HIGH YIELDS TO COUNTER PROFIT FALL
HIGH YIELDS TO COUNTER PROFIT FALL
By Mark Hall and Michael Brown
YIELD and price remain the two most important factors in determining the profitability of an arable farm.
With farm profit having suffered under low commodity prices over the past two years, the importance of attaining high yields over the whole farmed area has been more critical than ever.
Average farm fixed costs, including rent and finance, for a combinable crop farm are in the region of £500/ha. Using the tables below, which demonstrate the influence price and yield have over profitability, break-even yields at varying price levels can be clearly determined.
Farmers are able to influence both the price and yields achieved.
Table A shows that with wheat at £65/t, a yield of 8t/ha is required to cover typical fixed costs. With break crops (Tables B and C), high yields are vital and making these crops add to the farms profitability can be more difficult.
It is, however, all too easy to blame factors such as soil type, field size and topography as the reasons why high yields are not achieved. Careful planning, sound management and attention to detail at every level can influence these factors.
Field by field yield monitoring, which may include yield mapping, will soon provide a sound idea of where set-aside or conservation areas should be situated.
On many farms, the use of set-aside as a management tool is now accepted. But factors such as variety choice, drilling date, input choice and timing still have much room for improvement.
Despite trial results from the 2000 harvest showing at best no yield increase from early drilling, we still consider this to be the route to high first wheat yields. But carefully planned and timed applications must be supported by adequate sprayer capacity.
This year will undoubtedly see depressed yield potential in many areas of the country as a direct result of the weather. Hopefully this is the exception rather than a taste of what is to be the norm.
However, careful attention to detail and good agronomic advice will be important to maximise returns from what has been planted.
Many farmers still believe they are producers of commodities and can do little to improve the prices they receive for their produce. But we are now beginning to see real value from belonging to crop assurance schemes, which aim to guarantee a minimum standard of production.
In most situations the schemes simply require good agricultural practice to be adhered to. In addition the requirements for regular store monitoring and cleaning help minimise expensive claims.
Growing for quality, seed or non-food markets should be an aim for at least a proportion of crops. But storage facilities will dictate whether that is possible.
Maintaining a close relationship with merchants is also important. Many now offer e-mail or fax information services and a great deal of information on grain markets can be gained from the internet. With more volatile markets this sort of information will be vital to enable the best selling decisions to be made.
Co-operatives offer the advantage of removing this responsibility from the producer. But the costs associated with such organisations can be prohibitive.
Options contracts can appear attractive in securing a base price for grain, provided the commission does not eliminate the gains made.
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A – Effect of price and yield on winter wheat gross margin
Price £/t
Yield t/ha 55 60 65 70 75 80 85 90 95 100
7 365 400 435 470 505 540 575 610 645 680
7.5 393 430 468 505 543 580 618 655 693 730
8 420 460 500 540 580 620 660 700 740 780
8.5 448 490 533 575 618 660 703 745 788 830
9 475 520 565 610 655 700 745 790 835 880
9.5 503 550 598 645 693 740 788 835 883 930
10 530 580 630 680 730 780 830 880 930 980
10.5 558 610 663 715 768 820 873 925 978 1030
11 585 640 695 750 805 860 915 970 1025 1080
11.5 613 670 728 785 843 900 958 1015 1073 1130
12 640 700 760 820 880 940 1000 1060 1120 1180
Assumptions: Area payment £230/ha; variable cost £250/ha
B – Effect of price and yield on winter beans gross margin
Price £/t
Yield t/ha 70 75 80 85 90 95 100 105 110
2.75 333 346 360 374 388 401 415 429 443
3 350 365 380 395 410 425 440 455 470
3.25 368 384 400 416 433 449 465 481 498
3.5 385 403 420 438 455 473 490 508 535
3.75 403 421 440 459 478 496 515 534 553
4 420 440 460 480 500 520 540 560 580
4.25 438 459 480 501 523 544 565 586 608
4.5 455 478 500 523 545 568 590 613 635
4.75 473 496 520 544 568 591 615 639 663
5 490 515 540 565 590 615 640 665 690
Assumptions: Area payment £270/ha; variable cost £130/ha
C – Effect of price and yield on winter osr gross margin
Price £/t
Yield t/ha 110 115 120 125 130 135 140 145 150
2.6 306 319 332 345 358 371 384 397 410
2.8 328 342 356 370 384 398 412 426 440
3 350 365 380 395 410 425 440 455 470
3.2 372 388 404 420 436 452 468 484 500
3.4 394 411 428 445 462 479 496 513 530
3.6 416 434 452 470 488 506 524 542 560
3.8 438 457 476 495 514 533 552 571 590
4 460 480 500 520 540 560 580 600 620
4.2 482 503 524 545 566 587 608 629 650
4.4 504 526 548 570 592 614 636 658 680
Assumptions: Area payment £230/ha; variable cost £210/ha