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Why do farmers stay with cattle farming at a time when the SFP is decoupled from production?

If there is so little profit in the business why are people staying in beef?" asked Darragh McCullough in this paper last week. He had just heard Teagasc predicting negative net margins for beef again this year.

Teagasc predicted a 4pc rise in beef prices this year but rising costs would more than swallow this increase. Beef farmers will this year subsidise their production with a slice of cash from the single farm payment (SFP) again.

Think back to the premiums that morphed into the SFP. There was €150 at 10 months, €150 at 18 months plus €80 extensification at each stage; €224 suckler cow plus extensification, and then there was the €80 slaughter premium.

Making a profit in the absence of these premiums was always going to be a challenge. And while there has been a welcome rise in the price of beef since the turn of the year, beef prices to the farmer still lag well behind inflation and behind the increase in purchasing power of the rest of society.

Back in the late 1980s the Irish beef price headed -- in old money -- towards 120p/lb, or the equivalent of the 336c/kg of recent weeks. But in 1989 the average industrial wage was €272 a week. Today, this has increased to €595 a week, a rise of 219pc (TD salaries grew by more than 300pc over the same period).

In 1989, the humble pint cost the equivalent of €1.87. Today, this has risen 236pc to €4.30. To buy the same number of pints as it could 20-odd years back, today's bullock would need to sell at about €7/kg. This is why you will not see many pure cattle farmers driving around in 2011-registered cars.

Back to the original question; why do farmers stay in cattle farming, especially at a time when the SFP is actually decoupled from production?

We can speculate on several reasons:

  • Tradition and a way of life. People like working with cattle. I once heard a famous New Zealand farming professor declaring that his dream alternative life would be fattening bullocks on Irish pastures;
  • Land is hobby farmed with cattle but the main household income arises from other sources;
  • Land quality is not suited to tillage and farmers are slow to make the irreversible switch into forestry;
  • Fragmentation of farm makes it unsuited to dairying;
  • There is a fear that if you reduce numbers it may adversely impact on your SFP post 2013;
  • Always there is hope, even optimism that a big jump in cattle price is around the corner.

All of these amount to a weak foundation for an industry which is such a big contributor to the Irish economy and so vital to the well being of rural Ireland. Most vulnerable is the presence of suckler cows on lowland farms.

Across the world suckler cows are farmed on marginal land and why should Ireland be different? On the back of EU suckler premiums the Irish suckler herd jumped from a low of 480,000hd in the mid 1980s to 1.2m when Ireland took the decision to de-couple the payment from the cow in 2005. Maintaining lowland suckler numbers in the absence of premium incentive is now a huge challenge to Ireland's policy makers.

All around us we see pressure on suckler cow numbers. Some herds are switching and will switch into dairying in anticipation of the end of milk quota. This is positive nationally and individually. Calves will continue to be born and wealth created in rural Ireland. Other lowland farmers are switching from suckling to calf rearing systems.

And of course there is a constant effort to improve efficiency and profitability in herds through better grassland management, improved genetics, tighter calving intervals etc. The Better Farm Beef Programme is a magnificent effort in this direction.

But we come back to trying to justify carrying a suckler cow in the absence of a premium incentive. When there was no subsidy, I noted that farmers who carried out multiple suckling, consistently made higher profits. This involved more work but it spread the overhead of keeping a cow, and farm output was increased. The Agricultural Research Institute tested systems where cull cows from a dairy herd were used to rear up to six calves per lactation (four for four months and then two).

Suckled calves are invariable better than hand reared ones and in times of low calf prices such multi-suckle systems can be quietly very profitable.

At one stage the presence of implants greatly enhanced the efficiency of beef. Currently there is a major switch into bull beef production and this trend is likely to continue as herdowners fine-tune the handling of young bulls at grass. This takes extra effort and management but converting beef into a profitable farm activity is not going to happen if we continue along conventional lines.

There will always be a place for keeping single sucklers on the poorer marginal land. Just look at what the suckler cow can do! She can take rough grazing and convert it into a food which, if the Lord made anything nicer, He kept it for Himself. I refer of course to a juicy beef steak or even a tasty burger.

Indo Farming