30 August 2002

Farm size makes impact on profits

By Olivia Cooper

BIG is not better when it comes to farm size, says rural services company Tenon.

Despite widespread calls for larger, more efficient farms, its south-of-England survey shows that 300ha (750 acres) is the most profitable unit size.

Net income for a 300ha unit was about £250/ha (£100/acre) in 2001, falling to zero for a 3700ha (1500-acre) holding.

Agricultural manager Martin Rossiter reckons smaller farms tend to be more efficient, as they use family labour and diversify more. In contrast, big farms are more likely to employ a farm manager and staff, and concentrate on the farming enterprise rather than other income.

But it is other revenue that helped the average farm in the south to increase net income by 14% in 2001. The survey, which covered over 123,500ha (50,000 acres) of mainly arable and dairy land in the south, shows diversified income rose by 13%, to £173/ha (£70/acre) last season.

Of that, two-thirds came from non-farming businesses like storage and farm shops. These boosted average net farm income, before rent and finance, to £143/ha (£58/acre).

But the bottom line showed a loss for the third year running, at -£74/ha (-£30/acre) after drawings, rent and finance.

"It is getting harder to cut costs," says Mr Rossiter. Variable costs fell by £35/ha (£14/acre) to £215/ha (£87/acre) in the year, but overheads rose slightly for the first time in three years, to £566/ha (£229/acre). "There is only so much you can trim."

The picture does not look much better for the future. Few people can produce milk at current prices, and cereal markets are also poor, says Mr Rossiter. "But there are a lot of unknown factors. If prices pick up then incomes might improve." &#42