Even in the good times, it’s a struggle to break even
2017 might have marked a recent high-point for many of Scotland’s cattle and sheep farmers – but the income pendulum has been swinging sharply in the other direction for the sector’s income during 2018.
Livestock enterprise costing figures released yesterday by Quality Meat Scotland yesterday show that even in a relatively good year like 2017, much of the industry would have struggled to break even without farm support payments – and most farms failed to give a reasonable rate of return to the farmer for his time and capital invested in the business.
Commenting on the publication, QMS director of economic services, Stuart Ashworth, pictured, said the figures once again highlighted the importance of support payments to the livestock sector.
The costings showed that when the value of the farmer’s own labour and a return on working capital were added, only two out of twelve enterprise types saw the sale price cover the costs of production on a per kg basis.
While the report focused primarily on the 2017 lamb and calf crop, lower output prices and the continued input inflation – especially fuel, feed and fertilizers – looked set to knock margins during 2018. But Ashworth said the effects of the weather on productivity during 2018 along with the knock to confidence caused by Brexit uncertainty highlighted just how vulnerable the industry continued to be to forces outwith its control.
In a new section focusing on carbon emissions, Ashworth said that lower levels tended to be associated with higher margins: “This should not be a surprise, as the drivers for improved margin are also the drivers for improved emissions – namely the productivity of the system and the technical efficiency of that system.”
However, he said that carbon emissions and enterprise profitability were also influenced by the physical environment: “The levels of rainfall, sunshine hours and temperature can not only influence animal productivity and performance but also result in considerable seasonal change in input use, for example fertilisers and animal feeds, and the need for fuel and electricity for extended field work and/or housing periods and feed preparation and delivery.” And he added that while improving productivity and the efficiency of resource usage was important, the cold wet winter and drought like summer highlighted the challenges inherent in biological production systems. “For the commitment which producers have been showing to looking after the welfare of their stock in such a tough year will have had costs - and while margins will have fallen, emissions will have increased simply because producers were doing their damndest to look after their stock in the best way they could,” he said.
Turning to the current state of play with Brexit, Ashworth said that while the proposed agreement might represent a “curate’s egg” for the industry, the indications of free market access and continued recognition of PGI products contrasted what he termed “destabilising effects on the sector which would be hard to contemplate let alone calculate” likely under a no deal scenario.