We recently held an event for our arable clients to discuss the 2018 harvest and summarise below our findings and comments:
- We have generally seen a drop in combinable crop yields for the 2018 harvest compared to 2017. This reduction has been less for our top 20% farmers. With the exception of oil seed rape, significantly higher commodity prices have helped to push gross output for 2018 to around 5% above 2017. The difference between our top 20% and average gross output is around £75 per acre for this harvest year, due to better yields and higher commodity prices.
- Variable costs for the 2018 harvest have increased by nearly 10%, nearly cancelling the gain in gross output. The rate of increase has been slower for our top 20% farmers, suggesting the increase in precision farming has led to savings. The difference between the gross margins of our top 20% and our average arable farmer is now over £100 per acre.
- Average labour, power and machinery costs have risen slightly but our top 20% have achieved a decrease.
- Basic payments account for over a third of other income. With support likely to fall over coming years we expected to see a far greater take-up of environmental schemes. However, we are still seeing very low numbers joining these schemes. Straw sales from the 2018 harvest were significantly higher. We have also seen a near 20% increase in rental income. Other income totals have increased by 14%; surprisingly the figures for our top 20% show a reduction of 6% from the previous year.
- Management profits have risen this year, significantly so for our top 20% performers. However after drawings, taxation and capital repayments against loans and hire purchase, there is little left over for reinvestment.
- The 2019 harvest was good but with prices significantly lower than in 2018. Due to the ongoing wet weather drilling is well behind the target. Although this would suggest a lower harvest in 2020, there is still no significant rise in commodity prices. Currently, prices are still lower than the 2017 harvest levels. There is likely to be a shortage of spring seed available and we may see areas left fallow this year.
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