We have now completed our gross margin accounts for the 2022 harvest across our portfolio of arable clients. The database for 2022 is based on an area of over 90,000 acres.
A comparison of the 2022 harvest against the 2021 harvest for the productive cropping areas are included below with a 5 year summary for the average gross output and arable gross margin:
Key trends for the arable productive area:
Outputs
The 2022 harvest was the highest gross output on average we have seen since starting to benchmark at Ellacotts – over a decade ago.
There was a 72% increase in average gross output across all our farmers between 2018 and 2022 and a 33% increase on 2021 which is impressive given the strength of the 2021 harvest.
Yields were up across all crops on average and for our top 20% category for 2022 compared with the 2021 harvest.
Price per tonne for crops were significantly up on the 2021 harvest with wheat and barley both up nearly £50/T on average.
Inputs
Included in the calculations for the arable gross margin figures are the associated costs incurred.
The key movement was fertiliser, this on average had nearly doubled compared with the 2021 harvest figures at £105 per acre.
Spray costs were also up by over £15 per acre, resulting in an average spray cost of £87 per acre.
Overall
Stronger yields coupled with a grain market that was trending upwards off the back of the 2022 harvest has resulted in an arable gross margin position doubling compared to the three harvest years to 2020.
A 5 year summary of the management profit position based on the total area of the farm for our ‘average’ farmer:
Key trends for the profit/(loss) before Basic Payment Scheme:
The 2022 harvest generated significant profits before support from the Basic Payment Scheme (BPS) which is something we haven’t historically seen, with the exception of 2021.
Prior to 2021 arable farming has fundamentally been unprofitable before support and that support has been needed to ‘bridge the gap’ for the losses generated.
We are all very aware that BPS is reducing until 2027 when the support will be completely abolished resulting in £37m of BPS being lost per annum.
It is going to be critical to assess the other support streams available to recover the inevitable loss of BPS. The performance of the 2022 harvest is unlikely to be matched for some time and this has in most cases marred the impact of the reduced support.
Key trends for the management profit:
The trend for the performance of the management profit has mirrored that of the gross output and gross margin graphs as seen. The strength of the grain markets and improved yields are yet again a key factor in the upward trend of the management performance.
Outputs and inputs
These elements have been highlighted above with nothing further to add.
Fixed costs
Fixed costs, including rent and finance, were up by over 15% on the 2021 harvest. Many of the reasons for the increases are driven by external factors which are ultimately an unavoidable cost.
Power and machinery costs were up on average which is predominately due to the increase in fuel prices during the 2022 harvest.
Property costs were up over 25% due to increased remedial works off the back of COVID-19.
If you would like more information or any advice on benchmarking, please contact Laurence by emailing ledmunds@ellacotts.co.uk or call us on 01536 646000.
Information for readers: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.
