A better way forward than growing the biggest tillage crop at a loss? 

Profit margins on tillage farms are tight, and getting even tighter, with land rents escalating across the country because of demand from all farming sectors. File Picture. 

Ireland’s largest tillage crop by volume will be sown in the next couple of weeks

According to Teagasc, approximately 300,000 acres of spring barley will be planted.

Profit margins on tillage farming operations are tight, and getting even tighter, with land rents escalating across the country, as demand comes from all farming sectors.

While many farmers have already taken some opportunities to get land ploughed, across the country, seed has yet to be put into the drill.

For many farmers there isn’t much consideration given to drilling spring barley, it can almost be thought of as a default option, just following on in the same pattern as previous years.

To be fair, some ground might be too wet and too cold for winter cereals to survive, and with, for instance, increased slug activity on such ground.

There are other areas, especially along the Cork and Waterford coastlines, where there is a significant volume of tillage land, that might not be suitable to winter cropping, if exposed to salt water.

Some farmers choose spring crops over winter crops either to spread the harvest work, or add an element of diversification to spread the risks of poor yield and bad harvesting conditions.

When it comes to cropping, though, many farmers are not giving enough advance consideration to the amount of profit or indeed losses that they might expect to make from the chosen crop, even though there is a host of useful information on the profitability of tillage cropping in Ireland, with Teagasc producing an annual statement of expected crop margins for a variety of different cropping systems.

In the accompanying table, I have collated the expected profit margins from spring barley, as calculated by Teagasc for each of the past four years.

The figures are stark yet real, showing that over the past four years, the average profit to be made from spring barley, allowing for a fair share of machinery costs, amounts to an average of €156 per acre, before land rent and entitlements are factored in.

I would suggest that these figures are even overstated, as they are based on an expected yield of 3.2 tons per acre, whereas actual spring barley yields for the past five years, measured post harvest, only amounted to approximately 2.9 tons per acre (7.2 tons per hectare per Teagasc), falling as low as 2.2 tons in 2018.

That extra 0.3 of a ton reduction in yield from 3.2 ton to a 2.9 ton actual yield would knock about €45 off the average expected profit margin.

Worse still, the gross margin figures from Teagasc do not take into any share of overhead costs such as ESB, phone, motor expenses, accountancy and agronomist professional fees, liming, hedgecutting, land insurance, or additional sprays needed for wild oats.

Based on Teagasc e-Profit monitor costings, these overhead costs add up to €195 per ha to costs, or €78 per acre.

So, taking actual yields and overhead costs into account, the profit margin available to pay for bare land rent is €33 per acre.

If the land is carrying entitlements, that amount can be added to the land rent.

But, remember, the tenant farmer is carrying the entire risk then in the instance of a single farm payment inspection, this seems unfair, and many landowners settle for 75% repayment of entitlements.

Given that land rental is running at up to and in some cases exceeding €200 per acre plus return of entitlements, the reality is that almost all tillage farmers growing spring feed barley on rented ground are losing money, and effectively subsidising increased cropping area, either from contracting operations, or from large pre-existing entitlements.

Switching to malting barley can deliver increased profits, but it can be hard to secure contracts for malting barley, and the risk is that if the crop fails to pass for malting, a farmer is left in the worst of both worlds, with typically reduced yield and achieving only the (lower) feed barley price.

Ultimately, rising land prices are coming, as a result of competition within the tillage sector and from other sectors, with both factors leading to escalating land rental charges.

Instead of competing with each other and driving up land rents, farmers should know when to draw the line, should consider alternative collaboration such as planting maize or beet on contract for dairy farmers, and taking in slurry and dung to reduce their own crop establishment costs.

As it stands, it’s like one farmer said to another: "If you’re happy working for nothing, feel free to come work for me anytime that suits."