Keep producing to profit suggests Andersons research

GROWERS TEMPTED to cut back production and rely on decoupled payments could be in for a shock, according to the latest research from farm business consultant Andersons.

Though some costs will fall or disappear, many businesses will face residual fixed costs that remain high enough to undermine profits.

Francis Mordaunt, a partner with the firm, said: “It is far too simplistic to say that if the single farm payment brings my business back into profit, I would be better off not producing.”

Even cutting back by not cropping poor corners or less productive fields was unlikely to help profits, said Mr Mordaunt unless machinery or labour costs were also cut.

“It’s surprising how low the breakeven yield is likely to be in these poorer areas, it’s probably worth growing even if you are only getting 5t/ha (2t/acre).

Before knee-jerk decisions are made, all farmers must undergo a careful analysis of their business, said Mr Mordaunt.

Andersons used a model farm business at Cereals 2005 to demonstrate how profits could be affected.

On Loam Farm, a 600ha (1480 acre) holding of 40% owned land with the rest on farm business tenancies, some costs lessened or even disappeared when production ceased, but many remained.

In this case, it paid to carry on producing. “However, the analysis will be different for every individual farmer.

“It depends on cost levels, alternative ways of resourcing labour and machinery, rotations, yields and the opportunities to generate income from any land, labour or capital released,” said Mr Mordaunt.