Livestock Enterprises Report Some Margin Improvement

Despite some improvement in the financial performance of some types of cattle and sheep enterprises, the results of a QMS survey continue to highlight the challenge livestock farmers face in terms of achieving a positive margin without CAP support.

Speaking today (Monday 19th November 2018) at the launch of QMS’s “Cattle and Sheep Enterprise Profitability in Scotland” publication, Stuart Ashworth, QMS Director of Economics Services, said it had never been more important for farmers to benchmark their businesses and then act on what this reveals.

The QMS publication, also known as the “Enterprise Costings”, covers the 2017 calf and lamb crop, and is based on a survey of beef and lamb producers. It omits CAP support payments, except for those which are directly linked to production, and strongly highlights the technical and financial performance variation that exists when comparing Scotland’s top third producers and the bottom third.

The top producers continue to be characterised by high physical and/or technical performance; strong control over costs and the ability to maximise returns from the market place.

According to Mr Ashworth, 44% of suckler herds in the survey achieved a positive net margin. This is an increase from 36% last year and is much higher than the 2014 and 2015 calf crop years.

“Margins among store finishers also improved considerably on the year, with 43% of the businesses surveyed achieving a positive net margin – up from 30% of businesses last year,” said Mr Ashworth.

The proportion of hill ewe flocks making a positive net margin increased from 10% last year to 14% this year, returning to the levels seen in the 2015 lamb crop year.

“However, net profitability among upland flocks slipped to 56% of enterprises surveyed achieving a positive net margin for their 2017 lamb crop compared with 68% per cent recording a positive net margin last year,” he said.

“Similarly, lowground flocks also saw a slight deterioration in margins, with 80% achieving a positive net margin for the 2017 lamb crop compared with 85% of lowground flocks surveyed achieving a positive net for the 2016 lamb crop.”

Store lamb finishers reported a considerable improvement in margins, said Mr Ashworth, with all those surveyed achieving a positive net margin compared with only 38% of the sample last year.

“However, despite this apparent improvement in returns, those businesses reporting positive net margins still struggled to deliver a fair return for labour and capital,” he observed.

The Enterprise Costings publication can be collected free of charge from the QMS stand at AgriScot this week or viewed and downloaded from here. A printed copy can be requested by emailing info@qmscotland.co.uk