Harvest 2020 benchmarking reflections

When drawing together yield, price, variable and fixed cost information from farms local to an area and putting them alongside each other, the discussions that ensue are always useful and productive. The process was tough for some this year with yields down, largely thanks to the autumn and spring weather, which impacted on both winter and spring crops. However, the discussions at the meetings were as valuable as ever, with plenty of lessons to take forward and support for a situation that is often familiar for all.

Here, we look at the key points raised by groups across the regions.

With industry pressure to minimise inputs for the benefit of margins, the environment and possible future policy direction, many farmers are scrutinising input costs and trying to scale back. This approach certainly merits looking at, with the ideal situation being a programme that fits the current weather situation and potential of the crop at that time. Over the last year, farmers who have recognised that the potential is not there and have been able to reign in their variable cost spend, have seen that approach pay dividends.

However, some of the best yielding crops this year, have often had a higher spend associated. This has enabled diseases, along with pests and weeds, to be controlled and has resulted in both higher yields and margins. In this way, you may still see an optimum return by ensuring spend is appropriate to the season and questioning spend, but investing in your crops if there is potential there.

Some farmers this season have broken their crops down by drilling date, for example, November, December, January, February and later. The results for yield have shown significant differences for those crops drilled in December, versus those drilled into better conditions in January and February. A take-home lesson was that, despite the pressure to get drilled up, crops drilled in better conditions in the new year resulted in higher yields thanks to their establishment in the harvest 2020 season.

Given the dry weather experienced, margins of break crops suffered greatly for harvest 2020, with negative margins experienced by some, across various crops. With break crops, being honest about the budgeted yield, and matching this to input spend, was one way that farmers were able to keep break crop margins positive in some crops.

When looking at this across the whole rotation, the importance of wheat as a contributor to overall net margin was vital. For this reason, many group members were looking at how wheat area could be further optimised without being a detriment to other rotational factors. Options such as more second wheat or even third and more wheat rotations, rotating stewardship options with wheat and ensuring attention to detail with the current crop are all being considered to get the best yield and margin possible.

A recurring discussion around the virtual table of the business groups was the OSR and cabbage stem flea beetle (CSFB) question, with some stating that growing it was just like “a roll of a dice”.  Concerns raised included the unknown effect of larval damage on yield, the variable establishment, the costs, the negative impacts of using insecticides for the wider farmed landscape, the uncertainty and the need for effective pigeon control.

Where yield is achieved, OSR margins are indeed positive and tempting. For some, it is a risk too far however, for others, lengthening rotations and using various methods to get the crop away from CSFB at drilling and into the autumn is working. Despite this, looking at moisture availability at drilling and having a plan B which you are prepared to implement still seems advisable.

A discussion that has taken place in many of our groups this winter is about growing winter versus spring barley. In terms of yield and price, the volatility of both has been large over the last few years. Within the groups, we have looked back to see if either has been more consistent over the last few years and which has edged ahead across the group. In your business, the precedence might well be set by wider agronomic, market and logistical reasons for growing one over the other but, if flexibility allows, consideration of the options and consistency over time might be worthwhile.

One of the most difficult things to get right, but so important with its impact on cost of production. A personal choice of which strategy you choose, but discussions have certainly shown that knowing your cost of production, preparing a budget based on different yield options and then always selling at a profit have given success. In this year, it has been worth considering the use of options and strategies to take advantage of current market conditions.

This has been a hot topic of conversation this year, and there is unlikely to be a right or wrong answer due to a range of different experiences across the region. However, knowing your costs through using the AHDB machinery costing calculator, listening to webinar information from Harry Henderson), looking after kit, balancing repairs and depreciation, and running machines for more hours are all topics that were heavily discussed. Beyond that, the decision to hire, share, buy, use warranties, repair your own or get service contracts, and more, are always up for debate. It is therefore incredibly worthwhile to share thoughts and ideas within a group, to assist in your decisions.

At the end of meetings, we turned our attentions to the whole rotation, looking at proportional analysis targets of variable costs being 30-35% of the gross output, gross margin at 65-70% and labour, power and machinery lines sitting at 15-17%. Very few of our East Anglian businesses achieved a net margin across the rotation of £500 per hectare with a gross margin of over £1000 per hectare for harvest 2020. Going forward, is it worth considering if we need to be closer to this figure for our businesses to be sustainable? The suggestion is yes, but we just need to find a way to achieve that.

When asked about the primary area of focus for harvest 2021, there were, as ever, a huge range of responses across the groups. These responses ranged from a focus on nutrition with particular reference to nitrogen applications, looking at stewardship scheme options and optimising the poorer areas of the farm, to concentrating on the crops in the ground and aiming to achieve yield consistency across the farm. There were, of course, those who want a nice dose of rain in the spring to boost their yields or to be allowed some company in the combine! 

Whatever this season of harvest 2021 might bring for you, keep an eye on your costs, your budgeted yields and your marketing, and best of luck for achieving a sustainable and profitable business for the coming year. We look forward to benchmarking these crops with you next winter.

For more information and news on benchmarking, please visit: https://ahdb.org.uk/topic/business/benchmarking

If you would like to find out more about Farmbench, AHDB’s benchmarking tool, please visit: https://ahdb.org.uk/farmbench