Recently in Farm incomes Category

Sheep producers received a bigger share of the retail price for lamb in December 2011, but beef and pig farmers saw little change, according to AHDB’s latest UK Market Survey.

Strong export demand and tight supplies saw the average deadweight ex-farm price for lamb increase by 42p/kg in December compared with the month earlier. Over the same period the retail price declined slightly, so producers received almost 60% of the final retail price, up 6% on the month.

Overall during 2011 producers received 59% of the retail price, compared with 55% in 2010.

Beef producers received on average 54% of the final retail price during December, 1% down on the month, but 5% higher than December 2010. Pig producers saw a smaller improvement on the year (up 2%) and still receive a much lower share. The average ex-farm deadweight pig price equated to just 39% of the retail value in December.
 
 

FW has been hearing of some impressive rapeseed yields this season, despite the Spring's drought. One farming contributor in the office this week reports nearly 5t/ha in southern Oxfordshire (although he was less keen to talk about his barley).  But what remains to be seen is how much we have as a nation to export, and how this gross tonnage will influence prices. There are several ways the industry collects this information and the NFU is urging members in England and Wales to complete its harvest survey.
Chief arable adviser Guy Gagen said: “Historically, the harvest survey has proven to be a reliable estimate and provides the most accurate early forecast for UK crop yields and production levels. To ensure it is comprehensive it is vital that as many farmers as possible take part. The data gathered supports the results of DEFRA’s own survey later in the autumn and fills an important gap between harvest and when official estimates are available."

 

Long term prospects for UK cereals growers are still positive but higher input prices and the effects of drought may put short term pressure on cashflows, warned Lloyds TSB’s agriculture director Gareth Oakley at last week’s Cereals event.

He called on farmers to discuss requirements with their bank manager sooner rather than later. “There may be particular problems for growers who committed to sell large volumes of their crops forward. If they do not grow enough grain then they may be forced to buy in expensive stocks to cover their commitments.”

Short term issues could be addressed either by early discussions with cereal buyers to agree a strategy to deal with any problems or managed through cash flow if banks were involved early enough and understood that an action plan was in place.

The value of the euro recently reached about 90p, prompting more advisors to urge farmers to use currency hedging to secure the value of their single farm payment.

Fixing the exchange rate now takes the risk out of currency fluctuation, making budgeting easier for the coming season, says Andrew Vickery of rural accountant Old Mill.

“Sterling values have reached an important trigger point, and everyone should be considering their options. This is not about speculating on the currency markets, it is a tool to manage volatility.

“Although taking such a step can seem complicated, it is actually a very simple process, and is now normally done via a straightforward foreign currency contract, so there is no need for an additional euro bank account.

“Action can still be taken if you have submitted your 2011 single payment claim, irrespective of whether you have elected to take your payment in sterling or euros,” says Mr Vickery.

 

A valuable concession reducing the tax paid on income from mineral royalties is under threat. Last week’s Budget signalled Government plans to abolish a range of tax reliefs in the 2012 Finance Bill after consultation.

Half of the income from mineral royalties is currently taxed at income tax rates and the other half at the 28% capital gains tax rate, which meant a considerable saving for many landowners and farmers, said Carter Jonas partner Paul Malam.

“The present tax system for mineral royalties has been in place for a considerable period and recognises the unique nature of minerals extraction in that the asset is depleted over time,” he said.
 
The announcement on mineral royalties contradicts recent advice on the relief from the Office Of Tax Simplification at HMRC.

The Sterling:Euro exchange rate is at its lowest for four and a half months, with one Euro worth almost 87p which is better than the rate set for 2010’s single farm payments.

Whether you have chosen to take sfp in Euro or not, the rate can be protected relatively easily and cheaply, says Tom Barclay at currency broker WorldFirst. He has seen more sfp claimants moving to protect their payments against adverse currency movements in recent weeks by fixing their Euro exchange rate in advance.

 

North west accountant Dodd & Co’s annual farm profits survey shows the extent of dairy farming losses even before the grain price rises of this summer.

Fifty specialist dairy farms in Lancashire, Cumbria and Dumfries and Galloway with year-ends from February to April 2010 made a loss of 0.22p/litre after drawings and tax.

This is a stark contrast to 2009, when they had been running at a surplus of 3.11p/litre. The average milk price in the sample was 23.97p/litre, down from 26.61p/litre in 2009.

The survey also reveals that on Scottish farms in the sample, the sfp was worth 2.2p/litre more than on dairy farms south of the border. The survey includes further results for 50 livestock farms.

 

November 2012 wheat futures have - after some persistent hesitation - reached £150/t. Which leads me to start doodling some sums. Assume a farmer sold 2010 feed wheat at, say, £150/t, and has some left to sell. And he's going to try to take advantage of the scope current markets offer to extend the boom as much as he can. He's taken positions on May 11 wheat (£213/t), November 2011 (£181/t), March 2012 (£183.50/t), and November 2012 (£155/t). That's an average of £176.50/t over 3 seasons, albeit a futures price, not an ex-farm one. To establish that kind of base point in a marketing programme, with scope to react to market movements, looks like a fantastic opportunity. Or perhaps it's because I've just been reviewing a set of farm reports from 2004-2005, where, even with forward selling, contracts and market speculation, the best a pretty sharp arable business achieved was £76/t.

EBLEX is hoping to reach a wider audience for its What If? costings tools by making them available through the Government’s Business Link website.

Producers can enter physical and financial details for their own flocks or herds and see quickly and relatively easily the financial impact of changing input prices and output costs as well as performance factors such as lambing percentages, feed rates and sale weights. This helps to highlight opportunities for improvements and efficiencies.

The free online calculators are part of the Better Returns programme and are already available on the EBLEX website. They cover six enterprise types including lowland and LFA sheep flocks, extensive and intensive beef finishing herds as well as suckler herds.

Asda is to pay its Pork Link producers an 8p/kg deadweight feed price supplement for the 3000 finished pigs a week they supply, in recognition of the problems caused by high feed prices and low market prices.

The National Pig Association now wants to see similar action from other buyers, said chairman Stewart Houston.

The last pig slump of 2007-08 saw the UK pig breeding herd contract by 7%. He also called on retailers to reduce their reliance on imports - a move that would leave scope for the price of home-produced pigmeat to rise.

Some abattoirs had recently been rolling pig orders on by a week or more because it was easier to do this than get out of import contracts, said Mr Houston. Apart from increasing feed costs, this also raises the risk of producer incomes being hit further by weight and grading penalties.