Beef and sheep farmers see costs rise

The cost of production for beef and sheep rose by 4.6% per kilo on average in the year to 31 March 2011, an Eblex survey has revealed, although figures for the year to date are expected to show improved margins for farmers.

The annual Eblex business pointers benchmarking survey shows that rising fixed costs have driven the price to produce a kilo of beef or sheep meat up by an average of 9.2p/kg more than in the previous year. Figures for the year to 31 March 2011 show that beef was 5.75[/kg (2.6%) more expensive to produce than in 2009/2010, while sheep production costs were up 12.6p/kg (6.6%).

However, figures for April to September 2011, due to be released in October, are expected to show significant improvements on the previous year, reflecting an upward trend in the markets, especially for cattle.

Mark Topliff, senior analyst with Eblex, said: “There is no doubt that the picture for beef farmers in terms of prices has turned a corner this year and got stronger and stronger. However, that does take a while to filter through and the reality is that costs have been rising as well.
“Looking at some of the specifics, extensive finishing herd results show lower costs in 2010/11 following a year of higher allocated costs. But intensive finishers have had a significant rise in overhead costs, rising on average by 12% with only contractor costs returning a lower figure compared with the previous year.
“In common with intensive cattle finisher, sheep flocks also had a significant rise in costs with average variable costs up around 24% and fixed costs over 10% higher. Major areas of increase came from feed, power and machinery repairs. But replacement costs also saw a noticeable change of 48% in lowland flocks and 15% in LFA flocks.
“The business pointers data shows that the climate is still difficult for beef and sheep farmers, so it is essential that they keep a close eye on costs of production to see where efficiencies can be made.”

The information was collected for Eblex from 240 beef and 178 sheep enterprises across England, representing lowland suckler herds, less favoured area suckler herds, extensive finishing and intensive finishing herds for cattle, and lowland, less favoured area and store flocks for sheep.