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Farm profit forecasts for harvest 2024
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Strutt & Parker is one of the largest and most successful property consultancies in the UK, with offices across the country. Our Rural department provides strategic business advice and practical management services to farms, estates and a range of other landowners.
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© Strutt & Parker Strutt & Parker has updated its arable farm profitability model using current market data to produce revised forecasts for harvest 2023 and harvest 2024.
The modelling tool uses a set of universal assumptions to provide an outlook for the sector.
It provides figures for both an average performing business and also a higher performing business, the latter characterised by farms achieving higher crop yields with lower fixed costs.
© Strutt & Parker
The analysis shows that the net margin – which can be considered to be the equivalent of profit, before rent and finance – for an average performing arable farm for harvest 2024 is expected to be £258/ha.
This compares with an estimated net margin of £208/ha for Harvest 2023.
Meanwhile, the 2024 net margin for a higher performing farm business is forecast to be £475/ha, compared with £416/ha in 2023.
“We have updated our assumptions based on current market conditions,” says Tom Coate, farm consultant with Strutt & Parker.
“Estimated profits for 2023 and 2024 are higher than the forecasts we made in June, which will be welcome news as Basic Payments continue to reduce. However, net margins remain well below 2021 and 2022 levels and much closer to where they were in the late 2010s.”
The figures for the high performing businesses emphasise the value for growers of drilling down into the detailed performance of their business to find where there may be opportunities to cut costs or improve efficiency.
The estimated net margin of the higher performing business for harvest 2023 is twice that of an average performing business (£208/ha vs £416/ha), and it is forecast to be 84% higher for harvest 2024 (£258/ha vs £475/ha).
“While this is not a new message, it once again highlights the benefits of growers sitting down with an advisor to really analyse their costs of production and identify where there may be opportunities to make productivity gains,” says Tom.
Working capital requirements for farms, which are variable and fixed costs combined, have risen by 40% to £173,604 in 2023 for an average performing 131ha farm, compared with the 2021 baseline.
The figures are based on a 131ha farm as this is the average arable cropped area on a conventional cereal farm, according to the Farm Business Survey.
“While the working capital requirement is expected to reduce in 2024, it still remains 28% higher than the baseline, putting extra pressure on a farm’s cash flow and finance requirements,” says Tom.
“At the same time, growers are dealing with weather extremes, volatile commodity prices, as well as challenging supply chain issues. So it is becoming increasingly important, to consider the best allocation of resources and think through how to best manage risks in terms of cropping choice and land use decisions.”
If you would to know more about the figures, or would like assistance in identifying where there may be opportunities to cut costs or improve productivity within your farming business, please contact either tom.coate@struttandparker.com or andrew.atkinson@struttandparker.com