Farm Ireland
Independent.ie

Sunday 23 July 2017

We'll learn after a hard year

Liam Fitzgerald

Some years live on in the folk memories of generations as a result of some dramatic event that occurred, usually related to some significant political happening, a major national disaster or economic upheaval.

Thus, 1929 is remembered for the Wall Street Crash, 1939 for the beginning of World War Two, 1969 for the first man to walk on the moon and 1989 for the fall of the Berlin Wall.

Perhaps last year deserves to join that league. In the early months the world's financial system almost went into meltdown, then we had one of the worst summers since records began, and finally the worst floods in living memory. It was a year when many systems, both man-made and natural, were severely tested. So from this testing, we should be better prepared for future challenges.

On the farming front, the CSO estimates that average farm incomes fell by 30pc and cattle farmers' income by about 11pc between 2008 and last year.

Declined

It is no consolation to know that income per farm worker also declined substantially throughout most EU states, with the largest falls in Hungary (-35.6pc), Luxembourg (-25.1pc), Czech Republic (-24pc), Ireland (-22.3pc), Germany (-21.0pc), Austria (-20.4pc) and France (-19.8pc). Only in the UK (+14.9pc) and Malta (+9.1pc) was there any significant improvement in farm incomes per worker. British farmers have benefited from a reduction in supply and, more particularly, from the fall in the value of sterling both in relation to market prices, and the exchange rate when euro payments are converted into sterling. It may help the case for support that there is a farm-income problem across the EU.

Each farmer should also take stock of how their farm business faired last year.

It may not be a very attractive picture but there are lessons to be learned from getting the figures together as soon as possible and see what improvements can be made by way of enhancing the value of output or reducing the production costs this year. For most, it will be a case of consolidation and survival rather than new investment.


Teagasc advisers are available to do financial checks on the income and expenditure situation of farm households and to help plan a course of action to deal with cash-flow difficulties. It is important to get last year's accounts completed early so that you know the up-to-date position.

Point

In relation to farm income, the eProfit Monitor is a good starting point from which to ascertain the physical and financial performance of the cattle enterprise. The eProfit Monitor report shows the physical output as liveweight per hectare and per livestock unit (LU), and the financial output per hectare and per kilogramme liveweight. Variable costs, gross margin, fixed costs and net farm profit are also given per hectare and per kilogramme. The breakdown of individual cost items are also shown. From this you can get a good analysis of the enterprise performance, which will identify where improvements can be made during this year.

The most important key indicator of technical efficiency is gross margin/ha. Where it is below the group average, the reason should be investigated. It may be due to low output or some particularly high cost items, or a combination of both. Those with very high output can tolerate high costs and still have a good gross margin. An improvement in output is often easier to achieve and will yield a bigger improvement in gross margin than trying to cut costs. Output is determined by stocking rate and the value of output/LU. Improving weight gain and the quality of animals sold is the most efficient way to raise output/LU.

Taking the income level achieved by the top third of producers in the eProfit Monitor sets a good benchmark to aim at. The monitor is of particular value to beef producers as it provides a good focus on key indicators of profit and a benchmark to measure performance on similar farms.

Irish Independent