14 August 1999

Futures bright if youre big

LARGE cereal units have better management, higher output and considerably greater incomes than smaller ones, according to a report written by Séan Rickard, director of the executive MBA at Cranfield School of Management. The trend is likely to continue, he believes, with larger farms more able to adapt to the future.

"Large farms are in a much stronger financial position. By 2005 there will be considerably fewer cereal growers producing more cereals. We should welcome moves in that direction," he states. The report, commissioned by Lloyds TSB, is the second in a series Challenges and Prospects – UK Agriculture at the Millennium.

The former chief economist at the NFU has an impressive array of facts and figures to back up his case. Data from Cambridge Universitys Rural Business Unit, used as a benchmark by agricultural economists, show that larger growers produce higher yields for lower costs, and they receive a higher price per tonne (see table).

"Cereals are viewed as a commodity crop, so the larger farmer will always be in a better bargaining position on the open market, and tends to manage fluctuations better. When it comes to niche markets, often the saving grace for small meat farmers, there are fewer opportunities for small cereal farmers," he maintains.

He points out that many middle-aged farmers are likely to sell up, or contract out, when they retire because the next generation, with perhaps a small family, would need a comparatively greater revenue.

So what does the future of the cereals market hold? Mr Rickard is upbeat and optimistic. "The rest of the world is on your doorstep and you are part of it. Freer global trade in farm products will lead to greater opportunities. These opportunities will be highest where the demand and the standard of living are rising fastest: Asia. The continent is experiencing an impressive recovery and you ignore it at your peril," he asserts.

The future looks bright, he concludes. "I believe were never going to face a year tougher than this last year."

&#8226 Copies of Mr Rickards report can be obtained from Lloyds TSB business unit on 0117 943 3114.

By Tom-Allen Stevens


Areas of cereals and set aside <40ha 200+ha

Wheat

Yield (t/ha) 6.62 7.92

Price (£/t) 80.72 86.90

Returns: £/ha £/ha

   Grain 535.10 685.80

   Straw 32.13 10.39

   Arable area payment 253.86 250.76

Total Output 821.08 946.95

Variable costs:

   Seed 52.15 47.38

   Fertiliser 93.81 101.91

   Crop protection 108.62 123.48

   Other 69.07 26.26

Total variable costs 323.65 299.02

Gross margin 497.43 647.92

Variable costs (£/t) 50.80 38.35

Source: University of Cambridge 1997/98