27 July 2001

Consider contract options

GROWERS and landlords unhappy with contract farming operations should consider switching to a simple 50:50 wheat/set-aside system, suggests Lincs-based farm consultancy Aubourn.

Break crop profits have slumped so severely since area aid was standardised that the simple system is as profitable as a full rotation, but carries significantly less risk, says Angus Bell.

Not only are yield fluctuations less likely with wheat being the only crop grown, but there are also workload benefits, with seed-bed preparation possible pre-harvest following the set-aside period. To maximise rotational benefits a cover crop could be grown on the set-aside.

For the landlord, there is a more stable income and only half the demand for crop production capital (see table). Storage requirements are also simpler, since only wheat is being grown.

"It is something clients are starting to look at as a lot of agreements are being renegotiated and it certainly has appeal as a low risk solution," says Mr Bell. "It is a relatively risk free way of growing wheat on extra acres, but would not work where full fixed costs need to be offset across a range of crops." &#42


Standard 50:50 wheat/set-aside

Area £/ha £ Area £/ha £

Arable GM

W wheat 100 613 62,000 100 613 62,000

W beans 40 395 16,000 – – –

W OSR 40 440 17,750 – – –

Set-aside 20 217 4,400 100 217 22,000

Total GM 494 100,150 415 84,000

Deduct fixed costs

Contract fee 210 38,250 210 21,250(arable)

Contract fee 37 750 37 3,750(set-aside)

Drier costs 27 5,600 27 2,600

Interest 25 5,000 25 2,500

Total fixed costs 245 49,600 148 30,100

Net profit 250 50,550 267 53,900

Prior charge 210 42,500 210 42,500

Divisible surplus 40 8,050 57 11,400

Contract farming options (200ha)