The cost of production for feed wheat could hit £130/t next season, and many growers will struggle to turn a profit without subsidy income unless prices start to climb. That was the stark prediction from consultant Andersons at Cereals.
It estimated that higher fuel and fertiliser prices, plus increased rents, would push typical costs of production for winter feed wheat towards £115-130/t in 2009, compared with £97/t this year and in 2007.
“If the wheat price goes below £115-120/t, many combinable crop growers will be in a situation where they’re dependent on support to make a profit next year,” Andersons’ head of business research, Francis Mordaunt said. “The margins from production are that thin and I don’t see any sign of the principal costs – fuel, fertiliser and metal – coming back £115/t is very much the new break-even figure for feed wheat if you include rent and finance, plus the farmers’ own income.”
The situation this harvest was slightly better, despite escalating costs, because many growers bought fertiliser last autumn and sold a proportion of crops forward at higher prices, he said.
Machinery depreciation could be another significant cost, particularly as many growers had recently invested in new equipment, Mr Mordaunt added. “Some will have gone a bit overboard on replacing kit, so you could easily add another £20/ha [£2.20/t at a 9t/ha yield] on to the cost of production.”
Cup half full? Andersons’ Francis Mordaunt at Cereals 2008 this week, where farmers’ attitudes were generally upbeat.