Farm Business Management Practices 2007-8

More results from the Farm Business Practices survey of 2007-08 have been published by Defra. The main highlights are given on the first page. They show that the more educated farmers are more likely to perform better. A lot of farmers have no qualifications and do not practice basic business management skills. LFA grazing livestock farmers are less likely to have had any further/higher education. Arable farmers are more likely to have had a further/higher education and along with dairy farmers are more likely to consider improvements. Skills used by the top performers include risk management, IT, business planning, marketing and management accounting. Of these skills, 72% of high performers are likely to have at least 4 key business skills compared to 40% of low performers.

The measures of economic performance for the farms is the ratio between economic output and inputs and are divided into low, medium and high performance percentiles. The low performers make up the bottom 25%, medium the middle 50% and high the top 25%.

The results show that 60% of farmers have a further or higher educational qualification of some kind. Fewer, about 20%, have had business management training. Farmers with further or higher education or business management training are more likely to be top performers. At 29% it is more than in the 25% high performance percentile. More than 50% of LFA grazing livestock farmers have no qualifications at all. Nearly 50% of dairy farmers have a diploma/certificate in agriculture. Cereals farmers are more likely to have degree in agriculture and/or a business management qualification. There were a lot of farmers who had considered education and training but decided against it. The main reason given was than they were not sure of it's benefits to the business.

As far as skills and knowledge are concerned, farmers with skills and knowledge of management accounting are more likely to be high performers. Farmers not applying management accounting knowledge and skills (49%) are more likely to be low performers. Some farmers use more than one skill. The main management accounting skill used is reviewing the profit and loss account. Cereal farms are more likely to use all skills (except benchmarking) included in the survey. LFA grazing livestock farmers are least likely to use any management accounting skills.

Farmers using marketing skills are more likely to be high performers (32%). It is the same with IT (28%). Cereal farmers are most likely to have computing equipment. The least likely are the LFA grazing livestock farmers with up to 25% having no business computer. Some have computer equipment but do not use it for business. Of those who do not have a computer or do not use it for business, 45% are low performers and 20% are high performers. Broadband is widespread particular among cereal farmers and they are more likely to have computer literate business users.

Most farms don't acknowledge any knowledge or skills gap. Farms that do recognize a skills or knowledge gap are more likely to be high performers. The highest proportion were the LFA grazing livestock farmers (>70%) the lowest the cereal farmers (>50%). A risk management strategy was used by 70% of farms. A range of crops or enterprises was the most common. The farms with a risk management strategy were more likely to be high performers.

The uptake of technical advice seems to be an important factor in running farms with 98% of high performers and 93% of low performers saying they take technical advice. Business skills seem to give a certain edge. Diversification seems to require and provide more skills.

Formal or informal business plans were made by farms in all performance groups. The most common method used was to measure the farm's performance by the annual profit and loss account. The results showed that those that do not plan ahead are more likely to be low performers.

The survey also gives profiles of high and low performers who carry out at least one business management practice skill. The most common business management practice skills used by the high performance percentile include management accounting, IT, business planning and risk management. Of the high performers, 72% are using 4 key business management practice skills whereas only 40% of low performers are carrying them out. Of the high performers only 1% are using no skills whereas for low performers the figure is 11%. The high business performers have an average of £574/hectare farm business income and the low performers -£78/hectare.

The distribution of farms beween high and low performance showed that 50% of cereal farms were high performers and 19% of general croppers. Only 6% of cereal farms were low performers and 5% of general croppers. The low performers included lowland grazing livestock farms with 37% and LFA grazing livestock with 20%.

Earlier results published last March show that 24% of low performers did not identify any of the management accounting practices compared with 9% of medium and 8% of high performers. Most farmers with further or higher educational qualifications also had a diploma/certificate in an agricultural or related subject. The number of farmers with a diploma/certificate in agriculture have an inverse relationship with age group.

The survey was based on a sample of around 1,900 farm businesses from all regions and types of farming. The sample for management practices was reduced to 1,450 farm businesses but it remains a representative sample.