Key points:

• Results from a sample of 45 flocks in the hill and uplands show the group (average flock size 582) achieved an average net loss of £13.36 a ewe.
• As with lowland farms, top third flocks are attaining higher value of lamb output. This is through better lambing performance and better returns per lamb sold either as a finished or a store animal.

• Total variable and replacement costs were over £4 a ewe higher in the top third group than the bottom third, mainly due to total cost of feed. However, this was more than offset by the better lambing rates and number of lambs reared.
• The bottom third of producers sell half of their lambs as stores, which is probably due to geographic location. But breed is likely to be an influential factor and could also account for the lower return per lamb sold as store.
• A significant variation occurs in the level of fixed costs between top and bottom third but when the family labour, rental value and interest on working capital are taken into account, the fixed and non-cash costs are closer at over £5 a ewe difference compared with £15 before the non-cash costs are considered.

• Net margins including non-cash costs show an average loss of £42 with the top losing over £28 a ewe and bottom at more than £50 a ewe.
• Variation of net margin, including non-cash costs, is largely down to output factors. For LFA flocks this highlights cost structures are less of an issue and that technical performance has been the main margin driver.
• Looking at total costs, the disparity between the top and bottom group is just over one pound.

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