A modelling tool devised by Strutt & Parker uses a set of universal assumptions to provide figures for both an average-performing business and a higher-performing business, the latter characterised by farms achieving higher crop yields with lower fixed costs.
The analysis shows that the net margin - which can be considered to be the equivalent of profit, before rent and finance - for an average-performing arable farm for harvest 2024 is expected to be 拢258 per hectare.
This compares with an estimated net margin of 拢208/ha for harvest 2023.
Meanwhile, the 2024 net margin for a higher-performing farm business is forecast to be 拢475/ha, compared with 拢416/ha in 2023.
Tom Coate, farm consultant with Strutt & Parker says: "We have updated our assumptions based on current market conditions.
"Estimated profits for 2023 and 2024 are higher than the forecasts we made in June, which will be welcome news as Basic Payments continue to reduce.听 However, net margins remain well below 2021 and 2022 levels and much closer to where they were in the late 2010s.
Read more:听Arable farm profits to be squeezed for harvest 2023
Cost cutting opportunities
The figures for the high-performing businesses emphasise the value for growers of drilling down into the detailed performance of their business to find where there may be opportunities to cut costs or improve efficiency.
"The estimated net margin of the higher-performing business for harvest 2023 is twice that of an average-performing business (拢208/ha vs 拢416/ha), and it is forecast to be 84 per cent higher for harvest 2024 (拢258/ha vs 拢475/ha).
"Working capital requirements for farms, which are variable and fixed costs, have risen by 40 per cent to 拢173,604 in 2023 for an average performing 131ha farm, compared with the 2021 baseline.听
"We expect this to reduce in 2024 but still remain 28 per cent higher than the baseline. This puts extra pressure on a farm's cashflow and finance requirements," concludes Mr Coates.
Read more:听Regulations and yields threaten global arable profitability
Net margins, costs and receipts for average and high-performing arable farms, 2021, 2023 (est) and 2024 (est)
Source: Strutt and Parker
