Maximum yields versus margins?

5 Feb 2016

I have just read a very interesting article in Landmark, the NIAB TAG membership magazine. The title is ‘The economic margin; farmers maximising yields but not financial returns’. It is compiled by the Rural Business Unit of the Department of Land Economy, University of Cambridge. It uses data collected in the Farm Business Survey carried out by Universities across Great Britain between 2004 and 2013. 1,650 winter wheat and winter oilseed rape farms were involved.

I am sure that you have heard the term ‘big data’, well this is it! Specific field data were collected from 5,341 winter wheat crops and 2,927 winter oilseed rape crops and analysed by a sophisticated statistical technique: the results reflect the title of the article. It seems that farmers are maximising yields of winter wheat and winter oilseed rape but using too much seed, fertilisers and pesticides than would achieve the best gross margin.

The authors accept that it is easier to achieve maximum yields because farmers and their advisers like a clean crop. They also add that excess inputs cost farmers financially and impose extra costs on society.

I am a very poor statistician and cannot really comment on the approach taken. However, many will instinctively agree with the results of the analysis. It is interesting that the AHDB yield plateau report in 2012 also indicated the same conclusion. Interestingly, the Cambridge researchers found that the greatest yield returns from the last pound spent were from expenditure on crop protection, compared to smaller yield returns from the last pound spent on fertilisers or seeds.

So why do farmers maximise yields and not gross margins? Primarily it is due to risk management and the need for the rotational control of weeds. Risk management has become increasingly important with labour and machinery costs cut to the bone and also because of the rising tide of pesticide resistance.

Minimising labour and machinery costs has proved a very effective way of reducing total costs of production (see diagram). The savings surpass anything that could be achieved by paring back on the variable costs of seeds, fertilisers and sprays. However, the cutting back of these ‘fixed costs’ has meant that perhaps more has to be spent on variable inputs of seeds, fertilisers and sprays in order to limit the risks engendered by the reduced opportunities and flexibility to carry out field operations.

The disparity between maximising yields and margins may have grown due to pesticide resistance because as the control of insects, weeds or diseases gets weaker and more variable, the more risk averse a chemical means to control them has to become. The current approaches to disease control in wheat are a prime example, particularly as uncertain weather conditions after application have to be taken into account. However, farmers will have to totally rely on cultural controls should resistance to pesticides in a particular weed, disease or insect become extreme.

I have always maintained that we need very effective pesticides in order to achieve the classic IPM approach of assessing risk to the crop from insects, weeds or diseases before applying any necessary treatment. As an example, to support this view, I have regularly used GM glyphosate tolerant sugar beet. Currently, because of the rather weak selective herbicides that are available, complex weed control programmes are started pre-emergence and/or very early post-emergence of the crop. Further treatments are applied when the later emerging weeds are tiny. These applications are done before there is an opportunity to assess the weed challenge to the crop. Waiting to assess the likely competition from weeds is too late to get good control. However, using glyphosate post-emergence of the crop means that a true IPM approach can be adopted with the doses of glyphosate and number of applications adjusted according to need. Hence, ‘strong’ pesticides give us the opportunity to be even more compliant with the principles of IPM, a truth that the ‘green blob’ cannot seem to grasp. By the way, please do not take this as unfettered support for the adoption of GM glyphosate tolerant sugar beet because there are technical issues to be resolved, notably the danger of glyphosate resistant weeds developing.

In terms of weed control, no one crop is an island and there is often a need to use more herbicide than is necessary in the current crop in order to keep weeds at manageable numbers in the following crops in the rotation. This is particularly so when the rotations comprise just autumn sown or spring sown crops. Common times of sowing throughout the rotation mean that the weed species that share the same growth patterns as the crops will flourish.

Hence, whilst I can re-assure the authors of the article that farmers do not like spending more than necessary on their crops, it is still beyond the wit of the industry to tailor exactly the level of inputs required to maximise margins of an individual field. More accurate medium term weather forecasts would help. The authors rightly comment that approaches such as strip trials coupled with the more accurate adjustments from comparative farm data ("big-data") will lead to a growth in efficiency. I can assure the authors that NIAB TAG will continue trying to close the gap in order that input use more closely meets the requirement of maximising margins rather than maximising yields.

Please note that I have not used the word b****-g**** once in this blog and that, at the time of writing, Leicester City are still top of the premier league.