Livestock farmers are being encouraged to maximise their resources in order to lower fixed costs and remain profitable as farm payments tighten.
According to a leading beef consultant, even when cereal prices are high, most livestock farms in the UK and Ireland see positive gross margins but no profit after land, labour, machinery and capital have been accounted for.
Dr Jimmy Hyslop at SAC Consulting warned that little was being done within the industry to improve fixed costs, while the gross margin picture was a “good news” message for the sector.
Addressing the recent RuminOmics conference in Edinburgh, he said: “A lot of research focuses on things like feed efficiency and animal health costs but very little relates to fixed costs.
“Adjusting business strategy and production systems to ensure fixed costs generate more income that makes profit should be a clear focus for business-minded farmers.”
He suggested farmers look at diversifying, citing renewable power, consultancy and property lets as options for some. Other examples he gave included:
- Can a livestock shed (factory building) that cost a six-figure sum (often borrowed) be used in some way to generate extra income during the summer months instead of standing idle and earning nothing?
- Can the time taken for routine daily tasks such as feeding, bedding or scraping out be streamlined in some way that would free up expensive labour time (often by farm businessmen themselves) to devote to more profitable business minded activities?
“These are the kind of basic, profit-focused questions that can yield business success as subsidy levels become a smaller feature of most farming businesses into the future,” he added.
On the supply side of the market, he dismissed making product scarcer to maintain prices as a “dead duck” business strategy, championing growth and expansion.
“The only thing that the industry as a whole can do is to grow the beef and sheep sectors in Scotland, the UK and Europe as well,” he added, emphasising the role of processors in a bright future.
“We have got to have the infrastructure of slaughterhouses and meat processing plants. Far too many sheep go south of the border and get slaughtered outside Scotland.”