Financial Impact of FMD in Focus

UK - The severe financial impact of Foot and Mouth Disease on Scotland’s beef and lamb sectors has been put into sharp focus by the annual analysis of performance and profitability by the red meat promotion and development body, Quality Meat Scotland.
calendar icon 21 November 2008
clock icon 3 minute read

FMD coupled with rising costs for fertiliser and fuel made for a particularly challenging year for red meat producers.

According to latest analysis the average production cost of a kilo of output from hill suckler herd was 304p when taking into account all costs including unpaid family labour and a 5% return on working capital, but the market only returned an average of 133p. Similarly output from an upland ewes cost 208p a kilo to produce, but the market place only returned 107p to the farmer.

The findings were published in the 2008 edition of ‘Cattle and Sheep Enterprise Profitability in Scotland’, published today (Wednesday) at the AgriScot farm business event at Ingliston, Edinburgh.

The publication gives the 2007 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.

QMS Head of Economic Services, Stuart Ashworth said: “The figures show that unsurprisingly 2007 was a tough year for farmers in Scotland.

“The Foot and Mouth Disease outbreak in England hammered down producer prices at a critical marketing period, and the steady increase in oil and grain prices made for a very unfavourable business environment.

“Despite this, some of Scotland’s best producers just about broke even and they were losing a lot less money than the bottom third producers. All in the top third shared the same traits of better technical performance and meat yields, more effective use of food and fertiliser and a tighter control on fixed costs.

“As to whether the picture will be any different when we look back at 2008, any predictions must be treated with caution but it seems unlikely that the increase in prices will have been sufficient to overcome the sharp rise in output costs.”

The 2007 survey covers 58 breeding ewe enterprises farming 34,000 ewes and 116 suckler cattle enterprises. Between them they farm 10,465 suckler cows, 12 enterprises finish almost 5100 store lambs and 52 cattle finishing enterprises sell 2370 prime cattle.

Taking account of both fixed and variable costs among the cattle enterprises surveyed:-

  • Only 4% of all the various suckler enterprises made a positive net margin, slightly down from last year.
  • Nineteen percent of finishing enterprises made a positive net margin, a substantial reduction from the 44% that achieved this last year.
  • Only 14% of Less Favoured Area (LFA) hill breeding enterprises returned a positive net margin.
  • more than 50% of LFA upland and low ground sheep breeders achieved a positive, albeit small, net margin before allowing for unpaid family labour and a return on working capital invested in the business.
  • More than 80% of store lamb finishers achieved a positive net margin, up from 4% the year before.
Stuart said: “The upland and hill sector stood up better to the challenges in 2007 than many would have given them credit for. They were helped by FMD compensation, but a major part was their immediate response to the difficult economic conditions which saw a drive to reduce production costs, particularly focusing on fixed costs such as property maintenance and contract labour.

“The store lamb producers benefited from selling into a rising market in January 08, having bought in the depressed autumn sales.”

TheCattleSite New Desk

© 2000 - 2024 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.