At the recent Crops Forum, many of the presentations dealt in various ways with the income challenges that high costs, average yields and low prices have presented for the tillage sector. These bring many challenges, not least of which are cost management, investment evaluation and the conacre question.
Reasons to be optimistic
Teagasc specialist Shay Phelan told the meeting that planning is critical for 2017, given the current difficulties and projected future challenges. Simple things like knowing the potential margin for different crops and knowing which options better suit a particular field can help make a difference.
But he warned that such a comparison of margins should be based on five-year average yields rather than the best or worst. Numbers must be crunched based on realistic figures.
While the three-crop rule is an organisational nuisance for many, the fact that one has different crops should be used to implement a suitable rotation. This can help both crop performance and cost reduction. A non-cereal break should help the yield capacity of any cereal crop, so be sensible in your choice.
Soil suitability is always an issue and this should not be forgotten. Grow what suits the soil and the workload, as the latter can help reduce machinery costs over time.
While incomes are currently under pressure, Shay pointed out that there are a few pluses for 2017. Fertiliser prices are down and energy costs are relatively low.
Demand is continuously increasing, so when production is adversely impacted by weather, users will have to get more serious about pricing. We must always remember that we have a very high yield potential – the challenge is to achieve it – and this may mean reduced area to take the poorly performing land out of the equation.
Shay also emphasised the need for caution because we are having another record harvest and we have an amount of potentially poor-quality grain in Europe.
Brexit will continue to breathe uncertainty until its outcome is resolved and currency fluctuations are commonplace.
We also have growers with very expensive land costs and landowners with unrealistic expectations of high prices. We are short of good alternative crops and we have Russian farmers getting their act together.
However, given the potential for reduced costs, Teagasc estimates that an 11t/ha crop of winter wheat would gross €394/ha before fixed costs. This is actually €150/ha higher than 2016, but it is based on a price of €140/t for green wheat. The equivalent gross for a 10t/ha crop of winter barley in 2017 is €302/ha, up €130/ha based on a green price of €130/t.
Stay with the basics
Shay warned growers not to ignore the consequences of diseases like take-all and to consider good rotations. Growers must also be very cognisant of BYDV risk, as we appear to be losing our ability to control aphid numbers due to insecticide resistance.
Shay said that while we do not know of the presence of full-blown double-knockdown resistance, many aphid populations now appear to be significantly resistant to pyrethroid insecticides.
Some population may now not be successfully controlled by a full rate of a pyrethroid insecticide. This is serious for growers, especially in high-risk areas.
So when planting into high-risk situations, growers must seriously consider using seed treated with Redigo Deter to provide a period of control when risk is at its greatest. This will give up to six weeks of control, but if a follow-up insecticide will not work, the crop could still be at risk if planted very early. We must remember that there is also a risk of resistance to Deter if you continue to depend on it totally.
Shay emphasised that decisions taken now impact on next year and, in many instances, disease and pest control begin now.
Financial health
Looking at the overall state of tillage farming, Teagasc’s Fiona Thorne said that income from tillage farms in the national farm survey (NFS) were about half those of dairying in the high-yield year of 2015.
The NFS analysis presents these real-farm findings as the average income per system, where the average farm size in dairy was 55ha and 63ha in tillage. However, when the analysis compares the return to land and labour, tillage incomes rise to over two-thirds those of dairy, which has a higher labour input.
Fiona said that the so-called variable costs were relatively similar amongst the farms involved in the survey and that it is the fixed costs that generate huge variation. These average from €500 to €600/ha, but range from €70 to over €1,200/ha.
Machinery does not appear to be heavily related to income per hectare, according to this analysis. However, land rental has a negative impact on income – the higher the price, the lower the average income across all hectares.
Fiona reported that the rental price for land has continued to increase steadily, even when family farm incomes (FFI) have been quite variable.
