Farm Ireland

Monday 23 October 2017

Grain prices take gloss off perfect harvest

There is a very interesting line in Richie Hackett's tillage management piece on page eight this week relating to volatility.

And before anyone gets ideas, I don't mean that as a back-handed compliment to the man from north Co Dublin; his columns are invariably informative and interesting.

However, in this week's contribution, Richie questions how many tillage growers will stay in business if the grain price volatility that we have witnessed over the last few years continues, while the high cost base of producing cereals also remains in place.


Richie's comments tally with those of at least one senior Teagasc official who claimed that the precarious state of tillage farmer margins had been virtually ignored in all the talk about redistributing single farm payments (SFP). He claimed that tillage farmers were among those with the highest SFP entitlements per hectare, but Teagasc research showed that profit levels among this group were surprisingly low and dependency on EU payments was very high.

This appears to be borne out by the expected margins for this year's harvest. The quotes for barley off the combine range from €137/t to €145/t, while wheat is at €154 to €155/t.

At a yield of 3.5t/ac for barley, which is the level being reported at the moment, growers will be looking at the crop bringing in around €480-510/ac.

However, with input costs taking out €260-270/ac for even the very best of growers, and machinery costs and repayments accounting for a further €170/ac, it is clear that growing barley is no Klondike, even in a good harvest like this one.

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It is a similar story if you look at the figures for winter wheat. The total variable costs of growing the crop come in at €555/ac.

So if you take a yield of 4t/ac and a price of even €160/t, this only gives a return of €640/ac and a margin €85/ac. With this in mind, one can only wonder how growers are paying €160-€250/ac for rented ground.

Given the tight margins, it is hardly surprising that there is a lot of grower frustration over the low grain prices being quoted at the moment.

A common complaint from growers who have contacted this publication over the last few weeks is how a supposed bumper maize crop in the US can impact on European cereal prices when the American crop is at least two months from harvest.

Another point of contention this year is that growers have been assured in the past that cereal prices would mirror the fortunes of crude oil.

However, in 2013 this trend has been reversed, with oil prices increasing but cereals going in the opposite direction.

Should this continue, the man from north Co Dublin will be right, again.

Irish Independent

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