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Around 150 farmers attended the event in Newbridge, Co Kildare, where Teagasc economist Fiona Thorne presented the latest results from the National Farm Survey.
The average tillage-only farm is expected to generate an income of just €20,000 this year, down from more than €30,000 last year. “We are looking at a dismal picture when we’re looking at specialist tillage farm income in 2016,” Thorne said. With an average single farm payment (SFP) of €22,000 this year, tillage farmers are “taking €2,000 off their SFP to keep going”, she added.
With growers wondering whether to plant at all under these conditions, Thorne advised them to take into account the gross margin excluding fixed costs such as machinery, which cannot be stopped in the short term. As long as the gross margin is positive, it is worth planting for next year.
Conacre costs absorbing all margin
To help with this decision, Teagasc tillage specialist Shay Phelan presented Teagasc’s margin estimates for 2017. With global stocks expected to remain at an all-time high after this year’s record harvest and only a small reduction expected in planted areas worldwide, he forecast next year’s prices to be €140/t for green wheat, €130/t for green barley and €350/t for oilseed rape. Assuming yields of 11t/ha for wheat, 10t/ha for barley and 4t/ha for oilseed rape, Teagasc forecasts the costs of production on owned land to be €112-114/t for winter crops and €286/t for oilseed rape. This would leave a margin of €394/ha for winter wheat, €302/ha for winter barley and €257/ha for oilseed rape. With conacre costs reported in the €300-400/ha range, Thorne remarked that rent increases no longer reflected the returns from the land.
Phelan noted that crop rotation held some potential to reach profitability, with first cereals showing increased yields by up to 10%. “This represents €140/ha more on a 10t/ha crop,” he said.
2020 outlook ‘not very promising’
Looking further out, the outlook to 2020 is “not very promising”, Thorne warned. Based on a forecast of stagnating grain prices, a 5% increase in input costs and average yields somewhere between last year’s bumper harvest and this year’s lower numbers, the average tillage farm income is expected to be just €22,000 in four years’ time. At that point, tillage farmers would be eating into 8% of their SFP to keep the farm going.
IFA grain chair Liam Dunne summarised the current climate by saying: “I can’t afford to be digging into my single farm payment to grow grain for somebody else.” A farmer in the audience asked for next steps to ensure that he could still “put food on the table come Christmas” as his farm’s financial situation deteriorates. Teagasc farm finance specialist James McDonnell said he should start by completing the five-minute cash-flow planner designed for tillage farmers to see where he is going.
Pat Butterly of AIB added: “There will be difficulties in the coming months. We encourage farmers to contact their bank manager as early as possible.”
Listen to an interview with Charlie Angel, one of the farmers attending the meeting, in our podcast below:
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