The top ten performers in the Bidwells Contract Farming portfolio managed to achieve returns 28% better than the average in the 2015 harvest year – in a season which saw the lowest average net profit since 2009.
Bidwells’ analysis of farms managed under contract-farming agreements, released this week, shows total income fell for the fourth year in a row as farm commodity prices and the value of direct support payments fell.
But despite this drop in income, some farms were still achieving better returns, due to their attention to detail and other key aspects.
A number of the top performing farms in our managed portfolio are reliably consistent.
Jonathan Armitage, Head of Agribusiness
“Our own analysis reveals that they share some defining characteristics but also that being among the top performers is not dependent on farm size or soil type.
“Examination of the top contract farm operators reveals that some dispel some popular myths about contract farming. For example, that operating from a distance is necessarily a barrier to success – due to factors such as increased travel times.
“Above all the top performers share a commitment to attention to detail, which in turn helps to lift an average performance into a top quarter performance by doing things quantifiably better, for more of the time.
“These farmers are also able to build successful teams around them in terms of excellent farm staff and also good advisors and mentors.”
Each year, Bidwells publishes results from its portfolio of farms managed under contract-farming agreements. Derived from real results on real farms, this unique analysis provides unrivalled intelligence on the health of this widely adopted farming model and the broader arable sector in general.
The data in our annual analysis is drawn from farms covering around 15,000ha, predominately in the midlands and the eastern parts of the UK. Total sales near £15m and net profits are just under £5m.
Analysis of the results reveals that for the fourth year in a row, total income from crop sales, Single Payment or Basic Payment Scheme, Environmental Stewardship and cropping licence fees, has declined to a rate of £1,194/ha in 2015.
This figure fell £200/ha or 14% compared to 2014, reflecting much lower cereals values and an approximate £10/ha drop in direct support income. Total income in 2015 has fallen nearly 20% from the £1,465/ha achieved in the 2012 harvest year. This marked a peak in output and profitability despite the wet autumn that year, which primarily affected the 2013 financial results.
The fall in output was broadly carried through to the average net profit which fell to £370/ha. This is the lowest net profit achieved since the 2009 harvest year, and getting towards half of that earned in the record year of 2012.
“Total returns to both parties have fallen in line with gross output and net profit. The average contractor’s charge, which is the basic fee for establishing, managing and harvesting the crops, which is not intended to include a significant element of profit, remained unchanged. This suggests that for those agreements which were renewed in 2015, this element remained static.
“We have commented in previous bulletins that total returns to both parties are moving closer together over time, this trend is continued in our 2015 data.
“Furthermore, the 2015 results show that while returns to the contractor continue to outweigh those to the farmer, the contractor's average total returns fell by a greater amount – 20.5% between 2014 and 2015, than the farmer’s (18%)."