Rental costs must make sense
Published 09/11/2011 | 06:00
While many areas in the east and north east have considerable areas sown in good conditions, farmers in north Tipperary have been less fortunate. The harvest was longer than ideal, with never more than two suitable days together, and this has been followed by similar conditions for sowing.
Despite this, there have been some mad prices paid for conacre, which is in nobody's interest. A tillage farmer will only survive if their costs are such that there is a realistic potential for profit. A person letting land is unlikely to get paid if the person renting does not cover his costs and certainly won't have him as a customer the following year. Given that the cost of standard inputs for growing winter wheat this season is likely to exceed the price of 2t (before any additional charges for lime, land maintenance, additional labour or contractor charges and fees) and the cost of machinery will exceed another tonne, what should you pay for land? The answer may well lie in your own crop records -- forget the bumper yield and look at average yields. Remember to factor in price volatility and our unpredictable harvests.
Economy of scale is one of the major justifications for increasing sowing areas. However, as long as I have been working, I don't think I have met anyone who has achieved it.
Most have got caught in a merry-go-round of renting more land to get better use out of existing machinery. Then they find that they are over machine capacity and end up renting more land to cover machinery costs.
The pressure of having to increase acreage generally results in having to pay over the odds in order to get new land. Once the new land is secured, the word goes out and all his other landowners want similar money.
One person that appears to have got it right was a young farmer with 150ac of tillage who approached me with a request to plan a machinery purchase strategy to upgrade a run-down outfit.
After much agonising and plotting as to where he might get extra land to rent, he decided to buy one piece of equipment and go out on hire with it in order to cover contractor charges.
More than 20 years on, he still has the same piece of equipment, upgraded several times, farming his own land, renting the occasional bit of land when opportunity occurs and covering all contractor charges with his hire income.