Farm Ireland

Tuesday 24 April 2018

Paying high tillage rents is a huge risk

Declan O'Brien

Declan O'Brien

The latest drop in grain futures prices is another hammer blow to growers.

The sector has endured two horrendous harvests and unless the markets bounce back significantly during the spring and summer, then another difficult year is in the offing.

As things stand, harvest prices will settle around the €85/t mark for barley off the combine, while green grain will be in or around €95-€105/t.

This will leave farmers nursing losses of up to €50 on every tonne of grain produced on rented ground. Such a scenario is not sustainable in the current climate.

In light of this, it is difficult to understand the money that is again being paid this spring for tillage conacre. While prices have come back in many instances, there have been reports of between €140 and €160/ac being paid. This is way out of line with the commercial reality of the grain business.

Land owners cannot be blamed for seeking to nail the best possible price. However, farmers taking this land won't be working for nothing; they will actually be working to build up debt.

It has been suggested that uncertainty regarding the Single Farm Payment (SFP) is a factor in driving conacre prices.

The belief in some quarters is that last year and this year could be used as reference years for the SFP post-2013. However, there is no basis for this view.

Also Read

Agreeing a mechanism for establishing SFP entitlements is likely to be one of the most contentious issues in the upcoming CAP reform negotiations.

Whether the new system will be area based, historically based or a mix of both is still very much up in the air and will not be decided until late next year at the very earliest.

Given this uncertainty, taking land at inflated prices in the hope of somehow protecting SFP entitlements is a very dangerous gamble.

Ireland at 5/1 to win the Grand Slam might be a better punt.

Irish Independent