Profit Margins Under Pressure

Beef and sheep producers’ profit margins remain under severe pressure, despite recent increases in the farmgate price, according to the latest EBLEX estimates of Business Pointers farm costings data.

Taking into account the latest input costs data available for March 2008, EBLEX analysis shows that for beef producers, the situation improved slightly, with the average intensive beef finisher losing £17 per head in 2007/08 compared to a loss of £20 per head in 2006/07.

Average extensive beef finishers also improved with losses at £104 per head in 2007/08 compared to losses of £133 per head in 2006 /07.

For upland suckler herds, the loss was reduced to £138 per cow in 2007/08 compared to a loss of £151 in 2006/07. Lowland suckler herds reduced losses to £143 per head – an improvement on losses of £148 per cow in 2006/07.

However the situation has worsened for the vast majority of sheep producers with the average lowland breeding flock in England losing £22.40 per head and the average LFA breeding flock £16.70 per head in 2007/08.

Store lamb finishers were the only group whose margins significantly improved – mainly as a result of low post Foot and Mouth prices for purchased stores. Those selling finished store lambs in March this year at an average price of up to 150p/kg liveweight, for example, saw margins approaching £20 per lamb.

The EBLEX analysis was based on input costs from April 2007 to March 2008, and did not take into account post March 2008 prices for cattle or sheep. Finished cattle and store prices were based on a comparison between March 2007 and March 2008, and lamb prices were based on prices from June to October 2007.

EBLEX Chairman John Cross said the figures revealed the true financial state of the beef and sheep sector – something that was all too easy to forget when faced with the current high farmgate price: “It is a timely reminder that producers should not be swayed into thinking all will be right with their businesses if prices look set to stay at current levels.

“Despite the improvements made, the vast majority of beef and sheep producers continue to operate on negative margins.

“The message is clear – volatile input costs and prices are now a fact of business life. Global supply and demand, exchange rates and ongoing consumption patterns all play a part in shaping the farmgate price.

“Knowing how much it costs to rear your animals, and at what point your margins will improve are essential to remaining in business for the long term.”

TheCattleSite News Desk

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