Tillage Monitor Farms - Physical and Financial Performance

Profile of Monitor Farms

We are now entering the third year of the monitor farm programme. The farms were selected on the basis that they were largely representative of the tillage farmers in the area. The farms selected are all full-time farmers and some are also involved in contracting.

In all, there are thirteen monitor farms, including one farm in each of the following counties: Cork, Tipperary, Waterford, Kilkenny, Carlow, Wicklow, Kildare, Laois, Offaly, Dublin, Meath, Louth and Donegal. Of the thirteen farmers, eight have solely tillage farms and the remaining five have mixed tillage and livestock farms.

The average size monitor farm is 180 hectares. Farm size ranges between 97 hectares to 380 hectares. On the farms, 51% (Range 0-100%) of all land farmed is rented. The enterprise mix on monitor farms contains a mixture of winter and spring cereals, sugar beet and potatoes. The enterprise mix depends on the county involved as to what proportion of winter or spring cereals are dominant. In counties towards the north-east, winter cereals tend to dominate the cropping plan and in the midland counties, such as Laois and Offaly, spring cereals dominate the cropping on the farm.

The financial information presented in this paper represents a snapshot of some of the best tillage farmers in the country. The financial information is based on the whole farm and also on an enterprise basis. Individual monitor crops are also examined and they not only highlight the different physical management technique but also the financial implications of field decisions.

The farms are seen as gateways to introduce proven research at farm level so that the monitor farm can benefit from the research and also demonstrate the research to local farmers.

Teagasc E-Profit Monitor Program

Analysis of the whole farm data was carried out using the Teagasc E-Profit Monitor Program. This program is an internet-based program designed so that the adviser or farmer can input the information on-line. The program can deal with all enterprises, including dairy, cattle, sheep and tillage. Individual detailed analysis of the farms can be produced each year and viewed by the adviser and the farmer on the internet. The strength of this program is that it can analyse data from groups of farms with similar enterprises. For example, a highly mechanised potato farm will have a different cost structure to a farm with spring barley and beet.

Farm Profitability

Yield is one of the major driving factors of profits. The monitor farms can be described as excellent farms based on the yield in comparison to the national yields and also to the top 25% of mainly tillage farmers participating in the National Farm Survey 2002.

Table 1 shows that the monitor farms are well ahead of the national average figures in 2002 on all crops except winter wheat and are within the top 25% range of growers for winter and spring oats, spring barley, spring wheat and also sugar beet. In 2002, the top 50% of our winter wheat growers had an average yield of 9.9 t/ha in 2002 but the bottom 50% of growers had average yields of 7.4 t/ha. The lower yield was due to water logging during the winter and also from problems controlling septoria due to developing resistance to strobilurins.

Average yields for winter wheat on the monitor farms in 2003 averaged 9.26 tonne per hectare which will be well above the national average and will put the growers into the top 25% of winter wheat growers in the country.

The overall average net profit from the farms in 2003 was €410/ha. This represents a €83/ha increases in profits over 2002. In all, 51% of all land farmed by the monitor farmers is rented. In 2003, the top 50% group of monitor farmers made a net profit of €535 per hectare, whereas the bottom 50% group made a net profit of €284/ha. However, the bottom 50% group of growers incurred an average cost of €181/ha for all land, whereas the top 50% of growers only incurred a cost of €48/ha for all land farmed. The profits retained by the monitor farms reflect the high standard of the farms involved.

Detailed financial analysis requires individual costs to be examined. Fixed costs accumulate from many different areas and individual costs will be highlighted. Variable costs are particular to the crop grown and this aspect will be dealt with when looking at specific crops later in the paper.

Fixed Costs

Fixed costs tend to be fixed and will not be affected to any great extent by a small change up or down in the size of the farming operation. Fixed costs include machinery and building depreciation, interest, ESB, phone, car etc. The fixed costs incurred on monitor farms represent 39% of gross margin or 47% of all costs incurred (excluding land rental). If there was a 10% reduction in gross margin across the farms then the fixed costs would rise to 54% of the gross margin or a 15% increase.

Fig. 1: Monitor farm fixed costs: Average of 2002 and 2003

For the purposes of this comparison, farmers with potatoes as part of their enterprise mix are excluded as they tend to have much larger labour and machinery costs. In as much as possible the costs associated with contracting work completed by the monitor farmers is also excluded.

Fig. 1 shows that the costs associated with machinery represent one of the largest costs on the farms. The average total machinery costs which include depreciation, running and leasing costs represent €189/ha or 48% of the total fixed costs. The range of machinery costs between the farms is €109-€415/ha. The lower cost of €109/ha relates to a farmer who relies on a contractor to gets the majority of the heavy work (ploughing/sowing and harvesting) completed. These figures do not include contractor charges, which vary from €0-€281/ha depending on the farm. When the cost of contracting is added to the machinery costs then the average cost over all farms is €284/ha (range €113-489/ha).

Hired labour and interest represent some of the other larger fixed costs on the farms. As the farms are large one-man operations, hired labour is the only option at busy times, such as sowing and harvest. The high interest charges arise because many of the farms have invested in fixed assets, such as buildings (grain stores) and land.

