Tillage: Do your sums before renting any more land
Published 04/11/2015 | 02:30
With crops harvested and animals being taken off land, now is the time for commercial farmers to make the financial decision on land rental for the coming year or years. Costs and returns from each block of rented lands should be analysed in order to determine their viability.
Lands which do not make money should be dropped unless you have some other motive which you are prepared to finance with money earned elsewhere.
Every year farmers make money (hopefully) on some enterprises and unfortunately lose some of it on others. If the loss makers are eliminated farm profits will improve. Profit is the difference between sales and expenses.
Farmers are price takers when it comes to sales and have very little control over input prices such as fertilisers, seeds, sprays, machinery or contractor charges. Farmers do however have control over the price of cattle purchased at the mart and conacre bought on the open market.
They complain of cattle and land being too dear and continue to bid until there is no prospect of any profit being made. If you are bidding against someone whose motivation is not profit you have very little prospect of buying.
The big fear among tillage farmers about conacre prices was the impact of dairy expansion. However the shock of this year's milk price dip has changed the situation for the dairy man.
Production costs range from 20 to 30c/l and a milk price of 32c/l leaves a margin of 2 to 12c/l. If he rents 50 acres for an extra 50 cows, each producing 5,000l, he would have a margin of €5,000 (at costs of 30c/l) to €30,000 (at costs of 20c/l) before costs such as land rental payments and labour and so on.
The current advice to him is not to pay more than €150/ac for grassland land away from the main grazing block and up to €230 if he can knock a gap in the ditch to access the land.