Fight costs with buying groups, better planning

Farmers have been advised to counteract rising production costs with better financial planning, and creation of buying groups.

“A number of farmers and producers, working together to buy larger quantities of feed-stuffs and seed at cheaper prices, would dramatically reduce input costs and would result in greater profits for them. Due to the economic situation, there is limited appetite from the multiples to pass on cost increases to already financially stretched consumers. It is imperative, therefore, that members from the supply chain, from farm gate to fork, work closer together to manage the risk of rising input prices on all businesses in the sector,” said Pat Burke, of Grant Thornton, the international business services company with a specialised food-sector service in Ireland.

“It is also vitally important that the Government protects this essential, indigenous growth industry. While some of these costs are beyond the control of Irish borders, collective and co-operative action by producers, supported by the Government, is the best way to protect this industry,” said Mr Burke.

His comments came after Central Statistics Office figures for May, 2012, showed farm output prices up 1.8% compared to the same month in 2011 — but with a 2% increase in input costs undermining the growth.

“The main input cost increases have come from seed costs, electricity and motor fuels, where we have seen jumps of 7.7%, 14.4% and 7.3% respectively in a year,” said Mr Burke.

Meanwhile, costs on farms show no sign of falling, with global grain prices reaching new highs, signalling an expensive winter for livestock farmers.

Rain damage to European wheat crops has added to upward pressure on future prices, due to the worst US drought since 1956.

Just 3% of French soft wheat was harvested as of Jul 9, compared with 47% a year ago.

US wheat future prices have gone to their highest level since August 2008.

Crops in northern France, the UK, and Ireland have all come under severe wet weather fungal disease pressure. Yield losses are inevitable, but rejections of some crops, on grounds of toxic fungal residues, is also feared.