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Stackyard News Sep 2011

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Encouraging Combinable Crop Margin Prospects for 2012

Combinable crop margin prospects for the coming season are markedly more encouraging than 2011 estimates ahead of last autumn’s planting, according to the latest Masstock SMART Farming crop budgets.

John Deere combines
Prepared by Masstock Farm Consultancy (MFC) to guide their farmer and agronomist decision-making, this year’s autumn crop budgeting summary provides indicative margins for more than 15 different winter and 12 spring crops at a whole range of yield levels. These are based on November 2012 crop marketing and the most accurate forecasts of crop premiums and input prices possible.

“The prospects for next year’s cropping are clearly better than they were last autumn,” explains MFC specialist Roger Hellawell, responsible for the budgets. “Despite a better global harvest than many feared and additional worldwide plantings in response to higher prices, world grain and oilseeds markets are likely to remain tight.

“Global fundamentals like the increasing population, greater meat consumption in countries with developing economies and the drive to renewable energy production are all adding to demand. And in the UK new bioethanol and starch plants promise to absorb almost all our typical exportable grain surplus.

“So while harvest 2012 prices don’t necessarily reflect the exceptional levels seen over the past season, we believe there’s room for considerable market optimism. At the same time, however, we anticipate particular market volatility, making effective marketing programmes to lock-in crop values over the season more essential than ever in achieving crop budgets.

“We’ve allowed for a sharp year-on-year increase in fertiliser prices in our budgets, together with a steady rise in plant protection product costs,” Roger Hellawell points outs. “The detailed budget calculators our consultants and agronomists have to accompany their summary book allows specific changes – and actual costs as incurred and values as crops are sold forward – to be factored in to inform decision-making as the season progresses.”

At the sort of yields many crops have been turning in this year, the Masstock budgets indicate winter oilseed rape is again likely to be the best margin earner of all for many growers in 2012. Five tonne rape crops are, for instance, anticipated to deliver gross margins of over £1200/ha, putting them on a par with full spec 10t/ha breadwheats or 12t/ha Group 4s And even at 4 t/ha, they have every prospect of outperforming 10t/ha feed wheats.

High yielding spring milling wheats and spring oilseed rapes are also looking good. But, once again, there’s really nothing else to touch wheat and rape in margin opportunity. Even the best winter malting or feed barleys, for instance, seem likely to deliver gross margins around the level of an 8-9t/ha Group 4 wheat or a 3-3.5t/ha winter OSR.

Equally the ending of the crop specific protein payment claimed through the single farm payment makes peas and beans a far less attractive prospect than previously, although they continue to have considerable extra value as alternative break crops

“The sensitivity analysis we’ve run alongside each crop calculation underlines that yield has by far the greatest impact on gross margin,” Roger Hellawell adds. “Indeed, it shows that a 1.2 t/ha variation in the yield of a Group 4 wheat results in a 20% change in margin.

“This emphasises the critical importance of first class agronomy within the crop and across the rotation to secure the returns available. All the more so in the face of the increased economic risk represented by higher input costs and short term FBT rents.

“In their planning our agronomists always consider the potential margin from the crop in the context of its risk and place in the rotation too. Winter OSR, for instance, may have had a cracking year in 2011. But can it be relied upon to do as well again in a different season and with growing disease pressures? Equally, how will it affect black-grass control and slug problems in subsequent crops ?

“They also account for the fact that other (overhead) costs associated with growing a crop can have more influence on its actual profitability than the direct input (variable) costs,” he concludes. “Up-to-date estimates of work rates and field operation, drying and storage costs included in our budgeting guidance allow cropping options to be evaluated at net as well as gross margin level for the best overall decision-making.”

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