Fixed cost can erode margins on struggling cattle farms
Net profit margins on 80 adjusted acres of the best soil type average only 147 per week from mixed beef production, according to Teagasc Specialist, Pearse Kelly. For single suckling on a similar size farm, earnings average 106 per week.
One of the things which cattle farmers have to watch out for, according to Mr Kelly, is fixed cost, which can erode margins, if there is unnecessary investment in infrastructure and machinery.
“Fixed costs are rising on most beef farms. They are often the reason for poor net margins. Every time a new machine is bought or a new building is constructed, they rise dramatically“, he said.
The National Farm Survey 2001 shows that fixed costs on the average single suckling farm totalled 100 per acre per year, but many beef farmers had fixed costs of up to 240 per acre per year.
For the majority of cattle farmers, a sizeable slice of the premia payments received are now required to meet production costs. Survey figures show that, for suckler farms, slightly more than one third of the premia received go towards paying for production costs, with only 65% being retained as profit.
“Mixed beef” production enterprises fare slightly better, retaining 71% of the premia received. Some cattle farmers are doing 100% better than the average. The top 25% of farmers in single sucking are making net margins of 208 per adjusted acre per year, even before premia are included.
