Livestock prices on the up but not all are winners

Last year, cattle and sheep farmers in Scotland may have enjoyed their best year since 2005 but the chief economist at Quality Meat Scotland, Stuart Ashworth, yesterday introduced caution into that upbeat view by saying that no-one in livestock production was making a fortune.

The group’s costings survey showed an improvement across all enterprise types surveyed but they also revealed the continued difficulty among suckler herds and hill sheep flocks in achieving a positive margin from the market place.

Only 30 per cent of the suckler herds surveyed reported a positive net margin, out of which they had to pay family 
labour and reward the risk capital invested in the business.

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Similarly, while upland and lowground ewe flocks surveyed all produced a positive net margin, only 57 per cent of the hill flocks achieved this objective.

Ashworth added that, even then, those that reported positive net margins still struggled to deliver a fair return for labour and capital. He confirmed that all the data was exclusive of subsidies.

Ashworth also drew attention to the wide variability, with returns made by producers even within their own sectors of the livestock industry showing significant differences in financial and technical performance.

He characterised top producers as those with better than average outputs, strong control over costs and an ability to maximize market returns.

For example, those in the best performing third of beef suckler herds sold heavier calves, achieved higher calf rearing percentages and generally lower herd replacement rates.

Showing their better marketing ability, they also typically received between 3p and 7p per kilo liveweight more for the calves than their less profitable neighbours. Similarly, those in the top third of sheep producers achieved higher outputs through better stock performance, with a number of factors resulting in them achieving 20-30 per cent more income per ewe from lamb sales than the average.

Typically those producers reared about 20 more lambs per 100 ewes than the average. Although they did not necessarily rear lambs to the heaviest weights, the larger lamb crop typically resulted in top-third flocks selling 6 to 10 kilos liveweight more lamb per ewe. They also typically sold the highest proportion of lambs for immediate slaughter.

Looking at cattle finishers, he said those making most money had bought the smallest cattle and finished them over the longest period, selling into a rising market.

But that was not a formula for success every year, as in 2010 the picture was the opposite, with a flat market benefitting those who finished cattle over the shortest period.

Regardless of the policy, those in the top third did have strict control over variable costs, spending around 3 per cent less than the average.