Climate challenge: Modelling the cost on a mixed farm

For Farmers Weekly’s third instalment in the Rise to the Climate Challenge series, we examine the financial effects of different weather scenarios on a mixed farming enterprise

Having all your eggs in one basket is likely to raise business risk as the weather becomes more volatile.

A mixed farming system can help mitigate these practical and financial effects by spreading the risk between enterprises. Planning ahead and factoring in unpredictable and extreme weather will also help guard against the shocks and stresses a businesses could experience.

See also: Catch up on the other parts of the series, which look at the financial costs of different weather scenarios on an arable farm and a dairy farm

From now on this should be easier. A new model developed by the Andersons Centre, Farming Advice Service, Adas and the Environment Agency, has for the first time modelled the financial implications of different weather on farming businesses.

Using this as a template when creating a farm budget could help integrate the risks and opportunities from the weather into business thinking.  

The holding used in this model, “Meadow Farm”, is a 154ha lowland beef, sheep and arable farm, with 40ha on a fixed business tenancy, one farmer-owner, a further full-time family worker and casual labourers.

The most difficult year for the mixed farm is a wet year, with 25% more rain throughout the year. This brings increased lamb mortality rates, vet costs and a 24% jump in bought-in feed costs due to a longer housing period and difficult finishing.

The biggest financial effect is felt through the arable side of the business, which sees feed wheat and barley yields down 30%, with a knock-on effect of a 34% increase in straw costs.

As a result, crop area gross margin experiences a drop of £251/ha and the longer finishing period and increased costs reduce the livestock gross margin by £33/ha.

In such a wet year, the total business surplus drops to the lowest of all the scenarios, with a loss of £10,164 for the year.

George Cook, senior farm business consultant at the Andersons Centre, says a mixed farm can help spread the costs, but managing the cost base can be difficult due to a lack of economies of scale.

“You don’t get the highs and you don’t get the lows, but the problem is overall the economic system [of a mixed farm] is not great,” says Mr Cook.

To cope with increased extreme weather, farmers are likely to need to do more mixed cropping, particularly mix spring and winter cropping.

A key vulnerability for mixed farms is the quantity and quality of forage, which fluctuates a lot with the weather.

“People will need to get a buffer stock of forage to carry them forwards and to stop hoping for spring to come early, because it might not.” 

Scenario 1: High summer temperatures, normal rainfall and sunshine levels

 High summer temperatures, normal rainfall and sunshine levels Increased vet and medicine costs due to higher incidence of foot issues and fly strike  Feed wheat and barley yields increased (+5%) Increased cereal fungicide costs (+10%) Fuel usage increased due to greater requirement for grass topping Water costs increased (+5%) due to greater consumption Increased electricity costs (such as feed, cereal, cooling)

  Scenario 1 (£/ha)
Normal year of weather (£/ha)
Livestock gross margin 511 518
Crop area gross margin 797 762
Total gross margin 625 624
Overheads 504 500
Rent, finance & drawings 309 309
Margin from production -188 -185
Basic payment and ELS 209 209
Business surplus 21 24
Business surplus total (£) 3,234 3,696

 

Scenario 2: High spring and summer temperatures, with low rainfall for a sustained period

High spring and summer temperatures, with low rainfall for a sustained period Reduced cattle price (-1%) as fewer finished cattle meet desired specification Some lambs finished earlier off drier grass, meaning the balance required late season feed (lamb feed costs +10%) Cattle concentrate feed costs increase (+10%) as reduced forage availability Vet and medicine costs increased (+8%) Lower contractor costs due to smaller silage volume (less wrap), but purchases of bulk feed are required Water use and therefore costs increased (+10%)

 

  Scenario 2 (£/ha)
Normal weather year (£/ha)
Livestock gross margin 512 518
Crop area gross margin 623 762
Total gross margin 574 624
Overheads 492 500
Rent, finance & Drawings 309 309
Margin from production -227 -185
Basic payment and ELS 209  209
Business surplus -18  24
Business surplus total (£) -2,772  3,696

 

Scenario 3: Higher than average rainfall, with 25% more throughout the year

Increased lamb mortality resulting in fewer finished lambs (-3%), later lamb sales (7% price drop). Feed wheat and barley yields reduced by 30%. Straw cost increased (+ 34%). Sheep vet and medicine use increased (+10%). Purchased feed cost increased (+24%) due to difficult finishing and longer housing. Fuel and labour costs increased due to the longer housing period. 

 

  Scenario 3 (£/ha)
Normal year of weather (£/ha)
Livestock gross margin 485 518
Crop area gross margin 511 762
Total gross margin 542 624
Overheads 508 500
Rent, finance & drawings 309 309
Margin from production -275 -185
Basic payment and ELS 209 209
Business surplus -66 24
Business surplus total (£) -10,164 3,696

 

DECEMBER
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