19 March 1999

Price reduces pigmeat tonnage in Russian aid

LESS pigmeat than expected will be included in the first tranche of EU food aid to Russia.

Brussels had earmarked 30,000t for the purpose, but most bids to supply were judged too expensive.

Awards were made for just 8000t of half carcasses. Most came from Germany (6500t), where bids ranged from k1305-k1404/t (£874-£941/t). The UK failed to secure a place for 500t of forequarters at k1278/t (£856/t).

But Mick Sloyan of the Meat and Livestock Commission believes the full 100,000t in the programme should still be shipped by the end of July, helping to relieve EU over-supply and associated price pressure. Last year the EU was 109% self sufficient, leaving 1.5m tonnes for export.

"This is the first time the pig industry has done anything like this. It takes time to arrive at a sensible bid price and understand the system," says Mr Sloyan.

The first trainload of beef is expected to arrive on Mar 24, after bids for 20,000t of Irish and 10,000t of German boneless intervention beef were accepted. Bids ranged from k133-k170/t.

Contracts were also awarded for 280,000t of wheat from French intervention stores, and 100,000t of rye from Germany. Bids for 10,000t of skimmed milk powder were rejected.

lDutch pig farmers have won the first round in a battle to stave off an enforced cut in the national herd.

Producers were incensed when their government announced plans last April to introduce quotas to cut pig numbers by up to 25% by the end of 2000 compared with 1997 levels.

The aim was to reduce manure levels, which are causing a huge environmental problem in Holland. But farmers, dismayed by the size of the cuts and lack of compensation, took the government to court. As a result, the programme, started in September, has been suspended, putting the overall plan in jeopardy.

Meanwhile, plentiful supplies continue to overhang the market – Dutch output fell just 2-2.5% last year. &#42

Plunging profits force contractors to slash their costs

By Robert Harris

CONTRACT farmers are having to cut costs hard as returns from management agreements tumble, latest figures from property consultant Bidwells reveal.

Contractors charged land- owners £94/acre to farm the land in 1998, almost the same as the previous year. But additional income from profits fell to £23/acre, down 37% on the year.

This produced an overall contractors return of just £117/acre, almost 10% lower than 1997 and just half of typical 1995 levels, says Bidwells Richard Potter.

A near 10% fall in net profits was partly to blame. But land-owners also increased their prior charge, or initial share of the profits, by almost £2/acre, to average over £95/acre.

This represents almost three-quarters of the net profit, a climb of almost 9% on the year.

Add the share of remaining profits, and landowners average income hit £108/acre, just 1.2% lower than 1997, says Mr Potter. On an average size farm of just under 400 acres, this amounts to an income of over £42,000. But in the top 50% of farms, owners income hit £128/acre, up 5% on 1997.

"Pressure to reduce labour and machinery costs by increasing acreage remains intense, and ensures that contract managers must keep costs to a minimum," says Mr Potter.

This year is likely to see the same trends continuing, he adds. "Contract managers can operate successfully for a total return of below £120/acre provided that additional land is taken on without increased investment in additional machinery or employment of extra labour. Successful agreements will therefore depend on securing managers who can operate at low costs without prejudicing the efficient management of the farm."

lAverage gross output/acre in the Bidwells survey dropped from £397 in 1997 to £360 in 1998. Variable costs decreased by 16%. &#42

Glanbia returns increase

IRISH food company Glanbia (Avonmore Waterford) has announced a 25.6% rise in profits before tax and exceptional items to IR£75.36m (£64m) despite a slightly reduced turnover of IR£2.3bn (£2bn).

Exceptional items, including the disposal of the Wisconsin, USA, businesses and further reorganisation, cost IR£30m (£26m).

Strong margin growth was made in the consumer foods and food ingredients operations, says the company. Glanbia is the largest supplier of cheddar and territorial cheeses to the British retail sector, and a big supplier of liquid milk in the UK.

In this market, there was a good performance in doorstep sales, but "intense" competition in the multiple retail sector cut volumes, highlighting the need for rationalisation within the sector, says Glanbia.

The meat division produced a "very disappointing" result, it says. Operating profit fell 56% due to global oversupply of pigmeat and sharply reduced demand in Asia.

A second interim dividend of IR3.1p is to be paid on ordinary shares, taking the total dividend for 1998 to IR5.35p (4.54p). &#42


Harvest Year 1994 1995 1996 1997 1998

Owner

Prior charge (£/acre) 68.7 71.4 77.9 93.7 95.6

Profit share 29.3 49.4 34.8 14.0 10.9

Income including

depreciation 99.3 122.3 114.0 109.3 108.0

Contractor

Contracting charge 85.5 90.1 87.6 93.4 94.0

Profit share 88.7 131.0 87.3 36.1 22.9

Total return 174.2 221.1 174.9 129.5 116.9