16 November 2001
Arable bottom 25% ‘can’t survive’

By Tom Allen-Stevens

THE bottom 25% of arable farm businesses have been sapping capital reserves for the past six years and cannot survive, a senior accountant has said.

Gary Markham, agricultural partner at Grant Thornton, said even the best-performing farmers are barely breaking even with wheat at 65/tonne.

(/ha) Top 25% Average Bottom 25%
Yield (t/ha) 8.97 8.75 8.55
Arable Area Payments 220 220 220
Variable Costs 203 213 222
Fixed Costs 358 425 546
Total Costs 561 638 768
Rent and Finance 104 89 79
Drawings assumed 136 136 136
Cost per tonne (/t) 65 73 89
Other income (/t) 19 14 16
Net Cost per tonne (/t) 45 59 73
Average price received (/t) 65 65 65  

For most growers, the income they receive is propped up by contracting, straw and hay sales, rental income and other non-production income.

“The bottom group cannot survive,” said Mr Markham in a reply to a question on FWis lo-till advice line.

“They are living off their capital and have been doing so since the last time they made any profit, which was in 1995.”

The revelations have come from his analysis of the Grant Thornton client data, based on its total client base of 73,000ha.

The advice-line question came from agricultural student Fiona Mackie, who asked whether lo-till could help farmers overcome low cereal prices.

“I think we have to be careful with lo-till,” responded Mr Markham. “Survival means generating profit in the overall business.

“It may sound great to reduce the crop establishment time, but the trick is to turn that time saved into cash.”

Savings in production costs by adopting lo-till were unlikely unless a worker retires or the business becomes part of a syndicate, he said.

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