Business Clinic: Advice on budgeting for farm system change

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Here, Tom Hind, an associate with Carter Jonas Rural, advises on the consideration of going min-till and bringing livestock back into the rotation.

See also: Business Clinic – can I put a turbine on green belt land?

Q. We’re a 283ha combinable cropping farm and want to bring livestock back into the rotation alongside a move to min-till.

The most likely option is store lambs as we don’t want to get involved in lambing. One of our recently retired farm workers is willing to do shepherding on a part-time basis.

We’d like some budgeting advice for this change in approach. From your experience of this on other farms, can you also alert us to any pitfalls.

A. When considering a fundamental change to a business it is important to assess the balance of the gains and losses. In this case, you first need to carefully consider the short-term impact of transitioning to min-till.

The new tillage system must be attentively designed to avoid an unexpected decline in yield, which more often than not is a result of inexperienced management.

However, savings in establishment cost can often offset teething issues.

You will therefore need to consider if the proposed system is viable from the outset or whether it will take a few seasons to fully establish.

If it’s the latter, can the business survive the entire transition period with sufficient working capital going forward? If there is an intention to eventually adopt no-till, it may take years to see all the benefits.

Partial budget

As a first step, I’d recommend producing a partial budget – these are a fantastic, underused tool that can help calculate the cost/benefit associated with a specific change without producing a whole business budget.

A partial budget will help you quickly determine if the proposed changes will improve profitability in the long term and enable you to understand how the working capital requirement of the business could change.

Then you can decide if producing a full-costed budget for the farm is worthwhile.

Min-till and livestock integration will not suit every business – it’s best to realise this before any work starts, and a partial budget could therefore save you a lot of time and effort if that turns out to be the case. 

The pitfalls of min-till are usually associated with the teething issues during transition which can impact yield, for the first few years at least.

Slug populations can increase, and difficulties with weeds, pests and diseases can also be exacerbated.

As a combinable cropping farm, I would review the current weed burden and identify any additional measures that may be required to control this within the new system.

There is likely to be an increased reliance on agrochemicals going forward that will stress the need to monitor and control chemical resistance.

New skills needed

Reintroducing livestock will create a distinct enterprise on the farm which must be considered from the very basics.

The business must have the capacity to keep another tranche of records and have the skill set to purchase the right store lambs for your system, fatten them efficiently and sell them at the correct target weight/condition.

Forage must be either bought in or grown on-farm, which may impact your cropping rotation.

The partial budget will help balance the costs (including forage, concentrates, vet bills, medicine, a part time shepherd’s salary) plus any capital requirements, such as a handling system or trailer, against your budgeted sales.

It is worthwhile reviewing if the Sustainable Farming Incentive can support the new enterprise or, on balance, offer a more profitable alternative, such as under CSAM2 Winter Cover Crop for £129/ha.

Capital requirement changes

You also need to consider how the business’s capital requirements may change.

A transition to min-till will likely require new tillage equipment to be purchased which may alter the horsepower requirement of the existing fleet, potentially enabling rationalisation.

Subsequently, a change in mechanisation could impact labour utilisation.

Providing the business has sufficient capital to reallocate, remember to take a balance and consider if it is worth the risk.

Speak with neighbours or other farmers who have made the same decision and learn from their insights, particularly if you operate on similar soil types or regions with similar disease pressures or restriction zones.

It may be worthwhile trialling the new system first by hiring contractors/machinery/livestock to learn what issues you are likely to face on farm.

Giving concrete advice is difficult without an exact idea of the proposed system and farm constraints, therefore seeking expert guidance is key.

They will work with you through the points I have raised above and help you decide on the best course of action.

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