Global figures reveal high cost of UK crop production

Date:06-15-2012

Wheat production costs in the UK have almost doubled in the past five years, making the country one of the most expensive in the world in which to grow the crop, according to Charles Whitaker of Brown & Co., speaking at Cereals 2012.

Comparisons with other key competitors highlight the level of UK expenditure and suggest 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.

"An average yielding crop of feed wheat now costs just over £400 per acre to grow in the UK. In Argentina they are growing cereals and combinable crops for about half that amount. Labour and machinery are a key area."

In the UK, labour and machinery costs average around £200 per acre on a stubble to stubble basis. Costs in the Ukraine and Russia are lower still, though they are geared towards smaller yields.

"The usual argument is that high-yielding systems like the UK's can support high costs of production," says Mr Whitaker.

"To some extent that is true. Assuming a three tonne per acre crop, our cost of production averages £130 per tonne, but that is before land rent, finance costs and the benefit of support. That works with wheat at £150 per tonne. While prices are good, margins are good."

Mr Whitaker continued: "The problem comes if commodity prices fall. Currently profit and loss accounts are showing positive without the single farm payment, but it wouldnt take much of a price fall to change that."

"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," concluded Mr Whitaker.