Knowing your costs will soon be a necessity


FARMERS WHO talk to consultants at the Fair are likely to be told that CAP reform has made the detailed costing of enterprises a necessity rather than an option.

The need to know the physical and financial performance of farming businesses has become a recurring theme at conferences and farm walks, and several surveys have indicated that many prime livestock producers are working in the dark.

“If businesses don”t know where they are now, and how their figures compare with those of other producers, they cannot expect to find ways of improving things,” says Julie Jones, technology transfer officer at Hybu Cig Cymru (Meat Promotion Wales).

“Farmers have many options ranging from paying consultants to just keeping basic records themselves, perhaps using one of the computer packages that are on the market. The important thing is that they get a picture of their businesses and benchmark the results against average figures.”

Ms Jones acknowledges that not all producers would be happy to get together with others and put all their figures on the table for open discussion, but claims that doing so is a good way of identifying and finding answers to problems that are depressing profitability.

These could be poor genetics, inadequate grassland management, unsatisfactory animal health, excessively high fixed costs or poor marketing, all things over which farmers have control.

The latest HCC survey of beef cattle production costs on 65 Welsh farms indicates huge scope for improvement. It shows it cost an average 166p/kg liveweight to produce weaned calves and store cattle, including 102p/kg for fixed costs like labour, machinery, finance and rent.

But the top-third of farms spent just 65p/kg on fixed overheads, and a total of 121p/kg.

In contrast, the third of farms with highest costs paid the equivalent of 146p/kg in fixed costs and 222p/kg overall.

On average, the beef cattle produced realised 109p/kg at market, which meant that on the average farm market return covered only 66% of production costs.

Despite an average sale price of 114p/kg, the third of farms classified as high cost only managed to recoup 52% of their costs from the market.

Even on the units where costs were lowest sale returns were only 90% of production charges.

“Now is the time for all Welsh farmers to get to grips with reducing unit costs, and get their farms attuned to conditions post-CAP reform,” says Prys Morgan, HCC”s industry development manager.

Mr Morgan says that the Winter Fair will give producers the chance to talk to organisations like Hybu Cig Cymru to find out about help available through the Farming Connect beef and sheep programme.