Early analysis of the income situation in 2016 showed average FFI on tillage farms to be down from about €34,000 in 2015 to €20,000 in 2016. These are based on average figures. The average farm payment associated with these farmers is €22,000, so, on average, €2,000 of the farm payment is being spent to cover production costs.
Looking further forward, Fiona indicated that current projections show no joy for the sector up to 2020. The numbers indicate a projected FFI per labour unit of only €20,000.
The situation is not helped by the fact that farm payment values will be down by 8% in that period. So, as we face the future, Fiona indicated that growers need to get better before they get bigger.
On the question to sow or not to sow, Fiona stated clearly that it is worth sowing as long as realistic projections for the crop show a positive gross margin.
But she also said that this calculation must take in the cost of the rented land in that sum.
And even matchbox mathematics would show this to be a non-runner, except for the occasional good field at modest rental levels.
Fiona concluded by saying that liquidity is the major concern on tillage farms. This is the ability of a farmer to meet his or her financial obligations in the short term. She concluded by saying that “a shortage of cash can force any business out of operation”.
Think – Plan – Do
This may not appear to be a great time for investment in tillage farms, but every spend is an investment and should be considered carefully as part of an overall plan for the future, James McDonnell of Teagasc told the forum. This presentation posed real questions for everyday decisions.
James reminded the audience that Teagasc has a range of financial tools available which can be used by any farmer to:
Analyse the current situation.Decide on the direction for the future.Put a system in place to get there.These are three solid steps to help put direction into a business, which can be very useful for basic decisions, such as machinery versus fertility.
Why and how are such decisions made, James asked? James used a quote from Suze Orman: “Stop buying things you don’t need, to impress people you don’t even like.”
Financial fitness must be part of the main objective, not just scale. Farmers like measuring, but to different degrees. We like to quote things like good crop yields and machine horsepower, but we can be less good at taking farm figures to their end conclusion. “Measuring is part of farming life,” James stated, “and your euro is the best measure of that farm performance.”
There are many tools available now to help with farm recording and measuring. These range frSWm electronic computer or cloud-based systems to a daily diary or even a plain old notebook. The major difference is how easily and simply the information can be extracted. “The most important thing is to have the records,” James stated.
Cashflow is an important measure of farm performance. This is the movement of money in and out of a business. So it is receipts less payments to give net cashflow and this can be a positive or negative figure.
James said that Teagasc has developed a very simple sheet called the five-minute cashflow and he encouraged farmers to fill this in and learn from the result.
James suggested a list of very simple question which should be answered truthfully by all farmers. These asked why one farms, has tillage rather than another enterprise, why rent land, why ignore some productive costs like lime or make large investments without a plan?
Investment questions
Most inputs in tillage are an investment in the production or harvesting of a crop. However, James asked if we know which specific investment would produce a return of 10:1? Or what level of return is generated from rented land? Or which is most important – an investment in soil health or machinery?
Any investment involves a level of risk? Is that extra seed needed? Could I skip the growth regulator or insecticide? Will the crop take that additional 30 units of nitrogen? What level of risk is acceptable?
This is a very personal issue and individuals will have different thresholds, James said. He asked what is the probability of a risk occurring and, if it does, what might be its impact? The answers to these questions help inform decisions.
Risk management is important. James asked if one might forward-sell grain rather than building storage.
Hire in machinery (or at least some machinery) instead of purchasing? Consider share-farming rather than renting, etc?
He asked if farmers had considered partnering with another enterprise? All of these things help reduce risk to the farmer.
Any spend or investment needs greater thought, James stated. Which ones should be a priority is still back to the individual, but on what basis is the decision made – scale or profit, machine capacity or contractor, forward-selling versus drying and storage, etc?
These may be simple questions, but they are important decisions which should be given due care and consideration where one intends to have a future in farming.
