Early spring barley and winter wheat yields may be better than the winter barley, but they will still not make this a good year in tillage. We can only expect that low prices and the rejection of a significant portion of the crop for malting will take a big toll on the sector.

We cannot realistically say that yields are poor this year, but they are not good enough to compensate for low prices and high costs. But despite the challenges of 2016, are farmers about to rush out and repeat the production cycle all over again? It is unrealistic to repeat the production process and expect a different outcome where oversupply is the main market driver.

Listen to the latest harvest update with Andy Doyle in our podcast below:

At the end of last week the futures price for December 2017 wheat (€175/t) was €11/t higher than for December 2016. This time last year the November 2016 futures price was €184.25/t. So have we anything to help us believe that 2017 will present a better price than 2016?

Surely we can expect a problem or problems somewhere in the world to produce a deficit harvest in 2017. That’s exactly what I believed in 2015 and again in 2016 but the big harvests keep on coming. There has been quite a bit of conversation in recent years about the environmental stability of modern crop varieties and many now believe that modern genetics have gone quite a way towards weatherproofing crops.

While high prices always cure high prices, low prices are a different matter. Being at the bottom of the chain, the farmer generally reacts to low prices by attempting to produce more, either by increasing the area sown or pushing the current area harder. This is what farmers do globally and hence the oversupply is maintained through high or even higher stock levels. Either way, a surplus is maintained to keep pressure on price. Increased production in the absence of increased demand will always lead to over-supply problems with consequences for price.

Cannot ignore oversupply

But what can growers do? What can industry do? Arguably not a lot because we on this island produce just under 3m tonnes in a 2,000+ million tonne global harvest. So, yes we are insignificant but arguably the Russians could say the same with 100m tonnes or the US with over 400m tonnes of grain. Ultimately price will ration production but by the time farmers respond to that, many may have gone out of business or been forced to sell assets to cover debts.

At the risk of sounding like a broken record, the most important thing is to stop spending money in fields, or bits of fields, that have little chance of washing their face, even if the price was to increase by €20/t. I use this figure because there is little to suggest that any future price rise would be more than this amount if we were to see a price rise next year.

Stock will continue to overhang the market, even if there is deficit production next year, and this limits a price rise. But there is also a lot of grain in farmers’ yards around the world and this will come to the market once price is sufficient to tempt it out of store. These farmers are even more strapped for cash and there is a limit as to how long they can hold it. These things together will tend to push additional grain on to a rising market more quickly to limit a rise in price in the first year of inadequate production.

What can growers do?

Three things come to mind. Grow a non-cereal, don’t plant poor acres to cereals and get the acres in grain up to their genetic yield potential.

Grow a non-cereal

This seems like the easy option but the problem is we have very few real choices. Beans have become the new crop, helped considerably by the EU aid. Without this, beans would not feature and there remains a reluctance to handle and use the crop at many outlets. Beans are a good crop on heavier soil types, but we could do with more herbicide and disease control options. If we could ensile protein crops then peas and lupins provide additional farm to farm crop options.

Oilseed rape is the most versatile of the break crops in that it fits outside of the main work peaks for cereals. Timely planting can be a challenge as it tends to clash with harvesting. It has good yield potential but yield can be quite variable from year to year. It is relatively expensive to grow but is a very suitable crop for getting organic manures such as poultry litter into the tillage rotation.

Price is the big plus at the moment as it has not been affected by the cereal price pressure. The French MATIF forward price for November 2016 closed at €374.25/t last week and the equivalent for November 2017 was €361.25/t. Cereal prices will have to rise a lot to compete on margin.

Avoid poor acres

I’ve been saying this since the spring of 2010. Acres that don’t yield don’t pay and they can often cost more to produce. This can be because they were abused in the past, are low in pH, need more fertiliser, often need more herbicide, but still they don’t yield. The only thing that drives growers back on to such land is the need to encash entitlements. But it’s poor farming to work an acre that will leave a loss and pull down farm income.

Poor acres occur for many different reasons. The most obvious are headlands that have been hammered by traffic for years. Excess rain or drought make these show up far too frequently and, as they are the biggest runs in the field, they are a penalty on average yield. Growers know this but yet they continue to replant. Would you put expensive spray into a sprayer that was known to be leaking?

