I’m thoroughly enjoying my new life as a farm manager – the ups, the downs and the weather are all challenges I gladly accept.
However, nobody warned me just how tight the margins are once you wade through the financial side of things, and the consultants will say this is typical.
Why, as farmers, do we consider earning very little from our farming operations to be the norm? Take the beef market, for instance.
If you look at the little graph in the back of your Farmers Weekly, it will show you that the deadweight price for beef is about 40p/kg behind where it was this time last year, yet the store cattle price is still dizzyingly high.
See also: 9 ways to get into farming
So why are farmers out there buying cattle that they simply won’t see a profitable return on? It’s because so many people in the industry just don’t know their costs.
In my former life as a livestock nutritionalist, I was always bemused when a client couldn’t tell me how much it costs to feed their cattle for a year. Fact for the day: the average 1.5m-litre dairy farm spends £265,000 on feed a year.
Counting the costs
While we work with so many in the industry who refuse to know or have no interest in their true costs, we are always going to be on the borderline of profitability.
Progress by those who do know their costs may well be hampered by those who don’t. Go to a livestock auction and see for yourself.
As an industry, we need to consider life after subsidy. Imagine not having a Basic Payment Scheme to prop up the industry and, from what I have seen of the draft agricultural policy for the future, it’s going to be increasingly hard to push land and systems, as we will need to be more eco-friendly in order to receive any type of subsidy.
So come on everyone – take the time to examine your costs, know your break-even point and, if you’re making a loss, there will be something you can do to change that.
Only then will the industry have a fighting chance of sustainability and attracting the young new entrants it so desperately needs.
What’s more, we will then be working together to tackle the large retailers and processors which dictate prices. It’s worth remembering that 70% of UK beef is processed by only five or six large retailers and processors.
All of a sudden, farming will look so much more attractive to young entrants, as we will be able to demonstrate the profitability of agriculture.
There would also be opportunity – integration of supply chain, transparent pricing and, hopefully, a move away from treating food as a commodity rather than the true added-value product it is.