ONE of the last things to happen to UK Minister for Agriculture Jim Paice, before his recent removal, was to be howled down at a meeting of angry dairy farmers.
That wasn’t because he had failed to get milk processors and supermarkets to re-think price cuts, but because he had told dairy farmers that they should take a hard look at their production costs. Many of them, he said, could reduce their costs and by doing so reduce losses or even make a profit.
A meeting where farmers were protesting about being driven out of business by rapacious processors and retailers was probably not the best place to say that some of the problem was of their own making.
But, clumsily expressed and in the wrong place, it was still true. Every known survey on farm production of any kind indicates that some farmers turn a profit even in the worst of financial climates and some, and who knows how they stay in business, lose money.
These surveys also indicate clearly, whether we’re talking about potatoes, beef, lamb, pigs, poultry, grain or vegetables, that although those in the top third tend to produce better quality and more of it, those in the bottom third could make a big difference by reducing wastage and cutting costs.
We usually think of those costs as the clearly identified fixed ones that can be allocated to a specific enterprise, such as fertiliser, seed, feed, chemicals.
But in the latest annual edition of his Farm Management Pocketbook – the 43rd, a sobering thought for those of us who remember doing college farm management exercises with the aid of the first – Professor John Nix points to another cost that creeps up on most businesses.
The first few sentences of his foreword to the latest pocketbook guide to costings for every type of farm enterprise you can think of, and a few you haven’t, is worth quoting in full: “The profits from UK farming in 2011 were greater than any year since the 1990s and better per farmer in many cases than even then. For 2012 (writing in August 2012) whilst slightly lower, they are looking to be in a similar range. Exceptions are dairy farmers who have had large price cuts and those farmers whose crops have been badly damaged or even destroyed by this summer’s exceptional rain.
“Yet at the same time costs of production in general are rising swiftly and with no guarantee that output prices will remain firm for 2013, the premium placed on excellent management remains as vital as ever.
“The second largest cost category as defined by Defra is ‘miscellaneous’, meaning the small items that are not easily categorised and often overlooked that add up to become a major part of farm expenditure. This reminds us that attention to detail is a critical part of farm management and must never be ignored.”
Several things came to mind when I read that. One was the top third-bottom third ratings I mentioned earlier. Another was the old Scottish saying about “Mony a mickel maks a muckle” which can be applied to small cost cuts as well as small acquisitions. Not spending money is a great way of saving it.
A third was those farmers I’ve known who could do a farming version of the TV show “Super Scrimpers” about keeping costs down, living within their means and making a profit.
Some of it is a matter of temperament. Some top third farmers prefer being as large scale as possible, top equipment, output as high as possible. Some qualify by balancing lower output and a less flamboyant “big boys’ toys” approach with penny-pinching, every pound a prisoner, costings.
Whatever approach is taken, the lesson is clear: top management is about attention to detail and control of costs. Then, whatever the weather, behaviour of middlemen or state of the markets, profits have a fighting chance.
That will be as necessary in the future as in the past, according to Professor Nix. In the pocketbook foreword he adds: “Long-term bullish factors such as the rise in global population, changing consumer preferences in emerging economies, increasing UK political attention to food security, and recognition of agriculture as a crucial industry in the UK, are no guarantee that output prices will rise.
“Indeed, the ability of agriculture globally to match the demands of the consumer is overridingly what sets the price of a commodity. There is never any space for complacency in well managed businesses.”
Details of the 43rd Nix guide are on www.thepocketbook.co.uk
September started well, giving most farmers the chance to finish cutting grain and clear quite a lot of straw, but the second half of the month has been, as a neighbour said during one of the recent downpours with a gale whistling round his ears, “variable to hellish”.
That means a lot of work still to be done to clear the last of harvest 2012 and try to give the potential harvest of 2013 a good start. Best of luck to all.