A new benchmarking initiative has been granted government funding to help arable farmers drill down into their fixed costs to make better management decisions.
4sight Farming, a benchmarking group formed by an independent agronomist for farmers, analyses detailed machinery and labour costs alongside variable inputs to give farming businesses a greater understanding of true costs per crop.
The pilot project, which has been fully funded by the Scottish Government and the European Union through the SRDP Knowledge Transfer and Innovation Fund, will combine the findings of the data with lean management tools to help maximise the margins of 25 arable farming businesses in central and North-East Scotland.
Eric Anderson, senior agronomist with Scottish Agronomy, who initiated the project in partnership with four other organisations, including agricultural co-op and collaboration experts, SAOS, says: “With so many unknowns ahead, I passionately believe making farmers data ‘work’ for them is the future. Working with some of our Scottish Agronomy members has shown that as much as 53 per cent of wheat production costs are associated with machinery, fuel and labour inputs, yet there are no large-scale benchmarking projects that deliver an accurate picture of these costs per crop.
"By attributing fixed machinery and labour hours to each block of land, it will be clearer to farm business owners where efficiencies can be made, and, when combined with lean management tools, create opportunity to transform fixed costs for greater margins.
“With no clear commitment from the Scottish Government on the transitional changes after the UK leaves the European Union, it is more important than ever for Scottish farmers to have a full understanding of their business costs. This could be the difference between a farming business being fit for the future and struggling to make it work.”
Any part of the business that is using resources but is not adding to the end product needs to be analysed and corrected, Mr Anderson continues. He explains how the data produced from this project combined with lean management can change a farming business:
“Figures show that with the loss of BPS payments, 40 per cent of wheat-growing land – and 60 per cent of land for other combinable crops and potatoes - will not yield enough to cover actual production costs. Farming businesses need to know their true cost of production so they can make positive change in their businesses.
"A lean management approach could be merging blocks of land to reduce movement between fields or simply widening a gateway so a combine can move independently between fields without the cost of labour and fuel for a tractor and trailer to deliver the header. If farmers have a grasp of all their costs from the field up they can make simple but effective changes with confidence.”
4Sight Farming is working with four organisations to maximise on the outcomes of the project.
Joint Venture Farming Group (JVFG), a similar farming group in Oxfordshire, has provided benchmarking to its 14 members since 2003 to help drive down cost per tonne. Its established online data system will be used by 4Sight Farming to analyse the data from five core farmers, ‘the operational group’, to give them an in-depth breakdown of their own business.
The data from the other 20 group members will be analysed by EQ Accountants in Forfar, who specialise in agricultural services. The combined data from both groups will be used to provide a range of cost comparisons across operations and crops and to form the basis for discussion groups for the whole group facilitated by Mr Anderson of Scottish Agronomy and SAOS.
All 25 farmers involved will also benefit from workshops on lean management, financial planning and data protection workshops from SAOS, EQ and management consultants Urban Foresight.
George Noble of SAOS, which works with farming cooperatives across Scotland, said that they were keen to get involved as it is an exciting and important approach for the future:
“What is clear is that farmers need to be prepared for the future by maximising the value of the vast amounts of data that modern arable enterprises create, yet at present remains largely unused.
"The status quo is unsustainable and will be exacerbated, and farmers need to make effective decisions based on the data available to them. This project will allow farmers to make more informed decisions and also demonstrates the potential of co-operation and collaboration to achieve what would be impossible to resource and fund as an individual.”
Encouraged to see so much interest in the project, Mr Anderson explains why analysing fixed costs of production has historically been complicated:
“Most data comes from existing records which do not always include sufficient detail, and is often taken from financial records that have a different year end to the farming season. Without accurate information to benchmark against, it is very hard to make quality decisions, and this is where this project can offer a new lens to offer tangible solutions.”