5 July 2002

Output on rising trend till foot-and-mouth hit

Farmers in the north-east

are still living with the

legacy of foot-and-mouth

disease. But as

Wendy Short reports the

industry is tackling the

challenges it faces and

striving for ways to boost

farm incomes

FARMS in the north-east of England were steadily increasing their output until foot-and-mouth struck, according to the latest figures in a survey by the University of Newcastle.

The average rise in output was 5% in the year up to April 2001. Only farms in disadvantaged areas failed to improve returns. By contrast they suffered a 3% fall in output.

But researchers warned that the effect of foot-and-mouth in the region had a massive impact on financial performance. They said its effects would not be seen until next years analysis was complete.

The report, carried out by the Universitys Centre for Rural Economy, suggested that the rise in output in the dairy sector was largely due to herd expansion. This had resulted in marginally better returns, despite the lower milk and cull cow prices that prevailed at the time.

In the sheep sector, a rise in the value of animals was the sole reason for improved output, which came during a period when the Sheep Annual Premium was reduced dramatically.

For arable farmers, improved yields in 2000 were offset by falling cereal prices and a lowering of arable area payments. The total overall loss in returns on lowland arable farms was 1%, compared with the previous year.

An examination of farm costs revealed a 1% increase in variable costs on the year, while fixed costs rose by 2%. The highest return on investment (measured as return on tenants capital) was recorded by the lowland arable group of farms surveyed.

Dairy farms produced the best results when financial performance was measured as management and investment income (MII). Lowland dairy MII rose to £87/ha (£35/acre) and upland dairy to £40/ha (£16/acre).

The report also looked in detail at gross margins on hill farms carrying sheep and suckler cows. These were poorer on the farms with smaller acreages. Those with an average of 254 sheep and 40 suckler cattle produced a gross margin of £381 per grazing livestock unit (GLU). This compares with a gross margin of £390/GLU on larger farms with an average 1752 sheep and 51 cattle.

The researchers, who are working on the 2001/2002 report, said the next accounting year will be completely dominated by the foot-and-mouth outbreak. The North of England has lost half its sheep flock and one-third of its cattle.

They can already see that for more tightly stocked upland rearing farms and those in disadvantaged areas, the effects of a shift in support from a per head basis to a per hectare basis will continue to be felt. This is because the Hill Farm Allowance area payment only provides 80% of the financial support offered by the 1999 Hill Livestock Compensatory Amounts (HCLAs).

The survey also asked a sample of about 50 farms with an average size of 155ha (383 acres) how much they spent on agricultural contractors. It found that total annual expenditure per farm was £61.77/ha (£25/acre). Most farmers said they expected there would be little change in their use of contractors during the next five years. &#42