How to maximise your grain margins
The HGCA, a division of the Agriculture and Horticulture Development Board (AHDB), has released its spring 2015 edition of Grain Outlook.
Maximising farm business margins through cost management is what Richard Laverick, the Head of Regional Development, is giving farmers advice on.
He advises farmers to start with a whole farm review, using the best advice you can afford and to do a full budget, review actual expenditure against budget at least quarterly but preferably monthly.
“Calculate your costs of production and benchmark your business against other similar farms then assess the key risks facing your business and put a programme of mitigation measures in place,” he says.
Laverick advises farmers to plan forward and create a five-year strategic plan for the development of the business, then update it each year. He also says to involve staff and key business stakeholders in your annual business plan.
“Use key performance indicators (KPIs) to engage staff and stakeholders in cost management” for example fuel use or tractor-hours worked, he says.
Laverick tells famers to calculate their annual cash cost of buying new equipment and involve the main operator in the decision making process.
“Before considering expansion, make sure your existing business is achieving optimum performance and profitability also be prepared to collaborate with neighbours and be open to all the different options which may arise,” he says.
Jack Watts, Lead Analyst with Cereals and Oilseeds advise farmers on grain marketing; he tells farmers to understand the local market and then grow for that market.
Watts says to understand the global market – factors that drive price volatility – to inform what price risk and opportunities face a farmer’s business. He also tells farmers to build trust, by getting to know processors and merchants that operate in farmers’ locality.
He advises farmers to identify costs of production so profit and price targets can be set and to try to move beyond fixed price selling to help manage the uncertainty of markets. He also tells farmers to ask buyers what they can offer in terms of minimum price contracts.
Watts tells farmers to manage feed base prices and premiums separately – they are subject to different market drivers, so need individual management. Finding out about new pricing scenarios showing how different strategies can help to manage the risks of a volatile market.
He tells farmers to explore the new Market Data Centre to dig down into HGCA’s market information and create customised graphs and tables and to subscribe to Grain Market Daily for the latest information on the markets.