What Are Current And Future Realistic Arable Margins Looking Like? – Ian Browne (Stafford) 

It would appear that this harvest has been relatively kind to many businesses.  Yields in most cases are about average while the price being achieved is looking very positive along with good straw prices in the field.  The growing costs in many cases have also been very low.  Fertiliser seeds and sprays plus labour and fuel costs have all been acceptable.  Thus, when the whole “across rotation” margins are analysed, I am finding that we will achieve a better than average year.

But what lies in store for next year?  We can already see that seed prices are raised as the basic crop is more expensive prior to cleaning and dressing.  Fertilisers have shot up in price and already look as if they are £ 30-40 / t more than last year.  Sprays are also beginning to look as if they are in shorter supply and rising costs are being discussed already.  The impact of Brexit is definitely starting to bite.  Wages and machinery costs are rising with fuel and spares all costing more.  New machinery prices have jumped dramatically also.  It is easy to see that the growing costs could rise by a minimum of £ 20-30 / acre.   What of the output forecasts?  Well, assuming that the crops get planted well and the weather is not untoward, then we are likely to see a decline in prices to the more normal and affordable levels that are achieved in this country.  If the inputs are maintained then average yields should be achievable again, but if inputs are trimmed too far as a result of higher prices, then yield may suffer.  Assuming average yields are maintained but prices drop back by ~ £ 15 / tonne, then output will be impacted by between £49 (3.25 t / acre) to £ 56 (3.75 t/ acre).

When put together these two elements impact on margins to the tune of at least £80 / acre margin decrease.  This can place a very large dent in your finances for the year.  So, what can be done about it?  There are several important steps to examine …

The chart below shows what may have been occurring in the 2021 year (green boxes) and what may be about to happen in the coming year (blue boxes).  When all combined the last chart illustrates what may be going to occur in the coming year.  The red circles are what typical mixed farms are achieving in the midlands in an average year. 

Try working your figures out and see where you fit in now and in the future

What are arable margins looking like for Harvest 2021?  How is your business going to cope with rising input costs?  

Contact Ian at ianbrowne@fcgagric.com or your local FCG Office to help you review this and plan for next harvest.