A traffic light system based on financial and environmental performance for each of Ross Hewson’s fields is one of the tactics he uses to drive his business forward. In the first of a series on preparing for change, we visit his top-performing north Lincolnshire business.
Ross Hewson, managing director at Rockscape Agricultural Services and Contracting, says: “We are trying to establish an agri-energy business that is fit for the modern farming future.
“We want to make sure we are strong enough to be able to endure the next few years of turbulence in the industry and we are definitely on that road.”
To get on that path, Mr Hewson and his team of 11 have been benchmarking the company’s four enterprises; two in-house arable farms, a contracting business and an anaerobic digestion (AD) plant.
By understanding their figures, they have been able to set clear goals, make changes and shrink costs of production.
To get a better grip on Rock- scape’s costs of production, Mr Hewson started benchmarking using AHDB’s Farmbench tool in autumn last year.
Assured Agronomy brought Rockscape together with six other similar farms locally, so they could compare data with like-for-like businesses, as well as nationally using AHDB Farmbench. The group meets regularly to compare their latest sets of data and share best practice.
Mr Hewson says: “It makes us think about things differently. If we can benchmark for the next four to five years, we can really get our production costs down.
“It is all very well having the data, but you have to use it.”
Through benchmarking, he has identified areas for improvement and made changes to purchase fertiliser more cheaply, lower trading costs internally between the four enterprises, minimising wastage of straw for the AD plant and marketing his crops at more lucrative times of year.
The business has even gone deep into production costs and sustainability of each individual field, says Mr Hewson.
He says: “Every field has been mapped for different crops and given a red, amber or green colour code, according to how sustainable it is commercially, environmentally and socially [meaning the impact on the local community].
“It is all part of benchmarking and has highlighted areas that are not commercial. As a result, we are looking at alternative cropping on less commercial fields to increase their value, efficiency for contracting and overall returns.”
By knowing each field’s cost of production, he has been able to set ‘ambitious, but achievable’ goals to bring costs down and save money.
Mr Hewson says: “I use the benchmarking figures a lot, including in board meetings. Last week and this week we held business planning meetings and set out our budgets for the business using the figures.
“We run quarterly accounts so we can see where we are, where we want to be and how we are performing, which is really important.
“This is instead of chasing yields, which do not necessarily mean increased net margins.”
Mr Hewson says he has learned a lot through benchmarking: “It is one of the tools that moves us forward and ensures we have a good handle on costs. That attention to detail, those small changes in margins, all add up.”
The single factor to have the greatest impact on performance is having a positive attitude, according to a University of Minnesota Agricultural Extension Service survey.
This also strongly correlates with goal-setting and striving for these.
These attributes are evident at Rockscape. It has a mission statement, which is to ‘deliver innovative renewable energy and sustainable farming solutions’, which is then used to set business strategy and goals.
Key to achieving these though is engaging staff, says Mr Hewson, and the benchmarking figures help bring everything together ‘like a jigsaw’.
He shares the benchmarking figures with employees at annual appraisals and during meetings so everyone knows where the business is and where it is going.
He then sets individual goals around these, including around lowering costs of production.
“It creates a more business-type work ethic,” says Mr Hewson, filtered down from managers to workers, so everyone understands the costs of looking after a crop, and also of losing a crop.”
Part of achieving better results as a team is focusing on becoming more specialist, says Mr Hewson.
“With Farmbench, you can see where one crop might be carrying another and covering up losses.
“It is better to be excellent at a few crops rather than average at many. We let the experts deal with what they know best.”
A few years ago the business had a lot of crops in rotation, causing inefficiencies with logistics and machinery.
Now, it uses block cropping with just wheat, maize, oilseed rape and sugar beet, allowing the team, facilities and machinery to become more specialised.
The carrot, peas and potato production is done by growers specialising in these.
Looking ahead, all these changes are putting the business in a much stronger position to cope with potential changes brought about by Brexit, including reduced farm payments and greater exposure to the commodities market.
Mr Hewson says: “Our businesses are in a better and more resilient place as a result, 100 per cent.”
ROSS Hewson’s attention to detail and drive for improvement is common among the top 25 per cent of farms, according to recent research published in AHDB’s Horizon report ‘Preparing for change: the characteristics of top performing farms’.
Across all farm types, the top 25 per cent of businesses were found to perform 1.8 times better than the bottom 25 per cent.
In income, this equated to an annual difference of about £100,000 for most sectors, or £50,000 for grazing livestock, when comparing like-for-like farms.
Critically, more than 70 per cent of the difference between the top and bottom performers was due to decisions made by the farmer.
Less than 5 per cent of variation in performance was related to geographic factors, such as soil and climate.
The research found that, typically, top performers minimise their overhead costs, set goals and budgets, compare their businesses with others and gather information.
They also understand their mar- ket, focus on detail, have a mindset for change and innovation, continu- ally improve people management and concentrate on specialising.
Reducing costs of production is paramount for farmers, because they have minimal control over the sales price, says the Horizon report. Across all sectors, the top farms were found to have lower overheads: higher output acc- ounted for just 10-30 per cent of higher profits in top-quartile farm businesses, but lower costs con- tributed 65-90 per cent of profits.
To understand and improve costs of production, all top per- forming farms used benchmarking and comparison with other farms. Essentially, ‘farmers with more information made more money’.
For more AHDB information, go to www.ahdb.org.uk