Latest farm costings from Scotland's beef and lamb producers not only reveal the continued need for financial support, but also the correlation between technical performance, sound economic management and lower emissions intensity within the top third of performers.

Quality Meat Scotland's Enterprise Costings which are based on the financial returns of 200+ Scottish producers during the 2019 calf and lamb crop, also highlighted the growing difference between the top and bottom third of producers.

Most worrying however, is the need for continued support.

Speaking at the launch of the report on Monday, Stuart Ashworth, director of economic services at QMS said that without continued financial support, there is no margin in livestock farming.

"When we look at the returns needed to cover unpaid family labour, the risk capital invested in livestock and machinery, there is not a margin in it without continued support.

"We can't ignore it, financial support is important to us and perhaps one of the reasons why we have seen cow numbers reducing and so many sheep going off the hills in recent years. Continued support is important for economically sustainable livestock businesses in Scotland," said Mr Ashworth.

In saying that, he stressed that huge differences remain between the top and bottom third of producers, with the best performers not necessarily selling the highest priced animals in the market place.

Instead, he said the better producers have fewer losses between birth and weaning and fewer barren cows and ewes.

Furthermore, he added that those with the highest lambing percentages don't necessarily produce the best margins as such high scanning figures often come at a cost, with increased feed and vet bills and mortality rates.

"The top third of producers on gross margins tend to be consistently good across the piste. They have higher outputs per kg per ewe and per cow and they make more efficient, technical use of their feeds and fertiliser and have better grassland management."

Looking at the figures for the 2019 lamb and calf crop year, he said that all cattle producers had seen margins fall for a second consecutive year, while those in the sheep sector had faired better due to the improved weather.

"Get the progeny on the ground and keep them alive – that's the familiar message amongst the top end of producers compared to the bottom," said Mr Ashworth.

The survey, which provided a snapshot of the industry during 2019, compared for each sector the costs, revenues and margins achieved by the top-third of producers, the bottom-third, and the sample average.

The results omit Common Agricultural Payments (CAP) support payments, except for those which are directly linked to production such as the Beef Calf Scheme and the Ewe Hogg Scheme, and highlights the technical and financial performance variation that exists when comparing Scotland's top third producers and the bottom third.

The costings for 2019, also revealed that despite savings in feed and forage due to weather being more benign compared to that of 2018, offering good grass growing conditions for most of the year, the decline in market prices for some sectors led to further deterioration in margins.

"At store cattle sales, the autumn season failed to match spring price levels for a second year," explained Mr Ashworth.

"However, the declines relative to autumn of around 6% in September and 2% in October were less than those seen at prime cattle sales where prices in the autumn were 9-12% behind 2018, pointing to a particular squeeze on finishing margins.

"Only 31% of suckler herds achieved a positive net margin – a decrease from 36% 2018. This is also reflected among store finishers with 30% of the businesses surveyed achieving a positive net margin, down from 38% in 2018," said Mr Ashworth.

For sheep farmer, a better lambing resulted in more store lambs traded at autumn sales, and despite this, and the uncertainty around Brexit, values held up resulting in some improvement in net margins across enterprises.

"At prime lamb sales, prices were in line with their five-year average for most of the summer and autumn, before rising strongly in the final two months once EU exit had been delayed. Fortunately for store lamb finishers, the prime lamb market reached record levels in the first quarter of 2020; although did weaken following the onset of the Covid pandemic in late March and failed to fully recover at Easter," said Mr Ashworth.

He added: "The proportion of hill ewe flocks making a positive net margin increased from 8% last year to 15% this year. Meanwhile, net profitability among upland flocks improved and 75% of enterprises surveyed achieved a positive net margin for their 2019 lamb crop, up from 55% 2018 and 56% from the 2017 lamb crop year.

"Lowland flocks saw the highest increase in margins with 62% of surveyed flocks achieving this objective compared to 38% attaining a positive net margin for the 2018 lamb crop. Store lamb finishers similarly saw a marked improvement in net margins with 92% of those achieving a positive net margin compared to 69% of those surveyed in 2018."

The report also details the estimates that have been made of the greenhouse gas emissions associated with the enterprises surveyed and reported on the basis of net liveweight produced or added during the surveyed year.

"The results show over the five years that there has been some general reduction in average emissions per kg of output but the differences are too small and the range of emissions overlap from year to year to suggest the movement is a definitive trend," said Mr Ashworth.

"Nevertheless, there is a clear correlation between lower emissions intensity and better financial sustainability with those in the top-third of financial performance having the lowest emissions intensity per kg of livestock output."