Growers need to sit down and work out their margins
Published 23/02/2010 | 05:00
The cold, dry airflow over the past week has helped land to soak and dry on top. Ploughs were at work all over the country over the past week and some progress has been made with sowing crops on lighter land. Growers shouldn't expect to see these crops for some time as soil temperatures are low, at around an average of 3-3.5C.
Decisions about whether to plant or not this year have been boosted by the announcement by Liffey Mills of a base price of €100/t for barley at 20pc moisture. It remains to be seen whether other merchants will announce a price over the coming weeks.
It's commendable that such a large grain buyer has come out at this stage to give a little confidence to the market. Many may not like what's on offer and say it's too low, but at least one of the major variables has been taken out of the equation.
Growers who are willing to sell at this price can now sit down and work out their gross margins for the year. At €100/t for spring barley, a grower needs a yield of 6.7t/ha (2.7t/ac) to break even, given the current growing costs (material costs €339/ha and machinery hire €370/ha). There is no room for luxury applications of any inputs.
Growers will be tempted to strip out labour and depreciation from the machinery hire costs (€123/ha) which could leave machinery costs at €250/ac (€100/ac). This reduces the break-even yield by 1.23t/ha (0.5 t/ac) to 5.47t/ha (2.2 t/ac).
Yields above this level will contribute to overhead costs such as machinery depreciation, insurance and interest. However, in the short term, a grower needs return for labour and also to replace equipment for future production. There is no easy answer to the question of whether leaving land idle this year is the best course for your farm. Overhead costs have to be paid regardless of production and if the only source of income is the Single Farm Payment then fixed costs have to be paid out of this money.
I fear many growers are already committed to high costs such as machinery repayments, so the creation of income over and above the costs of production is important. As the figures show, there is little or no room for error or fat in the system. A budget can be drawn up now for barley where a margin can be factored in, and the formidable challenge through the season will be to keep to this target spend.