Improved Margins For Scotland's Top Livestock

Results are revealed in the annual analysis of performance and profitability by red meat promotion and development body, Quality Meat Scotland.

Stuart Ashworth, Head of Economic Services, QMS, pointed out the price of many inputs rose steeply over the first half of the year and there was little respite in input prices until late 2008. Fertiliser prices increased more than two fold during 2008 while feed and energy costs increased by over 20%.

These higher input prices led to some reduction in input use. Many suckler herds made savings of over 10% in the quantities of feed used and reduced fertiliser applications by more than 25%. Despite these physical changes in input quantities, variable costs typically increased by more than 15%.

Top breeding herds and flocks had lower replacement rates and all have strong control over variable and fixed costs meaning they spent less per kg of output. Top-third producers also made greater use of family and/or paid labour in running their enterprises.

“Looking at the general picture, 21% of suckler beef enterprises made a positive net margin, compared with only 4% last year. Fifty per cent of finishing enterprises made a positive net margin, an increase of 19% from last year but only six per cent higher than in 2007,” said Mr Ashworth.

“All store lamb finishers surveyed achieved a positive net margin, up from 80% last year. Nearly three-quarters (73%) of lowland ewe enterprises achieved a positive return with 56% of upland ewe enterprises also returning a positive margin,” he added.

However, he pointed out that hill farms found it more difficult to achieve a positive margin with only 20% of breeding ewe enterprises breaking even.

“Despite being lower than the other enterprise groupings, this is still an improvement from the 14% of LFA hill ewe enterprises that returned a positive net margin in 2007.”

Average net margin for hill sheep units was -£1 for the top third producers, down to -£39.15 for the bottom third. Bottom third producers suffered considerably from lower lamb sales. Gross output for bottom third producers was 32% of the average and subsequent savings on costs did not suitably offset the low sales figures.

The results also reveal significant variation in the levels of financial and technical performance within the industry – for example the gap widened considerably in the case of LFA hill suckler herds, where gross margin ranged from -£126 to £355 per cow.

Mr Ashworth said that in 2009 prices have held up with producers feeling the benefit of easing input costs – such as fertiliser and fuel – and low finance charges.

The findings were published in the 2009 edition of 'Cattle and Sheep Enterprise Profitability in Scotland', today (Wednesday 18th November 2009) at the AgriScot farm business event at Ingliston, Edinburgh.

The publication gives the 2008 crop year results of the annual benchmarking exercise of cattle and sheep enterprises throughout Scotland. A full copy of the report is available to download now from the QMS Website – www.qmscotland.co.uk

Notes for Editor

EXECUTIVE SUMMARY

The results of the survey of the 2008 calf and lamb crop year continue to show significant variation in levels of financial and technical performance within the industry. Nevertheless, there are a number of common themes that characterise top performance, many of which once again repeat the experiences of previous years:

All achieved higher output through better technical performance including more animals reared, sales at higher weights and efficient feed conversion leading to lower concentrate use.

All have lower replacement rates among breeding herds and flocks.

All have strong control over variable and fixed costs through attention to detail resulting in top-third producers spending less per kilogram of output on both variable and fixed costs. The only exception is among store finishers where top-third finishers carried slightly higher fixed costs per kilogram of output.

There is a general tendency for top-third producers to make greater use of family and/or paid labour in the running of their enterprises.

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LFA hill suckler herds have a gross margin ranging from (-) £126 to £355 per cow with the average being £141 per cow. This is a marked improvement on the year earlier average of £99. However, the difference between the top producers and the bottom producers has widened considerably. Despite the improvements in financial performance during 2008 only one business reported a positive net margin from the nine which were surveyed.

The LFA upland suckler herds were split into two categories: extensive herds selling calves at weaning and extended rearing herds selling calves at around 10-12 months old. Extensive herds averaged a gross margin return of £207 per head while their extended counterparts achieved a gross margin of £256 per head, an increase of 24%. The top-third extensive herds had a gross margin of £270, 31% higher than the average. They produced 11 kg more liveweight per cow while spending 24% less on variable costs. Nevertheless they carried 4% higher fixed costs.

Top-third extended herds achieved a gross margin of £369 per cow, 44% better than the average.

Non-LFA suckler herds have an average gross margin of £194 per head within a range of £1 to £349 per cow. The top third had a gross margin of £295 per cow, £101 better than the average and 8% more than a year earlier. A significant contributory factor was an improvement of 28 kg of liveweight produced per cow through the production of heavier calves and rearing four more calves per 100 cows.

Rearer finisher enterprises have a gross margin ranging from £66 to £623 per head with an average of £358 per head. Seven of the 22 businesses surveyed returned a positive net margin.

Cereal based cattle finishers averaged a gross margin of £140 per head although the range was between (-) £128 to £301 with sixteen of the twenty businesses surveyed reporting a positive net margin.

Forage based finishers averaged a gross margin of £176 per head within a range of (-) £114 to £454 per head. Of the thirty-one businesses surveyed, 15 (45%) achieved a positive gross margin.

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Upland ewe enterprises achieved an average gross margin of £47 per ewe within a range of (-) £1 to £69 per ewe. Top third LFA upland ewe enterprises combined heavier lamb weights and greater productivity (16 more lambs per 100 ewes) to achieve lamb sales 18% higher than the average. Better technical performance resulted in a gross margin £10 per head and a net margin £11 per head better than the average.

LFA hill sheep enterprises averaged a gross margin of £17 per ewe within a range of (-) £13 to £44 per ewe. Despite returning lower gross and net margins per ewe than their upland counterparts, LFA hill sheep enterprises showed the benefits of technical efficiency with higher prolificacy and heavier lambs contributing significantly to the £20 improvement in gross margin per ewe between the average and the top third.

Lowground breeding ewe enterprises surveyed achieved an average gross margin of £52 per ewe within a range of £27 to £95 per ewe. When fixed costs were included in the financial performance, the average net margin for those enterprises surveyed was £26 per ewe.

Store lamb producers achieved an average gross margin of £14 per lamb sold within a range of £6 to £26 per lamb. The average net margin among surveyed enterprises was £8 per lamb.
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Taking account of both fixed and variable costs among the cattle enterprises surveyed, 21% of all the various suckler enterprises made a positive net margin, an increase from only 4% last year. Fifty percent of finishing enterprises made a positive net margin, an increase from 19% last year, but only 6% higher than in 2007.

All store lamb finishers surveyed achieved a positive net margin, up from 80% last year. Nearly three-quarters (73%) of lowland ewe enterprises achieved a positive return with 56% of upland ewe enterprises also returning a positive margin. Hill breeding ewe enterprises found it more difficult to achieve a positive margin, with only 20% breaking even. Despite being lower than the other enterprise groupings, this is still an improvement from the 14% of LFA hill breeding enterprises that returned a positive net margin in 2007.