Many farm businesses ask us for ideas and advice in their fuel setup. How often should I buy? How large should my tank be? How much lead time is best for suppliers?
Every farm will have different answers to these questions. In this article, we lay out some of the common thinking to help you optimise for your business and needs.
What do you need?
Before we get going, list out key facts on your needs:
1. How much fuel do you buy? In a total year? In a week during peak harvest season? Your tank should give you at least a week of fuel in the busiest part of the year.
2. How many farm sites do you operate? How far apart are they? Are they too far to get machinery, including bowsers, between them efficiently?
3. What are the access points to your sites? Are they tarmacked with wide access? Large tankers require clear access on firm roads.
4. What do you value more? Ensuring availability, or ensuring you don’t get caught out when the fuel market is expensive? Set your priority, and your setup follows from there.
These questions will help you manage the trade-offs in deciding on your setup.
Big or Small?
Next, let’s consider two broad strategies for your fuel: big tank, big volume vs small tank, frequent buying.
Big Tank, Big Volume:
- Can ensure availability over a longer period of time, especially when you (and suppliers!) are busy
- You can ‘lock in’ good prices when the market is down by stocking up well ahead of need
- You can secure full tankers from your suppliers, which makes for the best prices as the most efficient logistics costs. Full tankers are 18’000L (a ‘Rigid’), or 36’000L (an ‘Artic’) direct from the fuel terminal for the very best price
- In combination with mobile bowsers, you have more flexibility on moving fuel around your farm sites, rather than having fuel stuck in smaller tanks which may not match the current need
- You can’t guarantee that you’ll be able to buy when the market is at its best, so you may miss out on favourable price improvements
- The investment in installing a very large bunded tank can be significant
- You need to ensure you don’t over-buy, as diesel can start to lose quality and begin to sediment after 6 months in the tank
- If you operate multiple sites you may need to travel back to the central tank to fill up, using up valuable time and fuel itself. Mobile bowsers can solve this problem by bringing storage direct to sites
Small Tank, Frequent Buying:
- Smaller tanks require less capital investment to install
- Frequent buying ensures you don’t get caught out by price swings, as you spread the risk evenly across the season to get an ‘average’ market price
- With multiple sites, a lot of coordination is required to monitor fuel levels and ensure they are all adequately filled for upcoming needs
- Even without multiple sites, at the height of harvest you’ll need to be carefully monitoring volumes and ordering frequently. Independent tank monitors can reduce the risk of running out
- You cannot achieve the best prices per drop if the tanks are less than a full load of fuel (18’000L or 36’000L)
- Taking on additional land may overstretch the capacity of your small tank so you will need additional capital expense
Getting the extra edge
As well as your tank size and strategy, there are a couple of pieces which can help you stay on top of your fuel purchasing:
- Install independent telemetry (fuel tank monitors). This helps you manage fuel levels remotely without physically going to the tank, and get alerts when your minimum tank volumes are reached. This helps you make sure you never run out, as well as helps multi-site farms centralise purchasing across multiple tanks.
- Pool demand with nearby farms. If you don’t have the tank capacity to order a full tanker of diesel, work with neighbours to reach the volume required, to take down your cost per litre. Technology can play a critical role in coordinating multiple farms and demand.
- Spot buy from a broad range of suppliers. We have seen how this leads to the best price outcome for the farm, since the relative cost base of suppliers is constantly changing, you can never predict who will be the cheapest on the day.
- Give at least 3 days’ notice in busy harvest periods. Suppliers get extremely busy, so make sure you get the best price and you’re top of the list on delivery day, by giving them plenty of lead time.
- Cut down your idling time. Big engines on idle still burn fuel! If you’re looking to squeeze the last percentages of performance from your operation, make sure engines are off and not idling.
And remember your health and safety! Modern tanks should be bunded for to prevent spills, and make sure you have a safety protocol in place for your suppliers to deliver with minimum risk.
Putting it together
Start with your needs: if you want to ensure timely availability from your fuel tanks above all else, piece together the tanks and technology to have plenty of volume on site and full visibility of tank level. If you just want to de-risk the price of fuel, order little and often, understanding this will take more management time.
In the end, each farm is different and should find its own preferred setup. Spending time assessing your setup will rapidly pay dividends.
We are happy to help discuss your setup, and adopt any technology features mentioned above. Get in touch today for a consultation, or to get setup with our online fuel ordering system.