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Fixed Cost Key to Efficient Enterprise

26 October 2012
EBLEX

UK - Controlling fixed costs is key to efficient beef and sheep production, EBLEX Business Pointers 2012 has shown.

The annual benchmarking report, which is released today, demonstrates that top third producers across all types of English beef and sheep enterprise spent significantly less on fixed costs than those in the bottom third.

This was particularly evident in lowland sheep flocks, where top third producers spent over 125 per cent less on fixed costs than bottom third producers. The impact was not so significant in less favoured area (LFA) sheep flocks, where top third producers spent around 30 per cent less on fixed costs compared to those in the bottom third.

The figures for beef enterprises show a similar pattern. Top third lowland suckler herd producers spent over 110 per cent less on fixed costs than bottom third producers, while top third LFA suckler herds spent nearly 60 per cent less than those in the bottom third. Top third extensive finishers spent over 100 per cent less on fixed costs than bottom third producers, while top third intensive finishers spent nearly 33 per cent less than those in the bottom third.

“Beef and sheep producers across all enterprise types have undoubtedly felt the impact of rising variable costs, particular in terms of feed and forage,” said EBLEX/AHDB senior analyst Carol Davis.

“However, this year’s Business Pointers data clearly shows that strictly controlling fixed costs offers producers an opportunity to make significant efficiency gains and ultimately improve their bottom line.

“Fixed costs include a range of inputs such as labour, power and machinery, contractor charges, administration, property charges and land resource costs.

“By benchmarking their own performance against that of top third producers, as detailed in the Business Pointers report, English beef and sheep producers can pinpoint areas where their input costs are particularly high and concentrate on identifying ways of reducing these costs.”

EBLEX Business Pointers are published each autumn as a reference point against which beef and sheep producers can benchmark their own performance. This year’s publication will use estimated costings cross-checked with available on-farm data sets. A new system of monitoring and analysis – Stocktake – is being put into place to collect additional data from a range of farms and enterprises to give an accurate picture of the situation in terms of costs of production and margins.

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