Support is crucial for Scots sheep and beef units

The importance of support payments to Scottish cattle and sheep producers is highlighted by the latest financial results from Quality Meat Scotland (QMS).

Even businesses reporting positive net margins struggled to deliver a fair return for labour and capital, says the report.

Suckler margins from the 2016 calf crop improved slightly. Even so, only just over a third of Scottish suckler producers made a profit before CAP area support and before accounting for unpaid labour.

See also: Sheep sector must look to develop exports – AHDB

It was a challenging period for store cattle finishers too, with less than a third making a positive net margin, as in the previous season.

Covering the 2016 calf and lamb crops, the report from the levy, promotion and advisory body says that both prime and store stock prices were below those of year earlier level.

Only one in 10 hill ewe flocks made a positive net margin, while profitability in upland and low-ground flocks improved, with 66% and 85%, respectively, managing a positive net margin.

How do top-third producers achieve best results?

  • Sucklers – high productivity, for example higher physical output a cow, mainly through higher calf-weaning rates, leading to higher revenue (though not always through top market prices), good use of resources, strict cost control (lower total variable costs and good fixed cost control) and lower cow mortalit
  • Sheep higher output – top third rear seven to 13 more lambs for every 100 ewes and 5kg liveweight more for each lamb, typically also achieve higher selling price for all classes of lamb, giving £10 a ewe more income than the average

Store lamb finishers struggled, with the proportion showing a net margin sliding from 70% to less than 40%.

QMS head of economics services Stuart Ashworth said it was important for producers to benchmark their businesses to identify strengths and weaknesses, seeking out elements that are their control.

The report details not only financial but also physical performance, providing a solid base against which businesses can measure themselves.

“In general the results show a clear correlation between the strongest financial returns, the best technical efficiency and the lowest greenhouse gas emissions per unit of output,” said Mr Ashworth.

The survey covers 38,000 ewes and 106 suckler cattle businesses with 10,300 suckler cows. Finishing results cover more than 7,400 store lambs and 4,500 prime cattle.

2017 prospects

For cattle the indications look more positive for 2017, says the report. Lower numbers overall and in particular of young bulls, coupled with lower steer carcass weights, the value of sterling and good export demand for manufacturing beef have underpinned farmgate prices.

“Finished prices have spent most of 2017 five-10% ahead of 2016 levels with store values also running higher, generally by closer to 5%,” it says. Store cattle prices have generally been higher than 2016 levels.

Large hogget numbers carried into 2017 and lower demand means some store lamb finishers will have struggled to make a margin in the run up to Easter.

Both sheep and cattle producers face higher input prices in 2017 but productivity gives room for some optimism, with high scanning rates and strong lambing percentages. The June census showed the highest lamb-to-ewe ratio for many years.

View Cattle and Sheep Enterprise Profitability in Scotland (2017 edition) online (PDF) or call QMS on 0131 472 4040.

Scottish cattle and sheep margins – 2016 calf and lamb crops

 

Top third

Average

 

Gross margin

Net margin

Gross margin

Net margin

LFA hill sucklers (£/cow)

425

33

318

-99

LFA upland sucklers selling calves at weaning (£/cow)

536

113

412

3

LFA upland sucklers selling calves as yearlings (£/cow)

574

123

452

-28

Non-LFA sucklers (£/cow)

513

106

413

3

Rearer finishers  (£/cow)

744

138

555

-1

Cereal-based finishers (£/head)

278

184

145

40

Forage-based finishers selling at under 22 months (£/head)

405

132

166

-74

Forage-based finishers selling at more than 22 months (£/head)

260

-31

155

-105

LFA hill sheep (£/ewe)

37

-9

23

-17

LFA upland sheep (£/ewe)

70

17

55

4.5

Lowland sheep (£/ewe)

Insufficient sample to split top third

77

26.40

Store lamb finishers (£/head)

Insufficient sample to split top third

7.90

1.48

Source: QMS.
Note: BPS and any other area payments are excluded from these costings but Scottish beef calf premium payments are included. The value of unpaid labour is not included

 

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