Farm Ireland

Sunday 26 February 2017

Analyse your costs to decide if spring crop sowing is viable

Michael Hennessy

The long struggle to lift the ban on ploughing imposed by the Nitrates Directive hasn't counted for much this year. Up to now, all ground, with the exception of very light ground, has not been fit to plough.

The very wet spell towards the end of last week will push the start date out even further. At this stage, even though many might think time is marching on, starting ploughing when conditions are poor will lead to smearing, damage to the soil structure and inevitably to much poorer yields.

Over the past few weeks I have attended local tillage seminars around the country. The continued slippage of current cereal prices and the fall-off in forward prices has forced merchants to start talking about a green price of €85-90/t for barley at harvest. This is based on forward prices available now minus a drying charge. The real question for growers -- and, to be fair, most are giving the topic major consideration -- is 'will I grow spring crops this spring or not?'

Deciding not to grow crops is a major decision not only due to the knock-on increase in fixed costs but also the psychological effect of looking at bare ground all year. The answer to the question lies with each grower. Past actions on the farm, such as the past five years' yields, material costs and the value of output, all contribute to the bottom line. Knowing your costs is vital.

A grower with an average yield of 6.6-6.9t/ha (2.7-2.8t/ac) of spring barley over the past five years, with a machinery outfit costing less than €296/ha (€120/ac), should, with this low price, still be able to break even this year. This assumes the grower can buy all inputs competitively, get at least €90/ha (€36/ac) for straw and if the land is free (owned or rented land).

The disturbing part of these basic calculations is the lack of profit. Profit pays for your labour input through the year. So the result of the year's labour is you are one year older, your machinery is that much closer to obsolescence and, at best, you have no money in your pocket for the effort or, at worst, you spent a proportion of your Single Farm Payment. Would other businesses continue like this?

At the moment world grain stocks are high and sentiment is low about future prospects. It will not only take one major weather disaster but several global disasters before world stocks are threatened enough to push prices up. The harsh reality, as it stands this week, is that prices are unlikely to rise enough to drag the average yielding crops into profitability.

It's difficult for me or anybody else to tell an individual farmer not to sow this year as I would not be familiar with their costs. However, if a grower was to tell me that, based on his average yields, the crop would not contribute to overhead costs, then I would tell him to leave the land idle.

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The advice this year is the same as last year: protection of your Single Farm Payment is the primary objective and is crucial for any farm business. The calculation growers must make for every field, and not for an entire enterprise, is output (grain plus straw) minus material costs (fertiliser, sprays etc) minus machinery running costs (hire purchase, fuel, parts and labour if it is hired in).

Machinery depreciation is a part of machinery costs but a proportion of it is fixed -- machines will depreciate even if parked up for the year. If there is a positive margin on a field-by-field basis then sowing is justified. If not, ask the question 'what is dragging down yields in the field?' Low fertility, wet spots and poor headlands all reduce average yields. The most sensible decision may be to plant the good part of the field, thereby increasing overall yields.

The National Potato Conference takes place today in City West Hotel, Dublin, at 9am. It's no surprise the conference is addressing the viability of potato growing as poor weather, losses because of frost, supermarket influence and imports all seriously threaten income. Growers can look forward to a robust discussion of the issues involved. In the afternoon, growers can participate in a workshop session on blight and share farming, and also attend a trade show.

Irish Independent