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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At Ellacotts we advise arable farmers on their rural businesses. Many of our Partners and staff are from farming backgrounds so we understand the challenges and opportunities that face the farming industry and can give tailored advice.