- With spiralling input costs threatening the bottom line of businesses up and down the country, the team at Farming For a Better Climate, part of SAC Consulting, is advising farmers to take small manageable steps, to safeguard their operations
Farmers have been advised that ‘spreading risk could be key to survival’ in challenging times ahead but reminded that ‘keeping it simple’ has helped the industry weather previous storms.
Commenting on the current outlook for arable businesses, Consultant Zach Reilly said:
“Although the increase in fertiliser prices over the past 18 months has been eye watering, there remains a strong margin for arable crops on many farms. Two years ago, fertiliser for wheat crops (N, P, K) was costing approximately £20/t, however at current prices it is closer to £80/t. However, grain prices over the same period have increased in the region of £100/t, leaving additional income to cover the increases seen in other inputs such as fuel, labour and machinery.”
He explained that the increase in fertiliser prices poses two large risks to arable units: firstly, that business cash flow is put under significant pressure, and secondly, increasing sensitivity to commodity volatility, which could leave growers with high input costs but low sales values.
Farming for a Better Climate recommends that farmers prepare a nutrient budget, which is a simple way to assess the fertiliser required on farm, whilst also reducing emissions from the farming business.
Zach continued: “To help mitigate risks, ensure you know the cost of production per tonne, and how rising input costs affect this. It is also worth considering selling a proportion of grain forward to provide some security going into the next season.”
Consultant Robert Ramsay shares his insight on the livestock industry. “Beef and sheep enterprises have been under pressure due to inflating costs, which are undermining any margin to be gained from strong farmgate prices,” he explained.
“It is hard to believe that 18 months ago we were pleased to be receiving an average deadweight price for beef of £4 per kg, when now we are seeing £4.60, but are in a worse off financial position.
“It is amazing to see milk prices for the dairy industry of 50ppl, but farmers cannot afford to become complacent. If we look back five or six years ago, milk prices were little over 10ppl and survival during that time was all about making the most of farm assets and making simple improvements in areas such as animal health or feed,” he continued, adding that although this was relevant for dairy farmers at the time, learnings could apply to the beef and sheep sector.
“If we can focus on doing simple things really well, it could tide us through this period of instability, knowing there remains a good future for livestock production here in Scotland.”
Martin Lawrie at Newton of Arbirlot, Arbroath, runs a mixed beef, cereal and potato farm and has been taking steps to understand his costs and spread risk across his enterprises.
“Cash flow for all businesses right now is poor and everyone is worried by fertiliser prices and knowing when to buy. We are getting pushed to make decisions about buying fertiliser now for spring barley and potatoes we’re planting next spring and have made the decision to forward buy around a third of what we need, knowing the price is high but to give us leg room to keep a close eye on the market. Similarly, we have forward sold about 50% of our wheat, and we have already seen the price drop 100/t since May.
“We are lucky that the beef side of the business supplies dung for the cereals and potatoes side, which saves on fertiliser. Finding ways to spread the risk, whether through diversifying incomes streams or spreading costs throughout the year is going to be key to survival for some businesses.”
This December, Farming For a Better Climate is running a roadshow of meetings across Scotland to support farmers with specialist advice in the areas of: energy; economy and efficiency, with a view to reducing emissions and building real business resilience.
The ‘Farm Planning in Difficult Times’ workshops will take place as follows: –
Stirling, 5 December (King Robert Hotel)
Larkhall, 7 December (Radstone Hotel)
Thainstone, 12 December (Thainstone Specialist Auctions)
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