Read more
Irish MEPs call for crisis aid for tillage farmers
Teagasc publishes 2025 roadmap for tillage sector
At the recent Crops Forum, many of the presentations dealt in various ways with the income challenges that high costs, average yields and low prices have presented for the tillage sector. These bring many challenges, not least of which are cost management, investment evaluation and the conacre question.
Reasons to be optimistic
Teagasc specialist Shay Phelan told the meeting that planning is critical for 2017, given the current difficulties and projected future challenges. Simple things like knowing the potential margin for different crops and knowing which options better suit a particular field can help make a difference.
But he warned that such a comparison of margins should be based on five-year average yields rather than the best or worst. Numbers must be crunched based on realistic figures.
While the three-crop rule is an organisational nuisance for many, the fact that one has different crops should be used to implement a suitable rotation. This can help both crop performance and cost reduction. A non-cereal break should help the yield capacity of any cereal crop, so be sensible in your choice.
Soil suitability is always an issue and this should not be forgotten. Grow what suits the soil and the workload, as the latter can help reduce machinery costs over time.
While incomes are currently under pressure, Shay pointed out that there are a few pluses for 2017. Fertiliser prices are down and energy costs are relatively low.
Demand is continuously increasing, so when production is adversely impacted by weather, users will have to get more serious about pricing. We must always remember that we have a very high yield potential – the challenge is to achieve it – and this may mean reduced area to take the poorly performing land out of the equation.
Shay also emphasised the need for caution because we are having another record harvest and we have an amount of potentially poor-quality grain in Europe.
Brexit will continue to breathe uncertainty until its outcome is resolved and currency fluctuations are commonplace.
We also have growers with very expensive land costs and landowners with unrealistic expectations of high prices. We are short of good alternative crops and we have Russian farmers getting their act together.
However, given the potential for reduced costs, Teagasc estimates that an 11t/ha crop of winter wheat would gross €394/ha before fixed costs. This is actually €150/ha higher than 2016, but it is based on a price of €140/t for green wheat. The equivalent gross for a 10t/ha crop of winter barley in 2017 is €302/ha, up €130/ha based on a green price of €130/t.
Stay with the basics
Shay warned growers not to ignore the consequences of diseases like take-all and to consider good rotations. Growers must also be very cognisant of BYDV risk, as we appear to be losing our ability to control aphid numbers due to insecticide resistance.
Shay said that while we do not know of the presence of full-blown double-knockdown resistance, many aphid populations now appear to be significantly resistant to pyrethroid insecticides.
Some population may now not be successfully controlled by a full rate of a pyrethroid insecticide. This is serious for growers, especially in high-risk areas.
So when planting into high-risk situations, growers must seriously consider using seed treated with Redigo Deter to provide a period of control when risk is at its greatest. This will give up to six weeks of control, but if a follow-up insecticide will not work, the crop could still be at risk if planted very early. We must remember that there is also a risk of resistance to Deter if you continue to depend on it totally.
Shay emphasised that decisions taken now impact on next year and, in many instances, disease and pest control begin now.
Financial health
Looking at the overall state of tillage farming, Teagasc’s Fiona Thorne said that income from tillage farms in the national farm survey (NFS) were about half those of dairying in the high-yield year of 2015.
The NFS analysis presents these real-farm findings as the average income per system, where the average farm size in dairy was 55ha and 63ha in tillage. However, when the analysis compares the return to land and labour, tillage incomes rise to over two-thirds those of dairy, which has a higher labour input.
Fiona said that the so-called variable costs were relatively similar amongst the farms involved in the survey and that it is the fixed costs that generate huge variation. These average from €500 to €600/ha, but range from €70 to over €1,200/ha.
Machinery does not appear to be heavily related to income per hectare, according to this analysis. However, land rental has a negative impact on income – the higher the price, the lower the average income across all hectares.
Fiona reported that the rental price for land has continued to increase steadily, even when family farm incomes (FFI) have been quite variable.
