Harry has been part of the team leading a Monitor Farm project to look at machinery and labour costs across the 21 farms of the scheme.
Although the reviews have found huge variation between farms, the key thing, says Harry, is that machinery costs are too high.
“There are growers using very high capacity machinery and not getting the return on expenditure in either reduced labour hours, costs or higher yields. Make no mistake; machinery is priced on the output it is capable of.
“The biggest cost element in growing a tonne of wheat is machinery, at between 25 and 30 per cent of the total spend. So it has the biggest potential for some serious pre-Brexit reviewing.”
Could older or second-hand tractors play a part in helping farmers reduce their machinery costs?
Harry Henderson is AHDB’s Knowledge Exchange Manager for the East Midlands.
Annual machinery and labour costs ranged from £288 to £593/ha per hectare across the farms, which measured from 97 to 1,278 hectares.
Harry added: “Perhaps the surprising revelation is there is no correlation between farm sizes, meaning economies of scale are not being realised.”
Some of the smallest farm businesses also ran the lowest costs and a few of the larger units incurred the highest costs per hectare. This means the common idea that scale helps to spread costs does not always ring true.
“While wet springs and catchy harvests mean that many farmers are keen to have increased drilling or harvesting capacity, farmers need to look at this policy in terms of cost to the business.”
Heavier, larger machines can also lead to deep compaction, said Harry, which can take years to correct. He said that soil care loses out when larger machines are operated in questionable conditions.
“Although we don’t know what the new domestic agricultural policy will look like, there’s no doubt that rural payments will be less.
“Running tractors and machinery on non-essential work may well reduce the overall cost per hour of operation, but every hour is still a cost to the business.”
The first step for farmers, said Harry, is to review their tractor usage and to keep what they already have for longer.
“Sure, trade-in values will be lower, but the cost of keeping machinery for longer is still lower than early replacement. In the longer term, a planned replacement policy, a review of the whole system and appropriate machinery care responsibilities placed with the operator are all important factors. Work with your dealer and remember that a special deal is unlikely to be the last: trade-in when you are ready.”
Farmers should also use AHDB’s Farmbench to help assess their machinery and business costs.
Farmbench is one of the tools for farmers to help manage resilience to risks and to cope with volatility. It is a free to levy payer service for farmers to analyse their own cost structure and then compare costs with other local growers.
Harry said: “It’s a very powerful tool to see where your business might be poorly performing in comparison to others and need some attention.”
Monitor Farms across the UK have been carrying out labour and machinery reviews with Strutt and Parker.
