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14 Aspects of Land Spring / Summer 2019
BUSINESS
Finding ways to keep a tight rein
on costs is always beneficial
to farming businesses, but the
pressure to do so will increase
over the next few years as the
Basic Payment Scheme reduces how much
farmers receive by £80 per acre by 2028.
One answer is to consider collaborative
working, says Alex Bragg of Savills Food
and Farming.
“To just stand still, farmers will need
to find ways to replace that £80 per acre.
That means increasing output, cutting
costs and finding additional income.
Increasing output is challenging, given
the vagaries of weather and commodity
price fluctuations, and finding additional
income streams doesn’t remove the need
for each aspect of the farm business to
stand on its own,” says Alex.
However, in many farming businesses
there remains the potential to reduce
costs, particularly around the area of
machinery and provision of labour. “There
needs to be a step change in agriculture,
around the approach to collaborative
working, which offers great opportunities
and can be as flexible as needed,” adds
Alex.
Working in collaboration can mean
anything from sharing one piece of
machinery right up to a whole farm-
sharing agreement.
“What is important, is to identify where
businesses are overcapitalised and how
they could be made more efficient,” says
Alex. “Key to a successful collaboration
is ensuring that the aspirations of each
individual are understood and aligned.
Often, you need two complementary
characters – for example, one who is keen
to run the office side and another who is
happy to get their hands dirty.”
A comprehensive written agreement
that includes termination provisions is
critical for protecting both parties.
“Issues can usually be mitigated if all
elements of the agreement have been
thoroughly discussed, agreed and signed
up to; this can be important when one of
the parties to the partnership sees their
circumstances change, and there is a
need for flexibility. It can also be useful
to have an individual third-party on board
to help pull everyone together and avoid
problems.”
The personalities of those involved in
the partnership are often the biggest issue,
but it is also critical to have clear goals and
be realistic about what can be achieved.
“We have one collaborative agreement
in place that was originally sparked by the
bank manager of both parties who saw
that both businesses were overcapitalised
and suggested they work together. That
agreement has seen savings of up to £100
per acre; but it is important to recognise
that while scale is beneficial to reducing
fixed costs there is a limit to this and
overall profitability must be kept in
mind,” says Alex.
The potential areas for collaborative
working go beyond machinery and
labour sharing; the latter sometimes
presenting challenges in anything less
than a whole farm-sharing agreement.
Thinking laterally can often help identify
opportunities; for example ways of
increasing buying power or shortening the
supply or food chain.
Farming businesses could work with a
local feed mill so that they are protected
from the risk of import and export
tariffs, and there is no need to haul grain
long distances. Similarly, oilseed rape
producers could work in tandem with
a crusher to shorten the supply chain.
Or an arable farmer could work with a
neighbouring livestock farmer to take
organic manure for use on their land.
“Working in collaboration can be as
simple or as complex as desired, but it
offers great opportunities for reducing
costs for the businesses involved,”
says Alex.
n To investigate ways you could benefit from
collaboration, contact Alex Bragg, Cambridge,
01223 347 206,
In a world of shrinking margins, sharing skills and machinery
with your neighbours could make a big difference to profits
All together now
IN THE FIELD
In 2007, Savills undertook the
restructuring of the in-hand farms
of the Brodsworth Estate near
Doncaster. This was the beginning
of a collaborative agreement with
Danum Farming Ltd – itself a joint
venture between two farmers.
Danum was formed in 2006
when Richard Smith and Tom
Morrell came together to
share machinery and labour
across their individual farming
businesses. Smith was focused
primarily on potatoes and
Morrell had a large scale arable
business with some sugar beet
and peas in the rotation as well.
“Bringing in the services of
Danum at Brodsworth allowed
machinery and staff to be reduced
and costs to be taken out of the
system,” says Andrew Wraith of
Savills Food and Farming. “For
example, by going from having
three combine harvesters to one
large one. As the three areas
of land farmed by each party
are relatively close together, it
has been possible to farm them
virtually as a single unit.”
Over the period of the
collaborative agreement, the
estate has worked with Smith
to install irrigation across the
estate land to allow potato
growing over a wider area.
Capital has been reinvested in
buildings and storage rather
than needing to be invested in
machinery, says Andrew.
“The whole operation works
smoothly, with each party
bringing something to the table
and taking a flexible approach
to optimising output within a
sustainable rotation.”
“Thinking laterally
can often help to
identify opportunities,
for example ways of
shortening the
supply chain”
KARAZBAEV RUSLAN / iSTOCK