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Ahead of one of the busiest periods on Irish farms, diesel prices have risen considerably.
With silage season almost here, the Association of Farm & Forestry Contractors in Ireland (FCI) is calling on the Minister for Finance, Paschal Donohoe, and Minister for Agriculture and Food, Michael Creed, to examine proposals to ease the cost to farming of the significant agricultural diesel price hikes that contractors and farmers have experienced.
FCI wrote to both ministers last week as contractors were being quoted diesel prices of €0.75/litre including VAT, up from €0.55/litre, at the same period last year.
FCI national chair, Richard White said: “Contractors will be forced to pass on this 36% increase in diesel costs to their farming customers, pushing up the cost of silage harvesting at a time of intense pressure on national animal forage stocks.
"At FCI we are concerned that this cost increase will impact on the volume of silage harvested as our members will be forced to increase their silage harvesting charge, accordingly."
Options
Given the extent of the diesel cost increases, the contractor representative association has provided the Government with two options that would make the silage harvest more cost-effective to Irish farmers as contractors strive to manage this potential autumn and winter 2018 forage crisis for their customers.
Option one: reduce VAT rate on agricultural contracting services from 13.5% to 9%
FCI recommends reducing the VAT rate on contractor operations from 13.5% to 9%, in line with the hospitality industry rate for a period of two years, in order to allow farming to work out from the forage difficulties presented by the spring of 2018. This would give the farmer a €5/acre saving.
FCI estimates that if one-third of the 3.6m hectares of land devoted to pasture, hay and grass silage, is accounted for by grass silage, then there will be in excess of 1m hectares (2.4m acres) of silage harvested this year.
Reducing the VAT rate from 13.5% to 9% would mean saving of €12m to Irish farming at this critical time, improving cash flow on farms and allowing farm contractors to maintain VAT exclusive charges to take account of the 36% increase in agricultural diesel costs.
Option two: remove the carbon tax from agricultural diesel
Removing the carbon tax from agricultural diesel would allow farm contractors to maintain silage harvesting charges at 2017 levels, according to FCI.
Estimates from the CSO and SEAI show that the 69,852 tractors in Ireland in 2012 consumed 288m litres of diesel.
Given the €0.20/litre price increase between 2017 and 2018, this means an additional cost to Irish farming of €57.6m.
Eliminating the carbon tax on agricultural diesel would reduce this diesel cost increase to Irish farming by €14.4m.
Silage harvesting machinery fuel consumption
The silage making process is the most fuel demanding process in Irish agriculture. This important harvesting operation is almost exclusively managed by agricultural/farm contractors, on behalf of their farmer customers.
Typical fuel consumption rates for a high output and efficient silage harvesting outfit in Ireland in 2018 are as follows:
The organisation believes that the 36% increase in agricultural diesel fuel costs to €0.75/litre in 2018 compared with 2017, will add in excess of €500 per day in fuel costs, to the overall running cost of a modern Irish silage contractor harvesting system.
Richard White believes that in providing the Government the above solutions FCI members will help to prevent this fodder crisis, a mere hint of which was evident in the spring of this year.
The organisation is also seeking the support of the Minister for Agriculture in bringing these proposals to the Minister for Finance as a matter of urgency, so that Irish farming can strategically plan for cost-effective and sustainable fodder production to support the important agricultural export sector.
“We believe that these FCI options offer significant savings potential to Irish farmers, who otherwise will have to contend with significant increases in contractor charges for silage harvesting to take account of the significant increases in agricultural diesel costs.
“We know that FCI members can play their important active role in ensuring that the 2018 silage harvest is cost-effective and sufficient to meet the need of an expanding Irish world class food production industry,” said White.
SHARING OPTIONS: