Not since the Yom Kippur in the mid-1970s have we experienced such a hike in energy and fertiliser prices.

In the coming year, the fertiliser buying power of farm products will fall sharply.

The buying power for products didn’t change much on average between 2020 and 2021. However, it’s expected to fall dramatically in the coming year.

In the case of milk in 2020 and 2021, it took about 2.5 litres to buy a kilo of nitrogen. For spring barley, a kilo required about 4.5kg.

For livestock products, it took a little over a fifth of a kilo of a prime beef animal and over a sixth of a kilo of quality lamb.

In other words, the real price of fertiliser, is likely to at least double compared to last year

Based on the Teagasc fertiliser and product price projections for this year, it will take over five litres of milk, over 8kg of spring barley, almost half a kilo of a prime-finished beef animal and a third of a kilo of lamb, to buy 1kg of nitrogen.

In other words, the real price of fertiliser, is likely to at least double compared to last year.

How to react

For grain and pasture, the reaction will depend on yield response.

Yield increases at an increasing rate initially, then the law of diminishing returns sets in and there is eventually no additional response as more applied nitrogen.

In a paper to the recent Teagasc cereals conference, Richie Hackett showed that the maximum physical grain yield occurs at about 236kg N/ha.

The choices confronting farmers are more complicated than for grain

The economic optimum when fertiliser and grain prices are factored in will be lower than this. Last year that would have been about 217kg N/ha. But even with a doubling in the real price of fertiliser, the economic optimum only falls to about 200kg N per ha.

Turning now to ruminant livestock production and specifically dairy production. The choices confronting farmers are more complicated than for grain.

First, there are alternatives to grass. Second, while the stocking rate depends on grass intake, the yield is affected by stocking rate.

Key factor

The essential factor, however, driving farmers’ reaction is similar to that for grain farmers, ie the response to grass dry matter production.

Teagasc Moorepark has produced a recent paper on the topic which takes account of location, soil type and weather. The response is different to grain in that the curve doesn’t flatten off until much higher levels (300kg n/ha).

Derogation limits application rates to 250 kg N/ha. Cutting nitrogen use from, say, 250kg to 200kg/ha would be to reduce yield by 0.8t (6% to 7%).

Moving to 150kg takes yield down another 0.9t. With no importation of feed, stocking rate would decline in turn by over 0.30 cows/ha if nitrogen was reduced by 100 kg/ha.

Buying in feed to maintain stocking rate would not be economically justified in that grazed grass is still by far the cheapest feed for ruminants. The latter point was emphasised last week by Debbie O’Connell of AFBI in a webinar organised by AgriSearch Northern Ireland.

Summary

For livestock and grain producers that are already operating close to optimal usage of N, the message is clear: they should avoid dramatic reductions in nitrogen use so as not to greatly worsen the hit to incomes arising from higher fertiliser prices.

What farmers will end up actually doing is another matter.

According to the 2020 National Farm Survey, fertiliser purchases in direct costs is about 15% for dairy and cattle enterprises and around 30% for tillage. Based on these shares and the expected price increases for this year, you’d expect dairy and beef farmers to cut fertiliser purchases by no more than 20%, with tillage farmers somewhat higher at around 30%.

In brief

  • It will take twice the amount of farm output to buy a kilo of nitrogen in 2022.
  • The expectation is tillage and livestock farmers will use less fertiliser in 2022.