Barley … crunching the numbers.
September 3, 2012 § Leave a comment
My second visit to Daftmill was to look into the business of growing distilling barley. This article appeared in Whisky Magazine, no 104.
On a dreich April day I returned to Daftmill to see what a barley farmer actually does when supplying distilling barley to the Scotch whisky industry. I hopped into Francis Cuthbert’s Landrover and we headed out to tour some of his 350 acres of newly seeded Spring barley. Francis has this split roughly equally with disease-resistant, high quality malting barley strains of Concerto, Belgravia and Minstrel. ‘You can only sow what you can sell so it’s the end-user who determines what you will harvest,’ Francis says. In Daftmill’s case the Belgravia which is a high DP (diastatic power) grain will go for grain distilling as the high diastase content is crucial in enabling the conversion of starch to sugar in the wheat/maize mash. The Concerto and Minstrel are destined for malt distilling, some of the former going directly to production of Daftmill single malt, and all of the latter exclusively to Macallan.
These latter two varieties are of the high-starch, low-nitrogen type that malt whisky distillers need to produce the required yield of 420 litres of alcohol per tonne of malted barley. Nitrogen content in these types is around 1.4%, while in the high DP strains it is 1.8-2.2%. Currently Francis is in the final year of a three-year contract with Simpsons of Berwick at a set rate of £150 per tonne. The spot rate on the day I visited was £180 but a quick glance back at the autumn surplus of 2010 revealed a rate of £90, so there is some security in this arrangement.
But what are the costs? First there is the seed which he ordered in December/January at £495 per tonne. On a rough working of 115 acres for each variety, he needed 75-100kg per acre so his seed costs alone came to around £40 per acre. Sowing the seed amounted to £21 per acre and after that the crop has to be maintained by spraying. Fertiliser costs have risen steeply in the last few years and is now around £300 per tonne. Francis’s recipe is a 20% nitrogen, 10% phosphate and 14% potash mix. That adds another £60 per acre. Add to that the cost of the actual spraying at £50 per acre, and the minimum cost per acre is £171 or around £60,000 prior to harvest.
If you happen to own your own harvester as Francis does, you can ‘save’ the £30 per acre charge for contracting this out, but bear in mind a new one will set you back around £280,000. Francis did the canny thing and picked his up second-hand for around £40,000 but has to maintain it and they are expensive animals that depreciate while sitting and doing nothing for 11 months of the year so it still works out at around £30 per acre. Our cost per acre is now £201 or £70,350 in total.
After harvesting in late August and early September the barley’s moisture content is checked. Ideally Francis wants to deliver grain to the merchants with a moisture content of 15% so if it is higher he has to reduce this in the grain drier. If grain at 20% is harvested it will require £2 per tonne for every reduction of 1% of moisture so to get the content down to 15% costs another £10 per tonne. Should barley delivered to the merchant be found to be higher that 15%, a sliding scale of excess charges is applied so if the barley arrives at 16%, a 1.2% moisture deduction is made. If it creeps above 19.1%, the charge is 6.3% with another charge of £3.50 drying charge applied per tonne. It pays to get the sums right before despatching it all down to Berwick.
The merchant will then pass the barley over 2.5mm screens to get rid of small particles and a magnetic field draws off any metal objects. This is where farmer’s mobile phones sometimes reappear! The dried barley is stored in vast silos, most commonly found nearest to where barley is grown, as in Francis’s words, ‘It is cheaper to haul malt than barley as it is lighter.’ There are large silos in ports as seaborne transportation to maltsters is more economic than road haulage. The maltsters in turn then dry the barley down to 12% moisture content while malting it to each distiller’s precise specifications.
So where does all this leave Francis? His 350 acres will yield him 2.2 tonnes of barley per acre, or 770 tonnes which he will sell for £115,500. His variable costs have amounted to around £71,000 including an estimated £650 for drying some damp harvest, his gross profit is around £44,500. And that’s before we have discussed his fixed costs per acre …