Many of the BETTER farm programme participants have expanded their operations, either by increasing stock numbers, leasing extra land or investing in infrastructure such as sheds, slurry storage, roadways or fencing. All of these come at a significant cost to the farmer and can put a significant strain on cashflow if not planned properly.

Since joining the programme, all of the farmers have completed profit monitors annually. This ensures that they have a good handle on their financial situation and viability and, crucially, helps them to predict where their farm will go in the future. Any investments made were planned meticulously by the team, both in terms of what they would add to the farm’s bottom line and, more importantly, how they would be paid off.

Case study

David Walsh, Tipperary

David farms 42ha in south Tipperary near Clonmel. In 2012, he was calving 35 cows in the spring, with all progeny sold as yearlings out of the shed. The stocking rate on the farm was low at 1.22 LU/ha and with total stock sales (gross output) of €38,000, the opportunity of making a margin was slim once variable and fixed costs were taken out. System gross margin in 2012 stood at €536/ha. David had built a slatted shed prior to joining the programme, affording him the option to carry some extra cows.

BETTER beginnings

If David wanted the farm to generate any significant returns, output needed to rise. Stocking rate is the main output-driver and, like the majority of Irish beef farms, David’s was low. However, David was lucky in the sense that winter accommodation for any potential extra stock was in place. For many, lack of housing can shackle any real jump in numbers. David had enough land to boost his stocking rate, safe in the knowledge that the winter shed-space was there.

However, as he found out, it wasn’t simply a case of buying the stock and letting them graze – investments in grassland infrastructure and land improvement would be needed to help David hit his grazing potential.

A plan was put in place for David to increase to 55 cows with the majority of stock finished at 20 to 24 months as steers and heifers, with a small proportion sold live in the marts.

The first step was to increase cow numbers. With prices at the time for in-calf cows and heifers ranging from €1,300-€1,800/head, David felt it was too much money to be spending at one time, especially given that he planned to move to selling progeny as stores and finishing some animals – delaying potential returns. This would put a further drain on cashflow.

It was decided to keep cash inputs low to begin with. As part of a stocking loan, Limousin X Friesian heifer calves were purchased from neighbouring dairy farms with intention of incorporating these into the suckler herd at two years of age. A small number of heifers from the existing suckler herd, whose dams had good milking ability, were kept on too. Over the course of the following three years, cow numbers increased gradually to 55, with extra heifer calves purchased in the spring each year to breed extra replacements.

Cashflow crisis

Roughly €4,000 was spent on fencing and water troughs in the spring of 2013 to facilitate increased grass growth and utilisation on the farm. With the rest of his stocking loan, two five-star maternal Limousin bulls were purchased to replace David’s one-star bull at the time. Collectively, the bulls cost €8,000 while the old bull was slaughtered for €2,000.

Then events took a sinister turn. The fodder crisis of spring 2013 followed on from the wet year in 2012. Spring grass growth and ground conditions were very poor and David was forced to purchase over-priced fodder and concentrates as cattle remained in. Cash ran extremely tight on the farm. In May of 2013, David’s hand was forced; he sold some of his yearlings out of the shed to generate some funds. To add insult to injury, prices were poor at the time. This was a big setback to David’s farm plan, but he remained focused and made efforts to stick with it.

Drained land and profits

During late summer in 2013, a small amount of drainage work was done to improve some wet areas of the farm and 20 acres of land at the back of the farm that had been neglected over the years were subsoiled, limed and reseeded to bring them back to full production. This land being productive was key to increasing output on the farm.

Gross margin on the farm for 2013 dipped to €311/ha which, while disappointing, could be explained by having less cattle sales – David was moving to a store-producing/finishing system which meant a temporary gap in cattle receipts – and the initial investment in stock.

Better times

In 2014, the financial fortunes of the farm began to turn. Stocking loans and farm overdrafts kept the farm’s cashflow safe. The higher stocking rate was generating greater output when stock were sold in the autumn.

At this point, David decided that the time was right to finish a small number of stock off grass. The vast majority of the stores were being sold straight off grass in local marts and, while returns were OK, David felt he could get a higher margin by taking them through to finish. In the end, the small number that were finished left a greater margin than those sold live.

In 2015, David decided to finish half of his stores at heavier weights, housing them in early September with a target finished date of early November.

Taking stock

As a result of his investments, David’s 2015 total gross income from stock sales was in excess of €72,000, versus €38,000 in 2012. In the same period, the increase in variable costs had been modest: from €17,000 to just under €29,000.

What has kept a cap on David’s variable costs – feed and fertiliser being the most significant – has been his grassland management skills. As is the case with the majority of successful beef farmers, David has upskilled in this area. Now, as well as producing more kilos of beef on the farm, a larger proportion of these kilos are coming from grass, as opposed to more expensive silage or concentrates.

Return on investment

David has invested a total of €36,000 in the farm since joining the programme. This spend has translated into an increase of €68,000 in his gross margin, meaning a gain of €32,000 since joining the programme. The vast majority of this investment will stand to David for a long time in the future.

In David’s case, effect of investment on fixed costs are solely in the form of interest on credit and loans. Since 2013, David’s fixed costs have remained sub-€500 per hectare – the national average on beef farms. Loan repayments and the non-stock-related investments themselves go into the balance sheet for the farm business. It should be noted that the margins presented here do not take into account any premia that David receives (BPS, BDGP, etc).