Rising beef and sheep costs masked by record prices

Record prices are masking the rising costs faced by beef and sheep producers.

According to figures released by Eblex in its Business Pointers report, English beef and sheep businesses across the board have made positive gross margins in 2011/12, which have been attributed to record prices.

Although on paper the situation looks positive, Eblex explained that once fixed and non-cash costs are taken into account, the net margins for many enterprises slip into negatives. This slip demonstrates the importance of the relationship between controlling costs and achieving profitability, said Eblex.
Senior analyst at AHDB Carol Davis said: “The record cattle and sheep prices we experienced in the last financial year have led to improved margins across every type of beef and sheep enterprise. However, rising variable costs, particularly in terms of feed and forage, have continued to have an impact.”
“As a result, Business Pointers’ estimates show that many enterprises have made a loss after fixed and non-cash costs are deducted. However, the top third producers across all types of enterprise showed positive margins, with the exception of beef suckler herds. This demonstrates that, by focusing on on-farm efficiency, it is possible to generate a profit in spite of the challenging financial climate.”
“Focusing on overheads and ensuring market prices are maximised is likely to be the most effective route to improving margins for many cattle and sheep producers.”

The Business Pointers report is published each autumn by Eblex as a reference point against which beef and sheep producers can benchmark their own performance. The full report will be available from Eblex later this month.

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