Machinery Rings

Author:Mr Mark Charter
Profession:White & Bowker
 
FREE EXCERPT

In many cases farming businesses will have considered improving their financial position through benefits of scale.

Frequently farmers will have sought to achieve benefits of scale by acquiring more land either through purchase or rental. However (and despite a depressed agricultural industry) the cost of land acquisition (whether in the form of freehold prices or FBT rents) in many areas has remained high; consequently if a farmer is not careful the cost of land acquisition can negate any benefit derived from economies of scale arising from an increased land area.

An alternative approach to achieving benefits of scale is clearly to consider means of reducing production costs (without necessarily increasing the area farmed). Using machinery over large areas (either through the medium of partnerships, contracting arrangements or machinery rings) provides the opportunity to reduce labour and machinery costs.

13 Years Old

The first machinery ring was formed in Scotland in 1987 initially by a group of fifteen farmers. There are now a number of machinery rings in existence throughout the UK. Co-operative arrangements for the sharing of machinery and labour between farmers are numerous and vary from the large machinery rings at one end of the spectrum to less formal arrangements being operated by, for example, members of the same family farming different farms in a locality, at the other end of the spectrum.

Whatever structure is adopted for the sharing of machinery and labour, essentially such arrangements have a common purpose namely:

To match a shortage of machinery and labour capacity on some farms with surplus on other farms.

To reduce the farmer's machinery and labour costs.

Whatever the size of the machinery ring to avoid problems in the future:

the manner in which the machinery ring is constituted should be clear to all (and properly documented), and

for the arrangement to be a success the members have to be committed to the machinery ring (many of the large machinery rings are registered under the Industrial and Provident Acts).

The opportunity to share labour and equipment, and accordingly reduce production costs inevitably will be looked at by an increasing number of farmers; indeed machinery rings and sharing arrangements provide a real opportunity to reduce production costs.

Documentation

However before a farmer enters into any such arrangement he should satisfy himself that a variety of issues are addressed in the sharing...

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