Controlling costs is key for farm profitability

Nov 24 2014

There continues to be a big discrepancy between the performance of the top third of Welsh farms compared with the rest, according to Hybu Cig Cymru – Meat Promotion Wales.

“The latest cost of production information highlights how the physical performance of the flock and herd has a major impact on enterprise profitability,” said John Richards, HCC’s Industry Information Executive.

The data is contained in Wales Farm Income Booklet for the 2013/14 financial year.

It shows that there was a significant difference between farms in the top third for gross margin and production cost compared to all farms average and those in the bottom third.

“When looking at lamb gross margin and cost of production figures it becomes evident that on most farms the factor that differentiates businesses is the amount of lambs reared per ewe,” said Mr Richards.

“The gross margin for upland sheep farms shows that those in the top third reared 19 more lambs per 100 ewes than the average,” he said. “This helped provide a gross margin of £71.67, around 78 per cent higher than the average on upland farms of £40.32.”

This latest data relates to the period April 2013 to March 2014.

“Unfortunately many farms in Wales were adversely affected by the poor weather during the spring of 2013, and these figures really do emphasis the impact that this had on enterprise profitability,” said Mr Richards.

The lamb production figures show that the two biggest costs were once again feed/forage and power/machinery. These combined accounted for over half of the total costs.

“Depreciation on machinery is a major cost and whereas some may see this as inevitable, it certainly should be considered when looking at replacing or purchasing equipment,” he said. “It’s almost an unseen cost, and the same can be said for poor animal growth or performance.’

As with sheep, the gross margin achieved by many suckler herds varied significantly.

‘For upland suckler farms the figures show that those in the top third reared three more calves per 100 cows than those in the average. Again this would have quite an impact on the enterprise profitability,” said Mr Richards.

“Over the last six months the beef sector has come under significant pressures, with reduced prices leading to many producers evaluating the viability of the enterprise.

“The key to any profitable business is to maximise output and control costs. In order to achieve this, the first thing that needs to be done is to evaluate current performance. Once these baseline figures have been calculated then areas of improvement can be identified.” 

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