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During February, we reported on the gross margins being achieved across the suckler farms involved in the BETTER Farm Beef Challenge NI.
The average across the group is over £700/ha, with the top margins being achieved of just under £1,000/ha. Most farms are currently in a good position to increase margins in 2019, as long as the beef market returns to normal trading conditions later this year.
The gross margin figure is a good indicator of technical performance on a farm, but it is not a measure of profit. When fixed costs are accounted for, the reality is that profits on the farms are relatively small.
In our experience, any suckler-to-beef enterprise that is leaving a net margin around the £200/cow mark is at the top of their game. There might be some who are making more, especially on good-quality land. There are also those who perhaps are nearing retirement and decided to put any further investment in land and buildings on hold. They might be getting higher margins per head, but their assets are gradually being run down.
So if a £200/head margin is achieved, it works out at a profit of £20,000/year. In one regard, it is a meagre return on the work put it, but add in direct payments, then the total income looks much more sustainable.
However, on marginal land, the figures would suggest it is virtually impossible to make a positive net margin with suckler cows. Additional housing and feeding costs, along with land maintenance, generally result in negative returns. So in this situation, farmers are totally reliant on direct payments for their income.
At the same time, these farms play an important role in the rural economy, and also have a good story to tell around managing the environment and the wider rural landscape.
The suckler sector is vulnerable, but with the right incentives in the future, it still has an important place in local agriculture.
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