Machinery 'rings' can cut tillage costs
Published 12/08/2015 | 02:30
One day last week I visited two farms, each of which had close to 140ac of winter barley cut. Yields on both were similar, averaging 3.8 t/ac but that is where the similarity ended.
One had an outfit consisting of a combine, tractors, trailers and baler which would be conservatively valued at €500,000; the other would struggle to make €100,000.
The €500,000 outfit would look lovely on YouTube, but not so great on the bank balance sheet - the difference between depreciation levels of €60,000 and €10,000!
Granted, repair maintenance and fuel are substantially lower with the fresh outfit and the operator will get to spend a lot less time on the machines than under them.
Spreading the depreciation over their respective areas of 850ac and 650ac gives annual depreciation of €70.60/ac and €15.40/ac.
While the older outfit is at or beyond capacity, the newer one must maintain or increase area in order to remain viable. The prospects for both to maintain current acreage is bleak with continuing pressure from dairy farmers for land.
I dread to think what might have happened if milk prices were better this year.
The prospect of economy of scale is a thing of the past with inflated land rental prices. Higher fixed costs from investment in improved mechanisation and harvest capacity has resulted in farmers paying uneconomic prices for land.
The other key driver on maximising land area was the Single Farm Payment. The opportunity to reduce the area farmed in 2015 and thereby reduce the area necessary in order to draw down the Basic Farm payment was only availed of by some.
The other main aspiration now for viability is that we get a better price for grain. Current prices are disappointing given reports from several areas of the world of poor yields.
Most tillage farmers would claim that they need €170-180/t in order to maintain their businesses. However, over the past 20 years that price range has only been achieved in two years - 2007 and 2012.
The average price over the 20 years has been €145/t, with the good years fuelled by poor harvests in other parts of the world. Is it realistic to expect that grain price will average €170 to 180 over the next five years? If the answer is no then farmers will have to find ways to cut costs, and machinery should be a key target.
These costs can be controlled by examining and costing the locally available options before deciding on purchase.
The simplest and perhaps the most cost effective approach is to use contractors for some tasks. At least you will know the cost and you are not committed to a long term arrangement.
Partnership or work-exchanges with neighbours works very well for some and can advance to a situation where machine purchase by any one individual within the group will be agreed by others and a commitment given to have work carried out by that machine on other farms and not to duplicate purchases unnecessarily.
The real big step that should now be considered is the establishment of machinery rings. Some of the first machinery rings were established in Germany and there are many successful rings throughout Europe and in the UK.
Machinery rings consist of a large number of farmers joining a group and listing:
l what services they can provide to other farmers
l what services they themselves require
The ring manager acts as a co-ordinator and will supply contact details for available machinery to any member requiring a service.
Standard contractor charges are charged by the work provider and a small percentage of the fee is paid to the ring to cover operating costs.
Any member that has spare capacity informs the ring manager who will then put him in touch with farmers requiring work. In general all work is carried out by the machine owner or his employee.
Members considering purchase of a new machine can first approach the ring manager to determine the likelihood of getting work from the ring or whether it would be cheaper for him to use existing capacity within the ring.
Ring members range from small farms with little or no machinery to large highly mechanised farms and to large agricultural contractors.
Finally, a quick note on efficiency and road safety. It is better to leave a few acres uncut in a big block of land and move to another early in the morning rather than wait to finish the following day and end up moving and losing valuable time during peak cutting hours.
PJ Phelan, is a Tipperary based agronomist and member of the ACA and ITCA