Arable profits set to dip with harvest 2020

The typical combinable crop farm faces a £27/ha loss before BPS from the 2020 harvest, predicts consultant Andersons.

The latest budget for its part-owned, part-rented 600ha Loam Farm model shows the physical and financial effects of the wet autumn and winter. 

The knock-on effects include reduced machinery investment and a new approach to cropping.

As for so many, the farm’s standard cropping pattern has been disrupted by the bad autumn and winter weather, so that instead of half the acreage being in wheat, just 130ha of wheat has been drilled.

Failed oilseed rape

One-third of the 150ha of oilseed rape failed and has been ripped up. Meanwhile, the spring-planted acreage has shot up to 350ha, which is in spring beans and spring barley. 

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Yield estimates have been trimmed and while crop prices are generally reasonably firm, the large area of barley planted nationally means it is at a big discount to wheat, said the firm’s head of business research, Richard King. 

Costs have been saved due to a less-intensive spray programme, fuel has been cheaper than originally budgeted for this spring and some stocks of seed and fertiliser have been retained for next year. 

Loam Farm

Harvest years

£/ha

2018   (result)

2019 (provisional)

2020  (budget)

2021 (forecast)

Output

1,205

1,314

1,091

1,244

Variable costs

403

439

370

397

Gross margin

802

875

722

848

Overhead costs

421

442

436

434

Rent and finance

242

239

238

242

Drawings

79

79

75

77

Margin from production

61

115

(27)

94

Basic payment

228

230

230

198

Business margin

289

345

203

292

Source: Andersons

“Even so, the weather has had a significant effect on budgeted farm profitability – pushing the business into a loss-making position from its farming operation,” said Mr King. “It is reliant on the BPS for overall profit.”

Cropping strategy review for 2021

The unreliability of oilseed rape and the reduction in BPS from 2021 have prompted a serious review of cropping strategy. 

With OSR and its front-loaded costs deemed too risky, a new rotation has been planned for 2021:

  • 200ha first feed wheat
  • 100ha second milling wheat
  • 100ha spring barley
  • 100ha spring beans
  • 100ha winter oats

This means the farm will have one-third spring cropping, helping to control grassweed issues and spreading workload. 

The change of cropping policy and poor cashflow from harvest 2020 mean machinery investment is being paused for a year. 

Grain store investment

However, there will be investment in an expanded grain store, with the move away from oilseed rape meaning that more grain storage is needed.

The cost of investing in this is included in the 2021 figures, in terms of depreciation (under total overheads) and finance. However, this is masked by falling machinery depreciation due to no reinvestment as a result of the cashflow pressure predicted from the 2020 harvest. 

“At present, the BPS is available to smooth over problems such as the dip in profitability for 2020’s difficult season,” said Mr King. 

“The reduction in and eventual loss of BPS challenge Loam Farm and the many businesses like it to do something different. 

“Loam Farm’s cropping changes will make it more resilient in the face of potentially more difficult business conditions ahead. 

“With change undoubtedly coming, those businesses that grab a head start in improving efficiency will be best placed to prosper in the new environment.”

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