The headland issue is mainly on the ins-and-outs or the turning end. However, as we use bigger and bigger equipment, field edges suffer on fertility because of wide tramline widths. Because there is no neighbouring bout to supply the balance of the P or K or lime or N, the edges of our fields are gradually performing less well. These same areas tend to be the source of weeds like sterile brome, cleavers etc. If these edges were grassed down for a few years it should get rid of the seeds in the ground providing the grass was topped during the growing season to prevent any weeds from setting seed.

Poor acres can also occur on whole fields or farms and these tend to be most often associated with rented land. It is bad enough to have poor owned land, but paying above the odds for land with very limited yield potential must be questioned. While extra acres help spread machinery costs, they also help wear out machinery and if the acres do not leave a margin they become a waste of time.

Delivering full yield potential

For me this is still the most critical element for successful long-term production. We seem happy if we get 4t of winter wheat or 3t of spring barley but yet we know that the varieties we grow can deliver over 6t of wheat and over 4t of spring barley. Same for other crops. Plugging this yield gap is essential. Last year showed us the economic benefit of yield in the face of low prices. It also showed up our potential yields. We built our industry on our yield advantage. Tonnes are critical in a low price year and very useful in a better priced year.

Yield potential is primarily about soil health. This means structure and biology, as well as fertility. The weakest link sets the yield potential. Worn soils tend to have low biological life, have poor structure, be compressed, be more difficult to cultivate and manage, have poor water percolation and all the negative associated consequences.

The solution to these issues is not instant. It can take a few years to get a soil back into good health. That’s why the time to start is now. This must be done on owned land and if you cannot get security of tenure on rented land you should walk away. Land that cannot produce high yields at moderate cost has no place in modern tillage. The economics just can’t carry it.

Soil improvement is primarily about organic matter. This helps rev up the biology. This includes earthworms, bugs, fungi, bacteria etc. All of these help to provide nutrients through mineralisation of organic matter while also binding soil particles together with organic matter to improve structure. Soil biology also helps to produce humus in the soil, and this is a hugely important component as it helps to improve nutrient access for plant roots, increases water storage and also stores carbon.

Nutrient access is key to building higher yield potential. A fraction of a unit of a nutrient can help keep an extra ear on a barley plant or an extra floret or spikelet on a wheat head or prevent blasting or abortion on an oat panicle. Whatever way it works, this is why healthy soils deliver higher yield potential and rotation adds an additional benefit.

Achieving maximum yield potential is critical to survival in tillage. Seven years ago I said that if we did not act we would be in serious trouble within ten years. Well it looks like seven of those years have brought more than enough problems. It’s a gradual process so you must start now. More and more farmers have gone down this road and are reaping the benefits of both higher yields and reduced production costs.

Hiding costs

It is perhaps a human failure to ignore certain costs to enable us to justify certain decisions. It is so common to witness growers talk about conacre in terms of input costs only. But can you realistically ignore the diesel, rubber and metal that goes into it, not to talk of time and the cost of travel?

Do a simple sum. Assuming that you grow grain only, take your total expenditure on all allowable farm expenses (excluding land repayment) and divide it by the total number of acres grown or tonnes produced in that year. If you are farming 300 acres and you have outgoings of €150,000, your average cost per acre is €500. If the outgoings are higher or lower, the average cost per acre will be higher or lower. Also divide the total expenses by the tonnes to get the average cost per tonne.

Average yield level and growing expenses impact heavily on the outcome of these sums. Land rental level and average land rental cost also impact. The bigger the price paid, the greater the proportion of rented land and the lower the yield, the higher the average cost per tonne.

Merchants can help

An income problem in the sector is everyone’s problem. Merchants can play a part by maximising or optimising the usage of Irish crop products in feed rations. The more of our own grain we can use the more confidence it gives to growers. While grain can be imported, straw is a different matter. And if we do not have profitable grain producers there will be no straw.

Maximising the usage of beans to supply protein for animal feeds would also be a very useful development. Demand, rather than availability, is currently one of the main constraints for the utilisation of this useful crop.