Johnnie Mackenzie and step-son, Gary Elder, who run Westfield, near Thurso, Scotland’s most northerly monitor farm, were aware their 249-cow suckler herd was making a loss before they received their subsidy pay-out.
But they were astounded to discover they would be £17,000 better off if they were to move out of cows while continuing to receive the subsidy cheque.
The figures, produced as part of their involvement in the monitor farm programme lead by Quality Meat Scotland, have given them cause to pause and reflect on their operation.
However, the pair have no intention of joining the so-called ‘slipper brigade’ which have opted out of active production. Instead they are now analysing their fixed and variable costs and the breakdown of their performance figures to see where savings and improvements can be made.
The figures showed Westfield’s suckler herd performance in 2008/09 compares well to similar extensive holdings in Scotland. The farm’s gross margin after forage was £257.71 per cow, compared with the average of £207.
After the inclusion of fixed costs, Westfield showed a loss of £108.50, compared to the Scottish average of -£127. The herd made a total loss of £27,016.50 but this transformed into a profit of £25,485 after subsidy.
Without the cattle, however, they would have taken in £42,497 by claiming the area-based Single Farm Payment.
It was not so cut-and-dry for the business on the sheep front. Their 448-ewe North Country Cheviot flock fared particularly well when set against the performance of other similar producers.
Even with slightly higher than average fixed costs, it recorded a net return of £17.38 per ewe. This was over £2 per head higher than the average of the top third of Scottish upland flockmasters.
The sheep operation, which is based on rented grazings, made a profit of £7,786.24, which grew to £17,091 when subsidy was added. Had Westfield moved out of sheep, it would have received £9,304.96.
Mr Elder (30) admitted the size of the unsubsidised bottom-line loss made by their cattle had been a bit of a bolt from the blue.
He said: “I think we all know that without subsidies, the business wouldn’t really work.
“You see the headline figures on a national level but it’s different when it’s set out in black-and-white for your own farm.”
The stats however have not tempted him or Mr Mackenzie to consider dispersing the suckler herd. Instead, they are determined to look again at their fixed and variable costs to see where savings could be made.
They have recently invested in a major upgrading of the steading on the 223 hectare holding, west of Thurso. This has included a new slurry system and further improvements are in the pipeline.
They are now analysing their fixed and variable costs and the breakdown of their performance figures to see where savings and improvements can be made.
“We’ve no plans to join the slipper brigade,” said twenty-nine-year-old Mr Elder. “We’ll be scrutinising the inputs to keep them as low as possible and see what improvements we can make on the performance.”
Among issues they are considering is whether to sell older, less productive cows and keep on more of their heifer replacements. They have also started to address their prolonged calving period which this year started in late February and has only just ended.
While they see some scope in opting for earlier calving, they have to weigh up the projected rise in output against the extra cost of using more concentrates.
Mr Elder and Mr Mackenzie, 50, were pleasantly surprised to note that the performance of both their cattle and sheep enterprises scored well against the national average.
They, however, caution that the relatively rosy picture for sheep is largely due to the current decent market returns for store lambs.
“Not so long ago, you could hardly give them away. But lamb prices have been on the rise over the last couple of years which has a lot to do with so many people having gone out of sheep,” said Mr Elder.
The farm statistics triggered a lively debate among the 48 members of the agricultural community who attended the latest monitor farm meeting.
Facilitator Iona Cameron said: “The figures indicated that Westfield is above average financially though there were a few things they need to address performance-wise.
“We’re keen that all the other farmers input as much information as possible so we can help make not just Westfield but all farms in this area better off in one way or another.
“Hopefully they’ll all go home and compare their own costs against Westfield’s and see areas where they can improve their performance.”
The holding has been included in the Scottish-wide monitor farm programme thanks to backing from QMS, local agricultural businesses and the Scottish Government.
The next on-farm meetings to review progress is being held on September 15. Further information is available here