British farmers spent about £1.8bn on farm equipment in 2014, a drop of five per cent on 2013. Figures for the first half of this year reveal that UK registrations of agricultural tractors over 50hp - a good indicator of market activity - were down 16.2 per cent. Sales of tractors and farm machinery around the world are also on the slide as farmers tighten their belts in response to falling profit margins.
The amount of income that a farm business generates is often out of the farmer's control. A cold wet spring may result in a poor lambing, a dry summer and wet autumn may lead to a disastrous harvest, while a cold, wet summer may lead to poor growth rates in cattle.
As if unpredictable yields weren't a big enough problem to cope with, few farmers can predict with any certainty the prices they will get for their produce. Often as not they are price-takers who have to accept what buyers are prepared to offer them.
Farming budgets must be about as inaccurate as that of any business. I regularly saw my autumn sheep sales 20-30 per cent below the figure I had prudently budgeted.
While my farm receipts were invariably out of my control, I also have to admit that they were substantial. My problem was working out how to keep hold of as much as possible of the money that came into my business. One thing that I discovered the hard way was that I had more success controlling expenditure than I had budgeting for income.
I learned that when things got tight the best cure was simply to put the cheque book into a drawer and make every penny a prisoner. Too much money is often frittered away on things we don't really need. It's fair to say that too often the root cause of low profitability is not so much down to low receipts, but rather high expenditure.
Over-borrowing at times of high interest rates has ruined many farmers who were otherwise technically efficient. High fixed costs as a result of employing too much staff, or investing too much in buildings and machinery are other well-known weaknesses in a struggling business.
At one time most farms kept a full range of farm machinery. Having your own equipment ensured you got the job done on time, in conditions of your choosing. The snag with that is that modern machinery is very expensive.
A typical 150hp tractor can cost between £60,000 and £80,000, with really big, sophisticated ones well over £100,000. Most combine harvesters will set you back anything between £100,000 and £250,000, while a self-propelled forage harvester is well over £100,000.
Apart from the hefty cost of modern machinery, there is also the problem of finding farm staff to work the tackle. Silage or harvesting systems requiring four or five people were OK when farms had plenty of staff. Nowadays a lot of farms employ no staff and casual labour with enough skill to operate modern, sophisticated machinery is very difficult to find.
Sadly farmers don't take readily to sharing equipment with a neighbour. Although there's more of that than there once was, such practice is relatively uncommon. Instead, some farmers prefer to use agricultural contractors, while others opt for machinery rings to supply temporary staff and machinery.
Machinery rings are where farmers pool their machinery and staff. Scotland's first machinery ring was established in 1987, and now the Scottish Machinery Ring Association has member rings throughout Scotland, serving more than 7,000 farmers and other rural businesses.
The concept is simple. a machinery ring matches a shortage of machinery and labour capacity on one farm with a surplus on another. All agri-businesses are eligible to join and each pays an annual subscription in order to access the services.
A trained manager co-ordinates the movement of equipment and workers in the ring to best advantage. Each operation like mowing, baling or carting silage has a set rate, as has labour, so that everything can be properly invoiced.
So a farmer who wants to make silage may get his ring to supply most of the equipment and operators while he may drive his own tractor and trailer.
Later he may supply his own tractor, equipment and labour through the ring to other farmers, so that at the end of the year the ring might even owe him money.
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