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Farming needs to up its game on efficiency even if it wants to ‘stand still’

But economies of scale were not always the answer.

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Grains in efficiency critical to bottom line

Farming needs to up its game on efficiency even if it wants to ‘stand still’, but economies of scale were not necessarily the answer.

 

Speaking at the consultancy’s spring seminar in Kendal, Cumbria, Andersons partner Richard King highlighted efficiency as the industry faces rising labour costs, the ending of direct payments and the impact of Brexit.


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Mr King said costs such as labour rising every year meant the sector needed to become more efficient just to stand still.

Consumers

While farmers tended to look at variable costs such as feed and fertiliser, he suggested focusing on miscellaneous costs such as office costs, fees and insurance could be more beneficial.

 

In arable, there was a perception scale was the key to profitability, but Mr King said it may be more about being the most efficient in terms of scale rather than getting ‘ever larger’.

 

He said in many cases farmers experienced disadvantages of scale.

 

“Land can be too far away, management overstretched,” he said. “There may be less attention to detail.”

 

And the industry also needed to focus more on the consumer, not just production.

 

Consumers

 

In dairy, Mr King said the market was still dominated by standard semi-skimmed, with dairy alternatives growing, but still a small part of the market.

 

“One thing the industry has not done well is add value to milk,” he added, highlighting semi-skimmed was retailing at just 57ppl compared to soya at 92ppl.

 

The dairy sector in the future would ‘inevitably’ move towards fewer, larger farms.

 

And getting costs of production down was key, with the difference between the best and worst
performing farms the difference between profit and loss.

 

Technology would play a role, but farmers needed to be challenged to ensure they delivered. Efficient forage production was also likely to be key to profitability.

 

The grazing livestock sector also needed to focus on grass utilisation and Mr King suggested lessons could be learnt from the dairy sector.

 

The shift in consumer trends towards poultry was expected to continue, bringing challenges to the red meat sector.

Sheep sector most at risk

The sheep sector is at the greatest risk from a no-deal Brexit, with the grazing livestock sector inherently less profitable than other sectors, particularly when direct payments were removed.

 

Mr King believed there would be a smaller sheep flock and beef herd, but there would still be opportunities to make money.

 

The sector had not seen the efficiencies seen elsewhere over the past few decades, he said.

 

“You can make an argument support has held back the livestock sector making the productivity gains we have seen elsewhere,” he added.

 

“Maybe we have three decades of structural change to come in a decade."

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