Ahard look at set-aside
WHEN new crop wheat is trading for less than £60/t and merchants have all but closed their books on the old crop its little wonder that farmers are looking hard at increasing their set-aside area for next year.
Provided you can cut drastically into overhead costs by shedding labour and machinery, 50% or even 100% set-aside looks an increasingly appealing option.
Arable aid for 2002 is estimated to be around £222/ha (£90/acre) which for a 100% set aside would gross around £49,900 for Easton Lodge. Deducting rent of £28,000 this would leave £21,900 to reward the tenant and pay for topping the natural regeneration as well as financing the residual bills for building maintenance, water rates, drainage charges and the like.
This business scenario would leave the tenant in tact and free to take up work off the farm thereby potentially doubling his income. In effect the business would be moth balled, the capital assets would be realised and the continual drain on the bank balance would be plugged. The casualties are the skilled and dedicated men and women who work on our farms and the rural economy in which they live. The businesses that feed off agriculture will also suffer with an immense knock-on effect.
Is it not time to consider a survival plan for our farming businesses while there is still time? At present the plain facts are that British agriculture cannot compete and since we can rely neither on the loyalty of consumers nor the intervention of our government we should act now.
Farmers however are optimists, they believe that next year will be better or that the United States corn crop will suffer from drought, or that the Far East economy will boom again forcing cereals back into three figures.
Farmers also have severe reservations about moth balling their businesses. Questions like; Where will the capital come from to re-equip if arable fortunes change for the better and, once made redundant where will the skilled labour come from?
More farmers are taking a firmer view and leaving the industry altogether. If you have vacant possession why not sell all or part of your holding? Prices have never been more buoyant held up by all those who have made their money elsewhere and who now want a piece of the countryside. There are those, too, who are able to diversify and we have all been to conferences and heard papers given by farmers and landowners who have applied for change of use for their farmyards and buildings and converted them into small business parks commanding mouth watering rents.
Or, like Easton Lodge, you can take on more land and hope that the economies of scale will bale you out. Here the arable area aid for set-aside has of course set a benchmark for farm business tenancy rents. If a landowner can get £222/ha (£90/acre) for doing very little then logic would tell him to expect something similar when offering his land for tender. In other words, cheap land does not exist.
I detect a wind of change which is essential if our industry is to survive and the people working in it are to get a fair return for their efforts.
At a recent A1 farmers board meeting which also coincided with our 33rd annual general meeting, members aired their views along similar lines. On one point we are all agreed and that is that overhead costs must not be regarded as being fixed.
If anything, it is the variable costs that are more difficult to change. Assuming that one has already addressed the crop rotation and one is growing the most potentially profitable mix of enterprises and since the budget yields will have been set, the inputs by necessity will have little room for manoeuvre.
Last week I pulled off our variable costs from the computer for the current year to date to compare with our final costs incurred for harvest 2001 (table).
The wheat costs reflect a saving of £17.60/ha (£7.12/acre) on seed and fertiliser compared with 2001 and with the possibility of an additional fungicide and insecticide on the ear plus another shot of magnesium we should end up inside last years total costs which would be helpful.
Barley is a different story, here the total costs have gone up, seed and fertiliser have increased by £21.77/ha (£8.81/acre) while pesticides are down by £9.72/ha (£3.93/acre). Seed rates last autumn had to be increased because we finished drilling late. We also applied nitrogen at 65kgN/ha (52 units/acre) in the autumn which had not been done the previous year, plus a further 140kgN/ha (112 units/acre) in the spring split-dosed which exceeded the previous years spring dressing by 20kgN/ha (16 units/acre).
In hindsight I wish I had done neither, especially bearing in mind the exceptionally good results achieved in both yield and malting quality last year.
Once again, both seed and fertiliser costs for oilseed rape have been cut for harvest 2002 by £9.23/ha (£3.74/acre) and pesticides are within 50p/ha (20p/acre) between the two years. But here we are holding our breath since we may yet have to spray again if alternaria rears its ugly head.
For the pea crop it is too early to call but if we add up the costs of fertiliser, seed and herbicides we are £4.73/ha (£1.91/acre) better off this year than last but with fungicides, insecticides and trace elements waiting to be applied it very much depends on the season from hereon in.
All in all, not much of a saving but one could argue that if the agronomy is right for the budgeted yield and the inputs are purchased competitively you are unlikely to make much of an impact on costs year on year. Output must go up and overheads come down – I think this is where we came in. *