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Outlook: Profitable year likely, although future less rosy

The event takes place on Tuesday, July 2.
The event takes place on Tuesday, July 2.

Harvest 2019 is likely to deliver another year of profits for growers, according to Andersons.

The farm consultancy firm said the recent run of “robust arable profitability” was likely to continue.

However, the outlook for the arable sector is less rosy.

“Not only is Brexit looming over the sector but other issues such as high costs, lack of break crops and stagnant yields will need addressing,” said the company’s head of business research, Richard King.

Ahead of next week’s Cereals Event in Lincolnshire, Mr King said many combinable cropping farms would need to make significant changes if they are to remain profitable over the next decade.

Data from Andersons’ fictional 1,500-acre Loam Farm, which the firm has been using since 1991, suggests the farm, like many others, will make an overall profit for the next few years. Loam runs a simple rotation of milling wheat, oilseed rape, feed wheat and spring beans.

Andersons has predicted outputs of £1,243 and £1,287 per hectare (ha) for the 2019 and 2020 harvests respectively, with margin from production at £45/ha for 2019 and £78/ha for 2020. Once subsidy money has been accounted for – £226/ha for 2019 and £219/ha for 2020 – the fictional farm is expected to make an overall profit of £271/ha in 2019 and £297/ha in 2020.

Mr King said the profitability predictions were based on an “orderly” Brexit and if there is a no-deal outcome, the prospects would be sharply reduced.

“Whilst the budgeted surplus for 2019 and 2020 shows a decent return to the proprietor of Loam Farm in the short term, it is also obvious how dependent the business is on the Basic Payment for overall profitability,” added Mr King.

“With changes coming under a domestic agricultural policy, Loam Farm, and many businesses like it, will have to reassess their operations.

“Those businesses that grab a head-start in improving efficiency will be best placed to prosper in the new environment.”

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