28 February 1997

Landowners losing out

LANDOWNERS have suffered the first drop in income from farm management agreements since 1992 – the first year of CAP reform.

According to latest survey results from eastern counties surveyors, Bidwells, (based on results from 80 farms with Sep 1996 year ends), landowners saw their share of returns drop 7% to £113/acre.

This is made up of a prior charge of £78/acre plus a share of surplus profit worth £35/acre (see table).

But this was small by comparison to the drop in earnings for the contractor taking on the extra land. His share of surplus profit fell a massive 34% to just £87/acre.

The initial contracting charge was also down 3% on the previous year to £87/acre, mainly due to keener rates on new agreements.

Despite the tougher terms, contractors were also prepared to offer landowners a greater prior charge, often in excess of £115/acre. "This reflects the continuing competition from contracting farmers, anxious to reduce overheads," says Richard Potter of Bidwells.

Reasons for the overall drop in returns to both contractors and landowners are not hard to fathom. Overall output was down 9% in 1996 to £440/acre on the sample farms, reflecting the drop in crop values. Variable costs, meanwhile, rose 6%, dominated by the 16% increase in fertiliser charges to £36/acre.


Bidwells farm

management

agreements 1996

AveTop 50%

£/acre£/acre

Output440490

Variable costs(110)(121)

Gross margin330369

Overheads(43)(44)

Contractor fee(87)(91)

Surplus200234

Landowners

prior charge7889

Surplus profit122145

Landowners

share3543

Contractors

share(87)(102)