The profitability outlook for most farming sectors in 2018 is the best for four years.
This is according to figures in the new John Nix Pocketbook for Farm Management.
The 2018 edition, number 48 in the series, shows a feed wheat gross margin for an average producer at £744/ha (£300/acre), up about 12% on last year’s budgeted figure.
This is based on a feed wheat price of £140/t ex-farm (November 2018 movement). Despite the improvement on the previous year, this will still leave only a slim margin before subsidy for many growers.
The winter oilseed rape gross margin is estimated at a high of £662/ha on an average yield of 3.5t/ha, the highest margin since 2014.
Dairy budgets are set to better both 2016 and 2017 while in the beef sector autumn lowland suckler herds are estimated to produce a gross margin of £200 a cow – a figure not achieved for many years.
Sheep gross margins are set to return a strong set of results from lowland and upland lambing as well as rearing and finishing, according to the pocketbook.
Author Graham Redman cautions that with Brexit and other uncertainties, much could change through the year.
Farmers who use the book tend to be above average performers, so may want to use the “high” performance figures to compare with their own calculations, he said.
Beyond the gross margin measure, expected changes to overheads for 2018 are relatively minor, but Mr Redman cautions that overheads vary widely.
He also stresses the importance of budgeting, saying that farmers should not use volatility as an excuse not to do so.
“However much you think prices will change, make a budget anyway; it is amazing how (even wrong) numbers focus the mind on what a cost or revenue is and should be and therefore the business as a whole.”
- Consider each enterprise individually, compare it against average and top performing gross margins
- Put a value in for your own time and any other “unpaid” labour – could you or others be earning elsewhere if not on farm?
- Put in a rent for owned land – its “opportunity cost”, or the value it could produce if you were not using it
- Plan for big expenses, calculate the depreciation, accommodate it in the cashflow
- Ensure you budget enough cash to pay at least the minimum repayment on borrowings. If that is locked into the budget from the start of the year, it will surprise you how the money appears at the right time.
- Test your budget – reduce incomes by 5% and increase costs by 5%. Is your business still viable and if not, what could you do to make it work?
- Identify the least profitable enterprise and consider whether it could be improved or replaced with one of the more profitable enterprises, even partially
- Is subsidy more than 50% of your farm profits? If it is over 100%, the farming activity is loss-making – are you running a loss-making business or a hobby?
- Where would your business be if BPS disappeared?
- Look at the figures produced when you make a purchase or sale and write the actual number next to its budget figure to keep track of how your business is performing against budget.
Print and online versions of the Pocketbook are available from www.thepocketbook.co.uk or phone 01664 564 508.
2018 winter feed wheat budgets
- Estimated average gross margin £744/ha on yield of 8.6t/ha
- Based on ex-farm feed wheat price of £140/t for November 2018
- Covers conventional winter feed wheats – first, second and subsequent crops
- Does not cover areas with severe grass weed infestations, for example blackgrass/sterile brome, which could incur extra £160/ha cost of treatment
- Diesel price of 45p/litre (50p/litre used in contracting rates)