November 16, 2007

Scottish beef farmers reel from low prices

Scotland's hill suckler herds need to increase prices more than twice from the current level to allow farm businesses to cover their costs, according to new figures from Quality Meat Scotland (QMS).

Unveiling at AgriScot, the results of a survey of more than 220 Scottish sheep and cattle businesses, QMS senior business analyst Stuart Ashworth said this figure was calculated making an allowance for a 5 percent return on working capital and payment of unpaid family labour.

The figures still do not factor in single farm payments and refer to 2006, not including the recent

foot and mouth disease outbreak and soaring feed prices, said Ashworth. Even without these pressures, he said the survey shows the industry's difficulty of making a profit from the present business environment.

He said despite a small improvement in margins compared to 2005, only 4 percent of suckler herds achieved a positive net margin, compared to 3 percent last year, and none of the hill suckler herds achieved this milestone.

Finishing cattle faired better with the average 8 percent improvement in prime cattle price between 2005 and 2006 that directly benefited farmers.

Ashworth said still less than half those surveyed achieved a positive net margin. Equally, to break even after paying unpaid family labour and return on capital the average selling price would have to be 20 percent more than in 2006, he said.

A quarter of the ewe enterprises surveyed achieved a positive net margin, a slight improvement on the 20 percent that achieved this milestone in 2005.

However, poor prices in the second half of the 2006 lamb crop year put considerable pressure on store lamb finishers, where only 7 percent of those surveyed achieved a positive net margin compared to 36 percent in 2005.