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VIDEO: Year of the Family Farm - Benchmarking

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It takes an open-minded farmer to admit they could run their business better. In the relentless drive to improve efficiency, comparing how one farm business is performing against others can be a powerful tool in highlighting where costs can be cut.


Farm benchmarking is often less about wholesale business change and more focused on a series of marginal gains to improve performance. While it can show simple savings to be implemented immediately, the information can influence a long-term strategy, leading to a gradual evolution in the farm’s structure and operation.


Pressure on farm incomes and an acceptance that support payments are likely to reduce raises the importance of farms sense-checking their performance against other farms. Strutt and Parker partner Rob Wilkinson says more farms need to do it.


“I suspect there is an element of benchmarking which goes on in most farm businesses, but a lot of it will be off the top of the head. “We have tried to encourage it for years and interest is born out of farming without Basic Payments. Farmers need to look at how they are going to put money back into their bottom line. “But the amount of people physically sitting down and filling out data is probably very few.


The reality is the number of farms benchmarking is probably nowhere near where it should be.” Benchmarking is not the preserve of the large farm. It can be deployed at all scales and is arguably more important to family farms which are more likely to prefer to cut costs than invest capital to improve their operation.

Five steps to starting to benchmark

  1. To begin with, start with the set of accounts
  2. Look at Farm Business Survey’s website and enter the data
  3. Take advice from a further source, such as a consultant or analyst
  4. Act practically on it by using an independent source who can analyse it and suggest the next steps
  5. Join and participate in a discussion group – national or regional

Mr Wilkinson says analysing performance with a view to making business improvements is as relevant to a 100-cow Shropshire dairy farm as it is for a 2,000-hectare (4,940-acre) Cambridgeshire combinable crop enterprise.


There is nothing new about the process, but technology has made it easier to capture and compare data quickly and easily.


Anything which can be measured can be scrutinised, from yields, labour and fertiliser costs to feed conversion, age at first calving and daily liveweight gains.


Mr Wilkinson says: “We split benchmarking into two categories: financial and management.


“The financial element goes off accounts and looks at figures such as turnover, machinery costs and labour, which are broken down into a £/ha figure.


“Management benchmarking looks at a farm’s equipment and people, so we can establish, for example, how much hp/ha they have, what their maximum drill output per day is, and how many labour units are required per job.


“Looking at this data usually starts the conversation about how other farms compare and where the farm sits. Is it in the top 25 per cent or is there significant room for improvement?”

Case study: Benchmarking against three groups

The more people you can measure yourself against the better, says Wiltshire dairy farmer James Wright.


Benchmarking on Wiltshire dairy farmer James Wright’s family farm begins as soon as the calves are born. Mr Wright farms a herd of 370 pedigree Holstein cows in the North Wessex Downs and starts by measuring a newborn calf around the middle with a weighband.


He says: “Every calf is born at different weights and we are aiming to get it to double its birth weight by the time it is weaned.” Mr Wright also utilises technology, such as a Volac automatic feeder for his calves, which he says allows different staff members to manage calves, as the machine keeps track of what each individual calf requires.


The farm then collects data on the cow’s fertility, health and yields, which Mr Wright measures against other farms and his own previous performances. He says keeping track of a cow’s fertility is paramount. “If she is only bulling for one hour in the middle of the night, we would probably miss the heat, so cows wear pedometers. “These measure the cow’s movement, as when a cow is in heat she will move around more.


It means we have eyes and ears on the cows 24/7, with the aim to get them back in calf quicker. “We are aiming for an 80 per cent plus survival rate from birth to second calving.” Mr Wright benchmarks across three different groups: nationally through his Sainsbury’s Muller contract; locally through his vets, Drove vets; and against a group made up of a ‘very diverse group of farms’, including low input and high input systems.


He says: “We can look at different aspects and we can see which way would suit the farm.” Mr Wright says due to benchmarking carried out on-farm, he is always adjusting the way it works, which has helped improve the farm’s performance.


“The more people we can benchmark against the better.” He denies benchmarking is simply a ‘box-ticking exercise’ and encourages those who might be cautious about sharing data to do it. Bonus He says there is a bonus to be made from benchmarking and reaching targets set by buyers.


“There is a bonus to be made. It is a motivator for staff and it will lead to being more profitable. “In terms of milk contracts, it is about making sure you get into their top band.”


Mr Wright encourages farmers who are cautious about sharing data to look into joining benchmarking groups, as results are confidential between those who present at meetings.

Data released - Annual benchmarking figures

An annual benchmarking survey from Savills released this month suggests collaboration continues to offer scope for cost savings. The survey covers 20,000 hectares (50,000 acres) of combinable cropping with an average farmed area per farm of about 300ha (741 acres).


Results suggest machinery sharing or contract farming agreements can reduce cost of production. High fixed costs, changes to key staff, succession issues or the desire to pursue other interests on or off farm are all prompting decisions by some farms to make the switch to contract farming, according to the land agency firm.


The research suggests an in-hand combinable crop enterprise would take £67/ha (£27/acre) from the 2016 harvest, while the landowner could earn as much as £161/ha (£65/acre) from employing a contract farming agreement.

Expert opinion - Measure to manage

If you don’t measure it, you can’t manage it’. This may be a well-worn management mantra, but if the objective of benchmarking is to understand and evaluate the current position of your business in relation to best practice, then the starting point has to be a sound understanding of where you actually are in relation to the top performers in any farming sector. Only then can you identify areas you need to improve.


To be both successful and profitable it is crucially important to set performance targets for your farm and to measure accurately how you are doing. For a dairy farm rearing its own herd replacements, for example, it is important to appreciate growth rates cannot be determined by eye.


Weight should ideally be monitored by calibrated electronic scales or a weigh band and not left to guesswork. Whatever measuring method you use, if it is used consistently then benchmarking between successive batches of calves and different years is achievable. And once you have an accurate handle on how your calves are growing, nutrition can be adjusted accordingly to make sure you hit target growth rates.


Benchmarking is central to Volac’s ‘Feed for Growth’ programme, but its foundation is undoubtedly consistent measurement of current performance. Once you know where you are, you can then look outwards to examine how others achieve their performance levels and understand the management practices they use.


In this way, benchmarking helps explain the processes behind excellent performance. Whether you compare how you are doing against industry norms, or simply want to discuss your business performance with other farmers in your local discussion group, there is no doubt benchmarking will help.


It is a powerful tool and it will certainly help you identify opportunities to improve your farming business.


By Ian Watson, young animal nutritionist, Volac

Taking part - Farm Business Survey

  • It is a free, comprehensive set of management accounts and, for many businesses, gross margin data as well.
  • About 1,900 farmers and growers are surveyed by universities and colleges.
  • Participants receive complimentary management accounts and information to help assess the state of their business compared with similar enterprises in their region.
  • Data includes turnover, assets, liabilities, land use, crop areas, sales, livestock purchases, labour use and much more.
  • Only the local data researching unit will be able to identify which farm provided the data, but will keep it anonymous from other participants; only your local unit will be able to identify the information you provide; your local unit will not reveal to anyone else you are taking part in the survey.
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