Precise Evaluation of Profit and Loss Is Key To Business Sustainability - Omnia Precision

Precise Evaluation of Profit and Loss Is Key To Business Sustainability

That was the message from Andersons’ business consultant John Pelham at the recent Hutchinsons agronomist conference, who sees profitability – or lack of – as the “elephant in the room” for UK agriculture.

Defra figures show how reliant on subsidy the agricultural industry has been over the past 25 years, as margins are squeezed by rising cost of production and falling commodity prices.

Increased Uncertainty

The EU referendum result last June has caused market uncertainty and has cast doubt over the future of direct payments post-Brexit, which could jeopardise the viability of some businesses if support is cut.

While Mr Pelham did not speculate on the future of direct payments, he believes looking at performance variability across a farm business and trying to eliminate loss-making areas will help to improve resilience to any external threats, such as Brexit.

For arable producers, this could be taking an underperforming crop out of the rotation or removing lowyielding parts of fields, such as outer headlands, from cropping plans. “You can either stop production altogether and profit will go up, because your business doesn’t have to incur that loss, or you can improve performance to make it more profitable,” he said.

Precision Tools

Being able to measure field performance and understanding unit costs are two critical factors in identifying profit and loss and precision farming platforms such as Omnia, combined with agronomist support, can enable this, according to Mr Pelham.

Hutchinson’s Omnia Precision Farming system allows growers to analyse multiple layers of field data – including yield maps – to pin down underperforming areas and inform management decisions.

“If you can’t measure something, you can’t manage it and you need a tool to do so. Omnia is clearly a tool that in time can enable us to know where the yield occurs, where costs are and the financial consequences of our management decisions.

“The opportunity for our industry to release profit by understanding and using these profit and loss principles is immense,” he added.

Eliminating Loss

Mr Pelham used an illustrative example, how understanding profit and loss can improve the profitability of a winter wheat enterprise.

Spread over 200ha, the enterprise comprised of five 20ha, five 10ha and ten 5ha fields and he made several assumptions, including £1,050/ha operational costs.

Structural costs such as admin, property, rent and finance were assumed to be covered by the Basic Payment, while the wheat price was set at £132/t and the farm’s breakeven yield was 8t/ha.

Where underperforming areas were taken out of production, a higher proportion of the cropped area was above the breakeven yield, eliminating loss from the business (see Table 1).

Profit Boost

If those increases are combined macross the whole enterprise, it mdelivers a significant boost to overall profit of more than £15,000 (see Table 2) by a relatively simple and modest change, explained Mr Pelham.

Dr David Ellerton (Hutchinsons Technical Development Director) continues the theme of the importance of early disease control in winter cereals, discussed in the previous issue of Fieldwise, by highlighting the benefits of stem extension fungicides.

Early disease infection can significantly limit growth and yield potential of both wheat and barley and priority should be given to keeping disease in check as soon as spring growth begins.

Winter Wheat

Foliar Diseases

Experience from the extremely high rainfall conditions of last season has exposed the difficulties of trying to control Septoria infections once they have become established on the leaves.

Wherever possible this season, growers will need to ensure that disease is prevented from spreading up the plant by adopting a strong protectant approach, not just at the T0 (mid to late tillering) stage but also at the so called T1 timing of GS 30-32 which is targeted to protect final leaf 3.

In order to try to avoid foliar diseases infecting newly emerged leaves, it is vital that the gap between any T0
and T1 sprays should not exceed 3 to 4 weeks and the inclusion of a multi-site active ingredient, such as chlorothalonil or folpet in any T1 spray will help avoid relying on later, restricted levels of curative control of Septoria tritici, should it become established within the crop.

The inclusion of other active ingredients in the T1 spray should be determined by disease risk, based on weather patterns and varietal susceptibility. Utilising the latest Seedstats information, showing likely area of varieties sown this season and the latest AHDB recommended list, Table 1 overleaf gives a clear insight as to the disease risk of the top 13 varieties of winter wheat.

For more information, please view our dedicated website:
omniaprecision.co.uk or email us: consultancy@omniaprecision.co.uk

2017-06-08T15:46:28+00:00