14th November 2016

Enterprise Costings Highlight Challenges and Opportunities

The variation in the financial and technical performance between Scotland’s top third producers and the bottom third is sharply brought into focus in a publication launched by Quality Meat Scotland today (Monday 14th November).   The “Cattle and Sheep Enterprise Profitability in Scotland”, which covers the 2015 calf and lamb crop year, shows very clearly the profitability challenge faced by sheep and cattle producers in a wide spectrum of business types.   It also highlights the opportunity there is for producers to take steps to make changes which could improve their profitability, according to Stuart Ashworth, QMS Head of Economics Services.   “Scotland’s top third producers are characterised by three key attributes - strong physical performance, control over costs and an ability to maximise returns from the marketplace,” said Mr Ashworth.   Looking at suckler herds, those in the top third of gross margin per animal achieved higher output through higher calf-rearing percentages and generally selling heavier calves resulting in higher yield per cow in the herd. They also typically received a small premium in the marketplace for the calves they sold.   “These units also had strong variable cost control and lower total variable costs than the average while achieving higher output. In all cases, variable costs per kg of calf reared were lower among the top third and fixed costs were also firmly controlled,” said Mr Ashworth.   Those in the top third of sheep producers similarly achieved higher outputs through higher stock performance.    “Typically they reared about 10–18 more lambs per 100 ewes than the average producer. Although they did not necessarily rear lambs to the heaviest weights, the larger lamb crop typically resulted in top-third flocks selling 5 to 7 kg liveweight more lamb per ewe,” he observed.   “They also typically sold the highest proportion of lambs for immediate slaughter. The net effect of this was that income per ewe from lamb sales was £14–£20 per ewe more than the average.”   The LFA hill suckler herds surveyed had an average gross margin of £285 per cow. The top third averaged £445 per cow gross margin, an improvement over the average of £160 per cow.  The top third recorded a negative net margin of £16 per cow against the average of (-)£154.    The LFA upland suckler herds were split into two categories, one group selling at weaning and a second group selling yearling stores. Those selling at weaning made an average gross margin of £319 per cow, but were outperformed by their counterparts selling yearlings, who achieved an average gross margin of £426 per cow.    Top-third producers selling at weaning made £442 gross margin per cow with 6% more liveweight produced per cow than the average while at the same time keeping variable costs 20% lower. Of those selling yearlings, the top third achieved a gross margin of £572 per cow. Again variable costs were strictly controlled and compared to the average were 8% lower while still producing 2% more liveweight per cow.   “Thirty-six percent of businesses selling calves at weaning achieved a positive net margin. In contrast, among those selling yearlings, 38% of the businesses achieved a positive net margin,” observed Mr Ashworth.   Rearer-finisher businesses surveyed recorded an average gross margin of £490 per cow, with the top-third averaging £639. However, the average net margin remained negative at (-)£78 – a fall of £12 over the year. Thirty percent of the businesses surveyed achieved a positive net margin, a decline from 38% last year.    Cereal-based cattle finishers surveyed reported an average gross margin of £154 per beast and a net margin of £62. Those in the top third achieved a £120 improvement in net margin over the average. Indeed, two thirds of businesses in the survey reported a positive net margin down from 80% last year.   The latest “Enterprise Costings” will be available to collect free of charge from the QMS stand at AgriScot on Wednesday November 16th. It can also be viewed on-line here or hard copies ordered by calling 0131 472 4040 or emailing info@qmscotland.co.uk.  

Sign up for the latest news and views