Wheat costs double in five years, East Anglian consultant warns
Wheat production costs in the UK have almost doubled in the past five years, warned a leading farm business consultant at Cereals 2012.
It has made Britain one of the most expensive countries in the world in which to grow the crop, said Charles Whitaker of land agents Brown & Co.
He has compared the costs of key competitors in order to highlight the level of UK expenditure. And he argues that significant savings could be made.
“We are concerned at very rapidly escalating production costs, which prompted us to take a much closer look at what our competitors in South America and Eastern Europe spend,” said Mr Whitaker, who discussed the figures in detail.
“An average yielding crop of feed wheat now costs just over �400 acre to grow in the UK.
“In Argentina they are growing cereals and combinable crops for about half that amount. Labour and machinery are key – in the UK labour and machinery costs average about �200 acre on a stubble-to-stubble basis, and the very best operators still spend about �130 acre. Compare that with Argentina’s �35 to �40 an acre.”
Costs in Ukraine and Russia are lower still, although they are geared to smaller yields – around half those of the UK at best.
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“The usual argument is that high-yielding systems like the UK’s can support high costs of production,” said Mr Whitaker. “To some extent that is true. Assuming a 3 tonne an acre crop, our cost of production averages �130 a tonne. But, that is before land rent/finance costs (and the benefit of support). That works with wheat at �150 a tonne – while prices are good, margins are good.
“The problem comes if commodity prices fall. Currently profit and loss accounts are showing positive without the single farm payment, but it wouldn’t take much of a price fall to change that. And if support levels fall – which, given the current turmoil in the Eurozone, seems possible - then we have an even bigger problem. We are significantly exposed compared with some of our competitors around the globe.”