to make significant changes if they are to be robust to face the challenges that Brexit will bring,” said director Richard King.
He said that despite a high level of investment in areas such as labour and machinery, many farms devoted far less effort into the efficient deployment of these resources than they put into shaving minor costs from their agronomy programme – but this would have to change in the future.
King also said that high rents -or rent-equivalents – also added costs in many businesses and this area was also likely to see some pruning once the coldwind of post-brexit reality set in:
“All parts of the sector need to take a realistic view of economically-sound rental levels, with an eye on future support changes and a long-term perspective on the husbandry of the land.”
The consultant also said that the effects of Brexit on the industry were likely to be delayed until 2020 in terms of support - and probably 2021 in terms of trade.
“It would therefore be easy to carry-on doing much the same thing in the short-term.
“However, change is undoubtedly coming, and those businesses that grab a head-start in improving efficiency will be best placed to prosper in the new environment,” said King.
Turning to the economic forecast for the company’s theoretical average arable unit, Loam Farm, he said that despite predicted yields being trimmed, the ability to tie into future prices higher than expected meant it was likely that the unit might come close to breaking even this year.
“And once the predicted Basic Payment is addedin, a reasonable business return could be expected,” King said.