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Farm profits expected to hit four-year high

Stable overheads and a widening in gross margins have provided a bright outlook for the farm sector moving into 2018.



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Farm profits expected to hit four-year high

Writing in the 2018 edition of the John Nix Farm Management Pocketbook, economist Graham Redman said the outlook for UK farm profitability in 2018 was better than it had been for the last four years.

 

As an example, the gross margin for feed wheat, for an average producer, reached £744/hectare (£300/acre), up about 12 per cent on last year’s budgeted figure.

 

This was based on a feed wheat price of £140/tonne, which was roughly where November 2018 ex-farm prices currently sat.

 

Winter oilseed rape was also at a high of £662/ha (£268/acre) using 3.5t/ha (1.4t/acre) – the highest margin since 2014.

 

In the livestock sector, the outlook was equally positive, with dairy budgets up above the 2016 and 2017 years, with all-year-round calving herds averaging a gross margin of more than £1,000/cow, levels not seen since 2015.


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For beef, autumn lowland suckler herds were seen generating £200/head.

 

Sheep gross margins returned a strong set of results from lowland and upland lambing, as well as rearing and finishing.

 

Mr Redman said while results were promising, farmers should continue to strengthen their businesses to make sure they were fit for the future, whatever lay ahead.

 

He said: “The upturn in the farm goods sector is clearly great news for UK farming, yet we must not get carried away, as much of it is grounded on a weaker pound, which could swiftly turn around if, for example, progress is made in Brexit negotiations.

 

“The current upturn should certainly be used to strengthen the farming business for possible trickier times coming, as we simply do not know what the coming years will bring, but change could be substantial.

 

“Figures should be adjusted as appropriate, according to personal circumstances and price and cost differences, as each farming situation is unique.”

 

Mr Redman said changes to overheads for 2018 were relatively minor, suggesting the overall outlook for profit next year is greater than for 2016 or 2017.

 

But he warned it was easy for rising overheads to erode any additional gain from gross margins and ‘the need to keep tight control of them is as important as ever’.

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