EBLEX plea to curtail overheads

Experts at the English Beef and Lamb Executive (EBLEX) said that clamping down on spiralling overheads could also provide an avenue into improving margins.

Analysis of EBLEX’s 2011 Business Pointers data shows dramatic differences between the top and bottom third producers for fixed costs and output prices achieved.

It shows that fixed costs alone were twice as high for less efficient producers at £376 per head compared to £187 per head for the top third performers.

Meanwhile output – the average price received per animal sold – was £521 for top third compared to £337 for bottom third.

Mark Topliff, EBLEX senior analyst, said: “There is no doubt operating conditions for extensive finishing have remained difficult. Net margins have fallen from year earlier levels because outputs also fell, despite reduced costs per head.

“However, the most efficient and best performing producers were still seeing positive margins of £102.60 per animal. In contrast, those performing least well saw negative margins of -£281.40.

“Just examining fixed costs alone, we can see how much can potentially be saved. Simple measures like looking at the energy tariffs used, cutting back on non-essential machinery and rationalising spend on labour can all help to improve margins.

“If we then also concentrate on the output and ensuring the maximum number of cattle are produced to the target classification, it is possible for under-performing enterprises to improve their bottom line with fairly simple steps. I would hope that the higher prices we have seen in the last 12 months will be reflected in improved output figures next time around, but by looking to make additional efficiencies, producers can ensure they maximise returns.”

The advice comes in the same week that National Farmers Union president Peter Kendall warned that horticultural farmers may face “serious challenges” in attempts to maintain any growth and success during the forthcoming year, with rising costs and intense downward price pressure from the major supermarkets causing problems in the sector.