Farm Ireland
Independent.ie

Sunday 22 October 2017

Growers need to sit down and work out their margins

Michael Hennessy

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).

Equipment

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.

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As the figures show, there is no room for conacre payments and even a modest rental will push the margins into negative territory. Some growers have themselves convinced that taking land over the next couple of years will increase their payments in the future.

Nobody can say for sure how the next round of entitlements will be calculated, but one thing is certain, renting loss-making conacre in the hope of building up rights in the future is a recipe for disaster, since nobody knows how these rights will be calculated.

Planting spring wheat and spring beans is progressing well on lighter land and it should be possible to plant this week on heavier ground. High yields derive from all the small decisions made throughout the year. Sowing into a good seed bed which is not only dried out on top but also relatively dry underneath is important for the crop to attain maximum rooting and yield.

Spring wheat varieties available this year are similar to last year, with Sparrow now provisionally recommended. A seeding rate of 188-200 kg/ha (12-13 stone/ac) is needed to achieve 350 seeds per meter squared at 85pc establishment. Seed rates can be adjusted downwards if conditions improve. In all but the lightest ground, it's too early to plant spring barley as yet.

There is still time to get a soil test completed before sowing. The lime status of land is particularly important as this affects the availability of all nutrients through the season. All too often it's the one input which has been neglected, resulting in poor crop performance.

When soil sampling, make sure to get the organic matter test if the field is in tillage for six years or more, and also look for trace elements such as manganese, copper and zinc.

Irish Independent