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We are heading into the time of year when deals are done for leasing and renting land. With the tax incentives for long-term leasing, the amount of land being let on a short-term conacre basis has decreased and this is a good thing.
However, I’m hearing of big money being paid in some parts of the country for leasing and renting land.
Is taking on more land an opportunity or a threat for your business? That all depends on what you intend to do with it. If the grass being grown on the leased land is going to be grazed by milking cows, then it could be a good opportunity.
This also applies if young stock are taken off the milking block and grazed on leased land, freeing up the milking block for cows.
Cow numbers don’t necessarily need to increase in either case for it to make sense.
For example, if a farm was running a high stocking rate, the extra land in the system would reduce the stocking rate and feed and other costs should decrease and the overall profitability and sustainability of the farm should increase.
However, taking on extra land to increase the stocking rate on the milking block above what it can sustain, or to provide extra winter feed, doesn’t always make sense and can be a risky strategy.
Effectively, when taking on extra land you are buying in feed. Whether that feed can be grazed in situ, or cut as silage or zero-grazed doesn’t really make much difference to the value of the land, but it does make a huge difference to the cost of making that feed for the farmer.
The average grass growth in Ireland is around 8tDM/ha, while the top grassland farmers are consistently growing around 16tDM/ha.
If leased land is valued at €500/hectare (€200/acre) the average farmers are growing grass with a land cost of 6.25c/kg while the top farmers are growing grass with a land cost of 3.12c/kg.
While management, soil fertility and grass species might differ between the two, the farmers growing the high amount of grass have a land cost which is half that of the average.
When looking at land, you should work out how much grass you will utilise from it (80% to 85% of what is grown) and how much it will cost you, including the cost of fertiliser.
This will help you to compare the opportunity with other alternatives.
Fertiliser costs for maintenance and some build-up of soil fertility should come in at around €400/ha
A good crop of first-cut silage will yield 5tDM/ha and a good crop of second-cut silage will yield 3tDM/ha, or 8tDM/ha in total.
If another 2tDM/ha is grown in the autumn, the land will grow a total of 10tDM/ha in the year, which is about 8tDM/ha of utilisable feed.
Fertiliser costs for maintenance and some build-up of soil fertility should come in at around €400/ha.
The contractor costs for harvesting silage are in the region of €300/ha for first-cut and €250/ha for second-cut. So fertiliser and contractor charges amount to €950/ha. If €500/ha is being paid for the land, total costs amount to €1,450/ha or 18.1c/kgDM. If land costs increase to €750/ha (€300/acre), then the total costs increase to €1,700/ha or 21.2c/kgDM.
Paying big money to lease land to grow feed is expensive business
To put some context around these figures, buying bales of silage weighing 800kg at 25% dry matter for €40/bale works out at 20c/kgDM.
The equivalent bale of silage costing €30/bale works out at a cost of 15c/kgDM. The point here is that paying big money to lease land to grow feed is expensive business.
The advantage of leasing land, even at high prices, is that it more or less guarantees supply of feed and this is important after 2018.
However, an alternative to leasing, but which also gives certainty of feed supply, is contract-rearing.
A replacement heifer will eat about 4.1tDM over the 570 days between three months of age and 21 months of age, or between May of her first year and December of her second year.
Take a typical contract-rearing cost of €1.20/head/day (cost to the farmer who owns the stock but excludes veterinary).
In this example, the total cost of contract-rearing a heifer works out at €684/animal or 16.5c/kgDM if the heifer eats 4.1tDM.
Relationships
This figure includes the cost of the feed, but also the labour.
However, the grass that the heifers would have eaten either has to be grazed by other stock, or converted to silage.
The key to contract rearing is to make it work on both sides.
Successful long-term relationships won’t be formed if one person feels they are being screwed, either by not getting paid enough, or equally by having poorly reared stock.
As the examples above demonstrate, it’s a viable option to generate extra feed on your own farm without taking on expensive land.
SHARING OPTIONS: