Arable Benchmarking Survey

Arable Benchmarking Survey
 
Harvest 2015 Benchmarking Survey Results

20 June 2016, by Ian Bailey

The results of the Arable Benchmarking Survey for the harvest in 2015 show that this year was less problematic than the previous year.

 

Yields

The mild weather during the autumn and winter of 2014 and the above average sunshine hours during the spring of 2015 provided crops with good establishment and growing conditions. Although the summer was slightly cooler and wetter than the previous two presenting some challenges at harvest, there were no major weather extremes and the growing conditions for Harvest 2015 were ideal with Defra announcing a record year for wheat yields.

Moreover, participants of our Harvest 2015 survey achieved average yields of 8 to 12% higher than those published by Defra. Table 1 compares average crop yields from the survey for the past three years. On average 2015 yields were 6% higher than in 2014.

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Source: Savills Research

TABLE 1

Average crop yields (tonnes per hectare)

 
Table 1

Source: Savills Research

Crop Price

Although the higher yields of the harvest were welcome, crop prices continued their downward trend with our survey recording a 14% fall in 2015 and more than 25% over the past two years (See Table 2). Our research indicates that survey participants achieved average crop prices around 10% higher than prices quoted by AHDB.

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TABLE 2

Average crop prices (£/tonne)

 
Table 2

Source: Savills Research

Power, machinery and labour

Harvest 2015 recorded a reduction in average power, machinery and labour costs and in particular savings were made by in-hand operations on energy and labour compared with Harvest 2014.

This, in part, may be reflected in the increased contract cost however the savings are above this additional cost suggesting efficiencies through targeted use of contractors. Graph 1 compares power, machinery and labour costs per hectare for in-hand operations with the full CFA cost to the landowner and shows the average efficiencies of using a contractor.

Our analysis of costs as a proportion of gross combinable crop output (see graph 2) shows that there is a wide range of performance across the farms surveyed. This suggests there are opportunities for improving costs for some businesses. In addition to the absolute savings (£ per hectare) energy and labour costs have reduced as a proportion of gross crop output. However, even with a reduction in cost labour continues to be the highest individual fixed cost. Our research suggests that there is a narrower spread of costs where landowners are using CFAs rather than farming in hand (see graph 2).

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GRAPH 1

In-hand and CFA power, machinery and labour costs

 
Graph 1

Source: Savills Research

GRAPH 2

Power, machiney and labour (% gross combinable crop output)

 
Graph 2

Source: Savills Research

Costs of production

Although fixed costs have fallen, at current crop prices, margins have been squeezed further and, excluding subsidy, average total costs are very close or in excess of crop price. Variable costs were similar to harvest 2014 (see graph 3).

Average total ‘fixed’ costs are lower in the CFA operations compared to the in-hand operations. Contractors are able to make cost savings and benefit from economies of scale as costs are spread across larger areas with these cost savings passed onto the landowner. In addition, the landowner is not required to invest in labour and machinery which might not be fully utilised throughout the year. Table 3 compares the average 2015 return (after power, machinery and labour and excluding subsidy) of in-hand and CFA operations to the landowner.

In addition, in hand farm operations tend to have higher ‘other fixed costs’ than those using contractors. Our research indicates that these are up to three times higher and add, on average, an additional £70 plus per hectare to costs.

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GRAPH 3

Total costs as proportion of crop price

 
Graph 3

TABLE 3

Combinable crops profit and loss (average £ per ha)

 
Table 3

Source: Savills Research

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Key Contacts

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

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