Farming Talk: Rising costs are squeezing farm margins

Each year, EBLEX produces a benchmarking report looking at costs of production on beef and sheep farms around England. This report, known as Business Pointers, has become a key indicator of the health of our industry

The figures don't always make for good reading. Despite improved market conditions, which saw livestock prices reaching unprecedented levels in 2011, and a positive outlook for 2012, rising fixed and variable costs are still squeezing margins for many beef and sheep farmers.

With the cost of bills, food and fuel increasing at a faster rate than household incomes, most people are having to tighten their belts to some extent and identify where they can make savings. Livestock producers are no different.

However, while the climate isn't easy, the most efficient producers are still managing to achieve positive margins, showing that the potential is there for the majority of farm businesses to improve their performance. This is where EBLEX comes in. Helping to improve on-farm efficiency, under the banner of the Better Returns Programme, is one of our key objectives, and in the face of higher costs this work becomes even more crucial.

Our benchmarking work is essential to identify the areas where changes to on-farm practices can be made. Last year's Business Pointers data has, for example, shown that for beef suckler herds in lowland areas there was a £250 per animal difference in fixed costs between farmers in the top and the bottom third of the sample.

When you drill down into the detail of the fixed costs, power and machinery is one of the biggest areas of disparity. The less efficient producers are contributing £110.70 per head towards the machinery upkeep and running costs, as well as £78.29 in depreciation (machinery and fixings).

The figure for those in the top third in terms of machinery is £37.63, and of course less machinery means less depreciation, at £27.36. This suggests some producers have higher machinery costs than their business can effectively justify.

For the last 10 years, Business Pointers data has been collected using an external company, but from this year we're taking the activity in-house, which should enable us to pick out more of this sort of detail, and relate the figures more closely to on-farm practices.

The first set of figures from the rebranded StockTake will be available in the autumn and will no doubt make for interesting reading.

Clive Brown is senior northern regional manager of EBLEX