Cereals 2009: Contract farming results prove yield is king

Bidwells latest contract farming results have reinforced the old adage that “yield is king”, as the high yields last harvest more than compensated for lower prices and higher costs.

Analysis of about 90 contract farming agreements showed a 15% increase in net profit last season from £479/ha (£194/acre) to £552/ha (£223/acre) – a result that may surprise some given the economic downturn and hike in costs seen last year, Bidwells’ David Cousins said. Farms that combined sound agronomic and marketing policies with proactive management fared best.

But the results revealed that variable costs continued their recent upward trend, reaching £308/a (£124/acre) and the high fertiliser prices for this harvest’s crop are expected to add to the rising trend.

On average, the profit share for the contractor rose 15% from £180/ha in 2007 to £208/ha in 2008. The level of Prior charge (the farmer’s first charge on profits) increased by an average of 3% in 2008 to £214/ha as a result of reviews of terms carried out in the previous year.