We are currently preparing 2019 harvest gross margin accounts for our arable clients. An indication of how the 2019 harvest compares with the 2018 harvest, drawn from our clients’ year end accounts so far, is summarised below.
Key trends we’ve seen in harvest 2019
- All farms show significantly improved yields for barley and wheat. Oilseed rape yields show a slight decrease. However, our top 20% have again seen increases in yields across barley, wheat and oilseed rape. The main difference with this year’s harvest is the reduction in prices. Barley is down by 23% to an average of £122 and wheat prices have dropped by 11% to £148. Oilseed rape has seen little change. With the yield increases, barley and wheat gross output per acre have increased by approximately 5% to £379 and £566 respectively.
- Price variations throughout the marketing year continue to be significant with feed barley ranging from £108 to £129, milling wheat £135 to £188 and oilseed rape from £302 to £340 (before oil premiums). A clear
marketing policy is necessary to achieve maximum prices.
- Savings are being achieved across variable costs, mainly a reduction in spray costs again. This is likely to continue for the 2020 harvest due to significantly more spring cropping. Fertiliser costs are also expected to be lower for the 2020 harvest.
- Average labour, power and machinery costs have decreased by 10% to £167 per acre. We are seeing a reduction in the labour costs, probably down to retiring staff not being replaced.
- For 2019, we have seen a significant increase in machinery replacement by our top 20% farmers resulting in higher depreciation costs, £76 per acre from £42 per acre in 2018. However, this is slightly offset by the reduction in contract work and hire costs.
- The increase in property repairs costs seen in 2018 has reversed by £6 per acre back to the levels seen in 2017.
- Administration costs have remained at the levels seen in 2018.
- Rental costs continue to fall slightly, as have finance costs due to the reduction in the base rate for lending.
- Other income has fallen by £44 per acre which is surprising. We haven’t seen a reduction in other income for many years. This is mainly due to a drop in forage sales of £6 per acre, a £21 per acre reduction in rental income and £13 per acre less subsidies. We suspect when all the 2019 harvest results are finalised and we have all our data to hand this decrease will be less marked.
- We are yet to see what impact the poor weather conditions for winter planting in late 2019 will have on the 2020 harvest year. Couple this with the COVID-19 pandemic impact on some of our farmers’ other sources of income and 2020/21 looks likely to be a very challenging year.