With crop prices rising worldwide, arable farmers should be in for a good spell, although individual returns will depend on how they have sold their crops forward. However, many medium-sized livestock businesses still rely on subsidy payments to make a profit according to farm busienss consultant Andersons.
Latest results from its notional Meadow Farm model, which is typical of many mixed farming businesses, suggest that while better market returns are expected to lead to an improvement in margins in 2010/11, the farm will only achieve a surplus once single payment and agri-environment receipts are included. The farm, like many others, has been hit by higher feed, straw and forage costs, which havepushed this season's variable costs up by almost 14 per cent on 2009/10.
Profitability of Andersons' hypothetical dairy farm - Fresian Farm - was also tight, although the situation had improved following recent milk price increases. The 150-cow unit was predicted to make a small 0.7p/litre margin from production in 2010/11, despite cost of production increasing by 0.6p/litre. With the single payment and ELS money added in, that surplus was boosted to more than 3p/litre.
Dairy processors Robert Wiseman have issued a warning that their profits could fall by about a third. They are major suppliers of milk to supermarkets. Tesco have increased the price they pay to farmers by a little over 1p a litre.