20 November 1998

Switch to industrial OSR meets set-aside needs and earns £s

By Robert Harris

CONVERTING conventional oilseed rape into an industrial crop to fulfil a farms 10% set-aside requirement could raise profits on that area by almost £300/ha (£160/acre).

The switched crop will avoid hefty scalebacks on oilseed area payments, but, more importantly, frees land for more profitable spring cropping, says Mike Bullen of FPDSavills Research.

Growing crops can be switched for the first time this season after a relaxation of the rules by the ministry. Industrial crops can now be registered with the Intervention Board by Dec 31, rather than by sowing date (Business, Oct 2).

"The 1999 UK oilseed area payment is likely to be scaled back by as much as 60%," says Mr Bullen. This stems from cumulative penalties, mainly caused by growers exceeding the maximum guaranteed area.

If realised, oilseed area aid payments would fall by £250/ha (£100/acre). But industrial crops attract set-aside payment, worth £306/ha (£124/acre). Even allowing for a £25/t cut in seed value, the gross margin for the industrial crop is almost £50/ha (£20/acre) higher (see table).

The biggest bonus comes from extra spring cropping. In this case, spring barley produces a gross margin of £614/ha (£248/acre), well above that for fallow set-aside. Even after allowing for extra fixed costs of £74/ha (£30/acre), the industrial OSR/spring barley option produces an extra margin of £296/ha (£120/acre).

A surge in switching would reduce scalebacks, Mr Bullen adds. This would increase aid payment on remaining conventional area. "But our analysis still shows it will remain marginally more profitable to switch to industrial oilseeds up to the set-aside commitment." &#42

Conventional Fallow Industrial Spring

OSR set-aside OSR barley

Yield (t/ha) 3.33 3.33 6.18

Price(£/t) 155 130 88

Area aid 173 306 306 242

Output 689 306 739 786

Variable costs (227) (12) (227) (173)

Gross margin 462 294 512 614

Total GM 756 1,126

Extra fixed costs (74)

Net margin 756 1,052

Switching benefits (£/ha)