Saturday, June 23, 2018

Keep an eye on machinery costs this harvest

May 31, 2018 by  
Filed under Crops

Growers heading into harvest are being advised to keep a close eye on costs – following a recent project suggesting farmers spend too much on machinery.

AHDB expert Harry Henderson has been part of a team leading a Monitor Farm project to look at machinery and labour costs across 21 farms. Although the reviews found huge variation between farms, it was clear 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.

Serious savings

Machinery is the biggest cost element in growing a tonne of wheat is machinery, accounting for 25-30% of total spend. This means it is also the area with the biggest potential for growers to make some serious savings.

Annual machinery and labour costs ranged from £288 to £593/ha per hectare across the farms, which measured from 97ha to 1,278ha. Mr Henderson says: “Perhaps the surprising revelation is there is no correlation between farm sizes, meaning economies of scale are not being realised.”

Some of the smallest farm businesses also ran the lowest costs and a few of the larger units incurred the highest costs per hectare. This means the common idea that scale helps to spread costs does not always ring true.

While wet springs and catchy harvests mean many farmers are keen to have increased drilling or harvesting capacity, Mr Henderson says farmers need to look at this policy in terms of cost to the business.

Questionable conditions

Heavier, larger machines can also lead to deep compaction, which can take years to correct. At the same time soil care loses out when larger machines are operated in questionable conditions. The prospect of Brexit is another reason to review costs.

“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 for farmers, said Harry, is to review their tractor usage and to keep what they already have for longer. 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.”

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