We are currently preparing 2019 harvest gross margin accounts for our arable clients. Take a look at how the 2019 harvest compares with the 2018 harvest, drawn from our clients’ year-end accounts.
Key trends we’ve seen in harvest 2019
- We have generally seen a yield improvement for the 2019 harvest compared to the 2018 harvest, other than for oilseed rape, which is unchanged. Average yields for other break crops such as oats and beans have significantly improved. Commodity prices dropped drastically to the levels seen for the 2017 harvest. Arable cropping has seen many changes as farmers look to alternatives to oilseed rape. Oilseed rape on average has seen an average drop of 18% across both our top 20% group and the average. Surprisingly there has been less barley planted with large increases in areas of oats and beans, albeit from a low starting area.
- With the relaxation of the three crop rule, it will be interesting to see what happened to the 2020 harvest areas and what farmers’ plans are for the 2020/21 growing season. The gross output difference between
our top 20% and the average is around £68 per acre for the 2019 harvest, due to both better yields and slightly higher commodity prices.
- Variable costs for the 2019 harvest increased by £5 per acre. An average saving of £4 per acre for sprays was cancelled out by an increase of £8 per acre for fertiliser. The average gross output increased by £20 per acre but the top 20% saw a drop of £3 per acre which explains the narrowing of gross margin between the top 20% and the average.
- Average labour, power and machinery costs have dropped by £17 per acre and are now roughly the same as our top 20% farmers. Property, administration, rent and finance costs are very similar to the levels seen in the 2018 harvest year. It appears that the higher labour cost for our top 20% farmers is due to additional labour requirements for diversification enterprises like farm shops, bed and breakfast and leisure activities.
- Basic payment accounts for over a third of other income. With this level of support set to fall over coming years, we are now seeing more take up of environmental schemes, especially among our top 20% farmers. Other income totals have on average fallen by nearly 6% but our top 20% have managed an increase of 24% this year, more than compensating for the 6% reduction seen last year.
- Management profits have risen this year by £38 per acre for our top 20% performers, and on average by £7 per acre.
- Due to the prolonged wet weather in 2019 and early 2020, very few farmers established all their planned winter crops, with spring planting to compensate. Although early prices for 2020 wheat are strong, at around £30/t above 2019, this is unlikely to make up for reduced yields. The 2020/21 growing year is also being affected by adverse weather. Add to this the uncertainty of Brexit and the impact of COVID-19 and we can expect another challenging year for farmers.