Key points

• Data from 49 lowland suckler herds showed an average net margin (excluding non-cash costs) of -£164.37 a cow in 2005/06, the first year since the removal of direct headage subsidies. (Based on an average herd size of 67 cows).
• Comparing the top third net margin with the bottom third shows a difference of £304 a cow. This gap appears to be widening.
• Top third performance is down to optimising output and better total cost control. Variable and replacement costs were similar for the average and top third group, but about £30 a cow lower than the bottom third.

• Fixed costs of the top third group were £112 or 38% a cow lower than average. Lower overheads and paid labour contributed to almost one-third of the difference. Even when the value of unpaid family labour is considered, total labour cost on top third units was still significantly lower than average.  
• For bottom third units calves were 20kg lighter at sale compared to the average despite higher feed and forage costs.
•  Fixed costs for the bottom thirdwere £128 a cow higher than average and £240 a cow higher than the top third. The main differences were on power and machinery repairs and machinery depreciation and fixtures. While paid labour was £11 a cow higher than average, the value of their own labour was significantly higher than average and more than double that of top third producers.

• In 2006/07, while feed and energy costs are expected to be higher, output should benefit from higher suckled calf values and cull cow values.
   

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