UK farmers are spending too much on their farm machinery, says AHDB’s Harry Henderson.
Mr Henderson, the organisation’s knowledge exchange manager for the East Midlands, has been involved in an AHDB 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, is that machinery costs are too high, he says.
“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.”
Annual machinery and labour costs ranged from £288 to £593 per hectare across the farms, which measured from 97 to 1,278ha.
“Perhaps the surprising revelation is there is no correlation between farm sizes, meaning economies of scale are not being realised,” says Mr Henderson.
Some of the smallest farm businesses achieved the lowest costs and a few of the larger units incurred the highest costs per hectare.
Mr Henderson said: “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.
“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 is to review tractor usage and for farmers to keep what they already have for longer, he advises.
“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 machinery and business costs, he adds.
“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.