Businesses should make efficiency gains pre-Brexit
Trading off the highest yields for lower input use could help make arable businesses more profitable, according to Andersons farm business consultants.
Farm profitability was mainly determined by the interaction between yields and costs, the seminar at this week’s Cereals heard.
And while higher yields will reduce the cost of production per tonne, partner Richard King suggested accepting lower output for reduced input use or more sustainable rotation was often a ‘trade-off worth making’.
“Similarly, simply not cropping the areas with the worst yield potential can make sense,” he said.
The largest difference in costs was usually seen in overheads.
“Some farms will devote far less effort into efficient deployment of labour and machinery than they do into their agronomy programme,” he added.
“Great opportunities still exist for the industry to take out costs through increased cooperation and collaboration.”
He added high rents, or rent-equivalents, had added cost in many businesses.
“All parts of the sector need to take a realistic view of economically-sound rental levels, with an eye on future support changes and a long-term perspective on the husbandry of the land,” said Mr King.
While the 2017 harvest delivered good profits for many combinable crop businesses, this was often due to external factors, such as the weakness of sterling, and not the strength of the business.
“Many combinable cropping farms still need to make significant changes if they are to be robust to face the challenges Brexit will bring,” he added.
And with the effects of Brexit delayed until 2020, in terms of support, and probably 2021 on trade, he said it would be easy to continue doing much of the same thing in the short-term.
“However, change is undoubtedly coming, and those businesses which grab a head-start in improving efficiency will be best placed to prosper in the new environment,” Mr King said.