Farmers advised to collaborate to face rising costs

Inflationary pressures on farm businesses could be reduced through better collaboration with other farmers and processors, a leading banker has suggested.

Addressing farmers at an NFU Cymru seminar at the Royal Welsh Show, HSBC’s deputy head of agriculture, Euryn Jones, said price volatility combined with high interest rates are hitting many farmers across all sectors.

But the businesses that are coping best are those that are prepared for market unpredictability.

See also: Farm profit forecasts point to focus on fixed costs

Individual actions

Mr Jones singled out the red meat sector as one that could most improve on grassland production and utilisation.

“I don’t think I have met an arable farmer who does not take agronomy advice, but it is still a rarity on a grassland farm.”

In Wales in particular, where a range of funded services are available through Farming Connect, Mr Jones advised farmers to use that support and advice.

He encouraged them to scrutinise their breakeven costs, but to not slim down their cost of production to the extent where it impacts on business performance and animal welfare.

“It is possible to overdo it, to cut costs that shouldn’t be cut, and I am aware of businesses where that has impacted on the health of the herd.”

“Obsessing’’ over tax minimisation is not beneficial either, he suggested.

Businesses that had best weathered the storm of high inputs are those with some form of diversified income.

“There is resilience that comes from having a degree of diversification,” said Mr Jones.

Farmer collaboration

For farmers who are geographically close, sharing machinery can yield major cost savings.

Mr Jones gave the example of two farmers who shared a feeder wagon, one using it in the morning, the other in the afternoon.

In situations where farming partnerships have split, it can make business sense to keep sharing machinery. “That can lead to a degree of efficiency,” said Mr Jones.

Buying groups for inputs such as feed, fertiliser and fuel, can allow businesses to secure a better price deal than buying individually.

Collaborating through benchmarking also has major benefits.

“The range of production costs in agriculture is very significant. The best keep getting better and the worst don’t change very much,” said Mr Jones.

“Benchmarking is useful for challenging businesses to improve.”

Collaboration in the supply chain

Farmers on aligned contracts have remained strong throughout the crisis of high input costs because those agreements take account of production costs.

Mr Jones believed aligned contracts would become more commonplace as buyers seek to improve their environmental credentials.