Loam Farm Budgets

In preparation for the Cereals Event the Andersons’ Loam Farm Model has been updated.  Loam Farm is a notional business, located in East Anglia, which has been running since 1991 and tracks the fortunes of combinable cropping farms.  It comprises of a 600 hectare (1,480 acre) combinable crop farm running a simple rotation of milling wheat, WOSR, feed wheat, and spring beans.  Of the cropped area, 240 Ha are owned and 360 Ha rented on FBTs.  There is a working proprietor plus one full-time man and harvest casual. 

Despite establishment problems in autumn 2012, Loam Farm achieved reasonable yields for harvest 2013.  Although prices were already falling from the highs seen in 2012, the business still produced a surplus.  For 2014 yields were above average as a result of good growing conditions.  But this did not offset the effect of lower prices as markets continued to slide.  There were some variable cost savings, but overall profitability fell.

For 2015, crops currently look good.  Yields are presently budgeted at average levels, but may again be higher than usual.  This would provide a much-needed boost – with current crop prices output falls once more.  Overheads tend to drift upwards – whilst fuel prices have dropped other machinery expenses have risen.  Despite the current low-inflation environment, general expenses are also likely to increase.  All this means the business looks set to make a substantial loss from arable production this season.

One of the big reasons for falling profitability is rising rent and finance costs on this farm.  With borrowing costs remaining low it is not finance that is the driver.  Loam Farm has two FBT agreements; one came up for renewal in autumn 2013, the other in autumn 2014.  With prospects better at those times, rent rises to £375 per hectare (£150 per acre) had to be agreed to secure the land.  The effect on costs for the 2014 and 2015 years can be seen. 

Prospects for the 2016 harvest year show little improvement.  A slight recovery in prices helps profitability somewhat, but the margin from production is still negative.  This farm requires support payments to bring about a business surplus.  By 2016 Loam Farm’s ELS agreement has ended, and it is assumed that it will not be able to get into the new Countryside Stewardship Scheme.  Therefore, including the move to the BPS and the effect of currency shifts, the overall level of support is much reduced from a few years ago.  A small glimmer of hope for the sector is that any variance in the 2016 figures is probably on the upside.  It is a long time to harvest next year, and there isthe possibility of a weather event somewhere in the world (perhaps prompted by the El Nino effect), or a favourable shift in currency

For more information and discussion on the Loam Farm results Andersons will be at the Cereals Event at  Boothby Graffoe in Lincolnshire on the 10th and 11th June, on Stand 824.