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Executive Summary
1. The 2004 cereals study is based on 41 enterprises (11 winter wheat, 12 winter barley and 18 spring barley) drawn from across Scotland on a representative basis. Scotland was sub-divided into three regions (north-east, south-east and south-west) for the study.
2. The overall results were weighted to reflect the population of holdings shown in the June 2004 census. But while it was possible to use the weighted figures to check average performance across the three regions for wheat, this was not completed for barley as the crop was analysed on a winter and spring barley basis. SAC judged that the analytical benefit of sub-dividing the barley crop significantly outweighs any loss in precision.
Table 1: Average crop performance in 2004
| Weighted | Unweighted |
|---|
Winter Wheat | All Barley | Spring Barley | Winter Barley |
|---|
| No of farms | 11 | 21 | 18 | 12 |
|---|
| Area grown per farm (ha) | 37.0 | 42.7 | 67.5 | 24.9 |
|---|
| Yield (t/ha) | 8.3 | 5.9 | 5.5 | 7.3 |
|---|
| £/ha | £/ha | £/ha | £/ha |
|---|
Output | 875 | 685 | 655 | 794 |
|---|
Material costs | 272 | 208 | 191 | 233 |
|---|
Other variable costs | 165 | 111 | 77 | 103 |
|---|
GROSS MARGIN | 438 | 366 | 387 | 458 |
|---|
Total fixed costs | 266 | 228 | 249 | 269 |
|---|
Total overhead costs | 146 | 155 | 160 | 153 |
|---|
NET MARGIN | 26 | (17) | (22) | 36 |
|---|
Note: figures subject to rounding
3. The winter wheat net margin for Scotland was £26/ha, with the north-east achieving £58/ha, the south-east £43/ha and the south-west a negative margin of -£44/ha. The very small sample size, however, means that the regional figures should be interpreted with utmost caution. The top 25% of wheat growers achieved a net margin of £216/ha compared to a negative -£120/ha recorded for the bottom 25%. Again, the sample size limits the validity of this analysis.
4. The winter barley net margin for Scotland was £36/ha. The south-east achieved £58/ha, the north-east £31/ha and the south-west a negative -£20/ha. By level of performance, the top 25% averaged £166/ha, and the bottom 25% a negative £106/ha. Again, caution is urged in viewing the latter figures.
5. The spring barley net margin for Scotland was a negative -£22/ha. All of the regions averaged negative net margins, with the south-west -£92/ha, the north-east -£22/ha and the south-east -£6/ha. The top 25% of producers did average a positive £94/ha, compared to a negative -£143/ha by the bottom 25%.
6. Several points regarding the 2004 season and the methodology used to complete the study were noted. In general, the 2004 cereal crop was badly affected by poor harvest weather and low barley and wheat prices. The survey also revealed the marginal economics of Scottish cereal growing. Despite including subsidy, a lot of Scottish cereal growers are making negative net margins. Achieving good performance still depends primarily on high technical efficiency. Some aspects of the survey methodology should be reviewed before completing another net margin survey.
7. Based on a review of the forces influencing Scottish cereal production, the outlook for cereal production was considered in the context of recent CAP reform. The general conclusion is that significant structural change is likely in the next 3-5 years, and that Scottish production could drop markedly if market prices remain anywhere near current levels.
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