6 September 1996

Hill suckler units most to lose in market crisis

UPLAND suckler cow units have been identified as the main long-term losers from the ongoing beef crisis in a study by the Scottish Agricultural Colleges Rural Business Unit.

An analysis of the impact of the crisis on four farm types, using farm models prepared by the unit, shows that a typical upland 50-cow suckler unit stands to lose more than £4500 in profits this year before payment of any compensation. That represents more than 80% of average net farm income for this example in 1994/95.

Peter Cook, head of the SAC Rural Business Unit, says the loss of such a large proportion of net farm income inevitably threatens the viability of these units.

Low borrowings and a heavy reliance on family labour means few will be forced out of business immediately. But longer-term, given continued low prices and little prospect of a cut in feed costs, the worst-hit farmers will consider leaving the industry.

Although the study found specialist winter finishers, traditionally selling stock in March and April, faced the biggest cut in profits Mr Cook suggests the longer-term impact of the crisis on these units is far less severe.

On paper a cut in expected profit levels of more than £31,000 for a 200-head finisher is expected to almost wipe out total profits for the year. But Mr Cook suggests many will be cushioned by profits from other enterprises, particularly arable crops.

And in the medium term lower store prices will allow those willing to take the risk to still achieve a feeders margin.

The third beef enterprise studied was the forward store finisher taking cattle to over 30 months of age. Mr Cook says such units were relatively well compensated under the over 30-month slaughter scheme by the top-up payments to the basic cull cow compensation rate and due to the generous deadweight option calculation.

But beyond November when the cull cow rate applies for clean beef, those finishing systems will no longer be viable.n