28 February 1997

ARABLE FOCUS

HONEYMOONS never last forever and the heady days of high arable profits while sterling struggled on world currency markets are no exception.

Over the past three years the weak £ has injected huge sums of money into cropping businesses through higher aid payments and easier exports.

Now that has changed. The strengthening pound has sent intervention values tumbling and exports have become more tricky. Combined with a general downturn in the world market the result is a £30/t slump in cereal prices.

Thanks to Brussels support most farms can still make a profit. A typical 200ha (500-acre) unit could sell feed wheat, feed barley and rape at £83, £91 and £139/t and still make a £30,000 profit after overheads.

But take away area aid and you would need to sell the same crops at £119, £133 and £302/t to make the same profit. Just to break even would need £100, £111 and £252/t. With feed wheat, barley and rape selling for around £87, £89 and £164/t who says we dont need area aid?

This is the brave new world of life after a weak £. It throws into sharp focus the importance of knowing your business costs.

That should be your first goal as you prepare for lower prices and less aid. Only then can attention turn to lowering the unit cost of production, enhancing quality and improving marketing.

In this supplement we show how you can achieve those goals. Make no mistake – the tide has turned. Those who ignore it could see their businesses submerged as price pressures wash away their profits.