Early analysis of the income situation in 2016 showed average FFI on tillage farms to be down from about €34,000 in 2015 to €20,000 in 2016. These are based on average figures. The average farm payment associated with these farmers is €22,000, so, on average, €2,000 of the farm payment is being spent to cover production costs.
Looking further forward, Fiona indicated that current projections show no joy for the sector up to 2020. The numbers indicate a projected FFI per labour unit of only €20,000.
The situation is not helped by the fact that farm payment values will be down by 8% in that period. So, as we face the future, Fiona indicated that growers need to get better before they get bigger.
On the question to sow or not to sow, Fiona stated clearly that it is worth sowing as long as realistic projections for the crop show a positive gross margin.
But she also said that this calculation must take in the cost of the rented land in that sum.
And even matchbox mathematics would show this to be a non-runner, except for the occasional good field at modest rental levels.
Fiona concluded by saying that liquidity is the major concern on tillage farms. This is the ability of a farmer to meet his or her financial obligations in the short term. She concluded by saying that “a shortage of cash can force any business out of operation”.
Think – Plan – Do
This may not appear to be a great time for investment in tillage farms, but every spend is an investment and should be considered carefully as part of an overall plan for the future, James McDonnell of Teagasc told the forum. This presentation posed real questions for everyday decisions.
James reminded the audience that Teagasc has a range of financial tools available which can be used by any farmer to:
Analyse the current situation.Decide on the direction for the future.Put a system in place to get there.These are three solid steps to help put direction into a business, which can be very useful for basic decisions, such as machinery versus fertility.
Why and how are such decisions made, James asked? James used a quote from Suze Orman: “Stop buying things you don’t need, to impress people you don’t even like.”
Financial fitness must be part of the main objective, not just scale. Farmers like measuring, but to different degrees. We like to quote things like good crop yields and machine horsepower, but we can be less good at taking farm figures to their end conclusion. “Measuring is part of farming life,” James stated, “and your euro is the best measure of that farm performance.”
There are many tools available now to help with farm recording and measuring. These range frSWm electronic computer or cloud-based systems to a daily diary or even a plain old notebook. The major difference is how easily and simply the information can be extracted. “The most important thing is to have the records,” James stated.
Cashflow is an important measure of farm performance. This is the movement of money in and out of a business. So it is receipts less payments to give net cashflow and this can be a positive or negative figure.
James said that Teagasc has developed a very simple sheet called the five-minute cashflow and he encouraged farmers to fill this in and learn from the result.
James suggested a list of very simple question which should be answered truthfully by all farmers. These asked why one farms, has tillage rather than another enterprise, why rent land, why ignore some productive costs like lime or make large investments without a plan?
Investment questions
Most inputs in tillage are an investment in the production or harvesting of a crop. However, James asked if we know which specific investment would produce a return of 10:1? Or what level of return is generated from rented land? Or which is most important – an investment in soil health or machinery?
Any investment involves a level of risk? Is that extra seed needed? Could I skip the growth regulator or insecticide? Will the crop take that additional 30 units of nitrogen? What level of risk is acceptable?
This is a very personal issue and individuals will have different thresholds, James said. He asked what is the probability of a risk occurring and, if it does, what might be its impact? The answers to these questions help inform decisions.
Risk management is important. James asked if one might forward-sell grain rather than building storage.
Hire in machinery (or at least some machinery) instead of purchasing? Consider share-farming rather than renting, etc?
He asked if farmers had considered partnering with another enterprise? All of these things help reduce risk to the farmer.
Any spend or investment needs greater thought, James stated. Which ones should be a priority is still back to the individual, but on what basis is the decision made – scale or profit, machine capacity or contractor, forward-selling versus drying and storage, etc?
These may be simple questions, but they are important decisions which should be given due care and consideration where one intends to have a future in farming.
Read more
Irish MEPs call for crisis aid for tillage farmers
Teagasc publishes 2025 roadmap for tillage sector
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