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OSR Leads The Way In Winter Cropping Profitability

Date Added: 26/05/2010

Oilseed rape is at the top of the gross margin league table as the most profitable winter sown crop, returning a higher margin per hectare than first wheat according to Richard Elsdon of United Oilseeds. But growers must be aware that creating an oversupply by increasing their OSR acreage this autumn could result in a decrease in value.

"In contrast to the days when oilseed rape was included in arable rotations purely as a break crop, winter OSR is now considered to be one of the best performing crops in terms of gross margin per hectare," Mr Elsdon explains.

In fact, winter oilseed rape is estimated to make a gross margin of £530/ha based on current market prices and variable costs.  In comparison, first wheat is predicted to return £506/ha whilst winter oats will realise £440/ha.  Winter beans, second wheat and winter barley are predicted to make less attractive margins, all of which are estimated to be below £400/ha.

"The latest Renewable Energy Directive has helped to maintain the demand for non-food oil crops and is helping to keep the market for oil crops buoyant," Mr Elsdon continues.

As the table below shows, winter oilseed rape is therefore the most profitable cropping option for farmers this winter, beating first wheat into second place.

"UK farmers are currently experiencing the same financial dilemma as their counterparts in America and Australia where oilseed rape, maize and soya beans are producing higher gross margins than wheat due to the simple market force of supply versus demand," Mr Elsdon explains.

In North America, the differential between returns from wheat compared to alternative crops has seen the highest ever area of maize, and a similar hectarage of soya beans being sown at the expense of wheat plantings.

"We are expecting to see a similar trend in the UK as farmers react to market returns by opting to increase the area of land sown to oilseed rape this autumn," Mr Elsdon predicts.

But farmers are warned to be wary of market volatility which could present problems to those growers who decide to put all of their eggs into one basket.  "We have seen the market react with significant price reductions in the past as a result of an oversupply of oilseed rape.  It is understandable for farmers to opt to grow the most profitable crop, but they must also be aware that an oversupply situation will undermine the value of that crop.

"With the Cereals event just a few days away, arable farmers have the perfect opportunity to seek professional advice and to thoroughly research their cropping options this winter.  With a range of crop marketing options also available - such as harvest, monthly and carte blanche pools as well as fixed price contracts - growers should also give careful consideration to how and when to sell their crops in order to secure the best prices."

Estimated gross margins for winter crops - Harvest 2010

 

Winter

OSR

Winter

Beans

Winter

Oats

First

Wheat

Second

Wheat

Winter

Barley

 

Output

 

 

 

 

 

 

Value (£/mt)

263.90

115.00

95.00

100.00

100.00

90.00

Yield (mt/ha)

3.60

4.00

7.80

9.50

8.55

7.80

Income (£/ha)

950.02

460.00

741.00

950.00

855.00

702.00

Area aid (£/ha)*

-

48.75

-

-

-

-

Gross income (£/ha)

950.02

508.75

741.00

950.00

855.00

702.00

 

 

 

 

 

 

 

Variable Costs

 

 

 

 

 

 

Seed (£/ha)

45.00

55.00

50.00

47.00

50.00

48.00

Fertiliser (£/ha)

192.29

68.23

151.01

202.47

202.47

161.16

Sprays (£/ha)

182.34

134.37

99.00

194.00

204.00

147.00

Total variables (£/ha)

419.63

257.60

300.01

443.47

456.47

356.16

 

 

 

 

 

 

 

Gross margin (£/ha)

530.39

251.14

440.99

506.53

398.53

345.84

* Protein aid per hectare based on €1.14/£ at €55.57/ha

Date source: John Nix Farm Management Pocketbook (crop values & variable costs adjusted in line with recent market movements).

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