Farm Ireland

Thursday 18 January 2018

Paying dearly for under estimating machinery costs

Machael Moloney with his hands full at the Listowel Horse Fair that took place in the town last Thursday, with one of the streets closed off for the day. Photo: Domnick Walsh.
Machael Moloney with his hands full at the Listowel Horse Fair that took place in the town last Thursday, with one of the streets closed off for the day. Photo: Domnick Walsh.
PJ Phelan

PJ Phelan

Yields in 2015 exceeded all expectations but poor prices left farmers working their own lands with a modest profit, while most conacre died in debt.

There are lots of variables that will determine 2016 grain prices, but present indications are for prices to be similar to 2015...and possibly lower.

So, if you intend to farm the same area as last year, you will need another year of exceptional yields combined with reduced costs to maintain income.

The major costs are machinery, land rental, fertilisers and pesticides. The benefits of increasing land area to get economy of scale is being destroyed with high rental costs.

However, farmers continue to believe that the costs associated with machine ownership present a significant saving over contractor charges. In practice that is often not the case.

The only advantage of machinery ownership is being able to do work on the day you want to do it. Before replacing any machine you should look at the costs of all the alternatives - leasing, contractor, neighbours or partnership with another farmer or farmers to provide one good outfit between you.

Compare this against the true cost of ownership, including depreciation, maintenance and repair, insurance, interest charges, workshop equipment, machinery sheds, fuel, lubricating oils and labour. Then divide that by your proposed acreage.

What will happen to the annual cost per acre if you lose or gain some land? What will the impact of the machine cost be on your ability to take advantage of some other opportunity that may come your way in the coming years?

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Prospects for reducing land rental prices are good given that the overall outlook for agricultural product prices is not good. However there will still be pressure to maintain acreage for basic payment and for new entrants who will be attempting to become established and get entitlements from the national reserve.

There is no economic justification for renting or leasing land without doing a cash flow projection - market prices are no indication of value to you. If you have more entitlements than land you should consider either selling or leasing out entitlements.

Share farming and farm partnerships present the best opportunity for farmers looking to expand and for others who either wish to slow down or devote their energies to something else.

Fertiliser is another major cost on tillage farms. It appears that fertiliser prices will be weaker in 2016, which should present some savings.

However there is still too much guesswork involved in fertiliser usage resulting in inefficiencies and yield losses.

Soil samples

Every tillage farmer should have analyses of soil samples for all land taken within the past three to five years.

Lime deficiencies are still an issue. Phosphorus (P) and potash (K) levels are marginal on many farms, and the high yields of 2015 will have removed more P and K than normal.

The intensive heavy rainfall over the past two months has caused leaching and nutrient runoff. So while crops that are not under water generally look very well, there will be pressure for nutrients once crops start into growth.

Early seedling growth is very dependent on phosphorus availability, particularly in cold wet soils. Potash, which is essential for shoot and root tip growth, is subject to leaching. Therefore, it is likely that the demand will be greater than normal if soil levels were marginal.

Old tillage land needs organic material. That is why you should be attempting to secure slurry from intensive dairy or beef farmers that are struggling to stay within their nitrate limits.

There is still a lot of pig slurry going out on grassland but there is more benefit to be gained by putting it out on tillage lands. Grants under TAMS of 40pc (60pc in the case of young farmers) for slurry storage facilities make the provision of dedicated storage a feasible proposition. But make sure you have a firm supply contract before proceeding.

Pesticide usage can be controlled by ensuring a good rotation, providing adequate soil fertility, and by maintaining a good soil structure.

Reducing pesticides by cultural means will decrease the risk of resistance by pests, weeds and diseases.

It will also decrease the risk of legislation banning the use of products that the sector currently relys on.

The increase in sterile brome in recent years can be attributed to the increase in winter barley acreage and will force some land back into grass or wheat production.

PJ Phelan is a tillage advisor based in Tipperary and is a member of the ACA and ITCA

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