Podcast: Fertile Minds on contract farming and marketing

At the third Farmers Weekly’s Fertile Minds roadshow, this time in Edinburgh, delegates heard advice on contract farming agreements and marketing.

Sandy Ramsay, head of SAC Consulting Solutions gave new entrants pointers on negotiating with farmer landowners when entering into a contract and farmer Andrew Keeble, co-founder of premium sausagemaker Heck Foods, explained how, as a small business, he marketed his products.

Listen to the podcast and read the full event report below.

Contract farming agreements

Getting the farmer’s retention and contractor fees right are the two most critical factors when entering a contract farming agreement, according to Sandy Ramsay, head of SAC Consulting Solutions.

See also: Podcast: Fertile Minds on diversification and retailers

Fees

Speaking at Farmers Weekly’s Fertile Minds roadshow in Edinburgh, Mr Ramsay said would-be contractors must be thorough when calculating their fee during negotiations with landowning farmers.

“What a contractor should be doing is making sure the fee covers their costs,” said Mr Ramsay, who is also the programme director for Scotland’s Farm Advisory Service.

“You don’t want to be losing money on the contractors’ fee, otherwise the contractor is running a really big risk.”

Negotiating on the farmer’s retention or first charge was no less important, he added, since the divisible surplus shared between the farmer and contractor is based on what is left once the costs, contractors’ fee and retention are deducted.

“The more you rely on that divisible surplus, the bigger the risk you are carrying as a contractor,” he said.

“I would suggest that 80-90% of that surplus goes to the contractor, but I have seen people down at 60%.

“You’ve got three variables to get right: the divisible surplus percentage, the contractors’ fee and the retention.

“Somebody can make a Horlicks of all three and end up working damn hard and getting very little reward out of it.”

BPS

Contract farmers should also pay attention to whether the Basic Payments Scheme (BPS) receipt goes direct to the farmer or into the account in which the divisible surplus is held.

“If the farmer wants to put the payment into his account, he is in effect excluding the BPS from the agreement,” said Mr Ramsay.

“That alters a whole host of calculations, not least the retention and the divisible surplus.”

Mr Ramsay also said that share farming offered huge scope both for those farmers who wanted to take a step back and for new entrants to build a business.

Marketing

Earlier in the day, the young people at the roadshow were given advice on marketing from North Yorkshire farmer Andrew Keeble, the co-founder of premium sausagemaker Heck Foods.

Future proofing

Mr Keeble said it was crucial to future proof your business by looking out for new trends. For example, Heck Foods had recently added vegetarian sausages to its range, he said.

“We see that people’s diets are changing. We didn’t have a vegetarian business this time last year. In 2017, we will.”

Mr Keeble advised attendees to treat complaining customers with respect.

“Complaining customers are your best friend,” he said.

“Whenever we upset one, whatever their complaint, we are like Buzz Lightyear – we look to recover with style. If you take a complaining customer, treat them really well and respect their views, they become a fan. I’ve literally driven 100 miles to turn up on customer’s doorstep and apologise and I would do it again.”

Lean production

He also said lean production was vital to ensuring Heck Foods could compete with brands owned by large corporations.

“We’re the only independent sausage business nationally on the shelves,” he said.

“So how do we compete with the big boys? Well, we are better at our job.

“I was part of a huge business once and I’ve seen how many mistakes they can make just through bad production. We focus on lean production.

“We focus on our waste and how we can reduce down time in the factory. By being more efficient, we will always beat the big boys.”

Sponsor’s message

“NFU Mutual is pleased to support the Fertile Minds roadshows.

We hope that the expert advice on marketing produce and share and contract farming will prove invaluable for the roundtable attendees as they start their careers in agriculture.”