Land rental is not a part of the above fixed costs but represents a large proportion of the costs on the farms. The rental costs can represent as much as 23% of the gross output. The average rental figure for all land farmed over the two years is €102/ha. Some monitor farmers have no land rental and others operate on all rented ground, which results a range from €0-€373/ha for land rental.

Winter Wheat

Winter wheat is one of the major crops on the monitor farms. The yields and returns over the last two years have fallen from the highs in 2000 and 2001. The CSO recorded that the average yield for winter wheat fell from 9.8 t/ha in 2001 to 8.8 t/ha in 2002 and the Teagasc Harvest Report provisionally put the national average yield in 2003 at 8.9 t/ha.

Table 2 shows the average yield for wheat in 2003 is 9.09 t/ha, which is well ahead of the national average and puts the monitor farms in the top 25% bracket of growers in the country. The wheat yields for 2002 were badly affected by water logging the previous winter and also septoria control problems.

In Table 2 the common costs per tonne relates to all the variable and fixed costs associated with growing a tonne of wheat except land rental, labour and interest. This figure is a better figure to compare across farms, as costs such as rented land, labour and interest can be very farm specific. The common cost-per-tonne figure comprises of variable common costs and fixed common costs. The variable common costs figure rose by €2 per tonne from 2002 to 2003. However, the biggest increase was in the fixed common costs which rose by €4 per tonne over the same period. Although this is worrying and will be examined further, a three-year average figure will be more informative.

The average net profit of winter wheat was €403/ha in 2003 which is an increase of €147/ha compared to 2002.

Fig. 2: Herbicide, fungicide and yield for winter wheat, 2003

In Fig. 2 the average fungicide spend is €140/ha. However, the costs vary from €114/ha to €174/ha. The top 50% of growers, in terms of yield, spent an average of €138/ha on fungicides compared to the bottom 50% who spent €144/ha on fungicides.

Spring Barley

The poor weather in 2002 had an adverse affect on crop yields and barley was hit particularly badly in some cases. Despite the setbacks in 2002, the average yield for spring barley across all monitor farms was 5.85 t/ha and is well ahead of the national average, which was 5.3 t/ha. Yields of barley in 2003 are also anticipated to be ahead of the national average.

The poor return of 3.31 t/ha by one monitor farmer was a direct result of water logging. The total common costs to produce a tonne of barley ranged by over 40% between the lowest and highest cost of production. The overall cost to produce a tonne of barley is €13 per tonne higher than the total cost to produce a tonne of winter wheat. The main variable costs include fertiliser, herbicides and fungicides. Fertiliser usage will vary depending on site but the average spend was €100/ha.

Fig. 3: Monitor farms: herbicide, fungicide and yield for spring feed barley, 2003

Disease control in spring barley could not be described as difficult in 2003 but there were areas where rhynchosporium control proved problematic.

Fig. 3 highlights that one farm spent nearly 47% more on fungicides than the average fungicide spend in 2003. The differences are partly down to variety choice and farm position within the country but it can also underline a larger issue of over-spending on fungicides.

The net profit per hectare from spring barley in 2003 ranged from €17-€573/ha, with an average of €427/ha. Land rental again plays a major role in the financial returns of crops, with an average land rental cost for all barley sown of €154/ha (range €0-€445/ha).

Other Enterprises

As expected, sugar beet profit per hectare was well ahead of all other enterprises, with a net profit per hectare of €575. Herbicides and fertilisers represent the main material inputs in sugar beet. The average herbicide spend was €159/ha and the average fertiliser spend was €233/ha.

Winter oats proved its worth on farms with average net profits over the two years of €200 per hectare for winter oats, which include an associated cost of €226 per hectare for land rental. Spring oats returned an average net profit over the two years of €274 per hectare, which includes an associated cost of €111 per hectare for land rental.

Potatoes, oil seed rape and beans were on some farms but the acreage was small and not enough to comment on.

Physical and Financial Performance of the Monitor Crops

The tillage adviser and the discussion groups had an input to many of the management decisions of the crops. The decisions and subsequent operations and inputs to the crop were posted onto the internet where all Teagasc clients could view the data and compare crops across the country.

All the financial data was closely monitored and a gross margin obtained for each crop. The results for an individual crop will always highlight differences due to field circumstances or due to the position of the field in the country.

Collaboration with Crops Research Centre, Oak Park

Where possible, Oak Park scientists were involved in carrying out parts of their research programmes on the monitor farms. These included fungicide and nitrogen trials, with future plans to include the monitor farmers as part of a machinery survey. The farms are also used as part of the growth stage predictions for winter wheat.

One of the main areas where the monitor farms were crucial is early last year where they participated in the initial survey to ascertain the level of septoria resistance to strobilurins in winter wheat throughout the country. The results showed that the average level of resistance in the monitor crops was well above 48% and in some cases as high as 84%. These results set the alarm bells ringing as to the extent of the resistance problem through the country and resulted in a re-examination of the fungicide programmes for the season. The farms also took part in the subsequent intensive nationwide survey in June. Results of this survey were presented this year at the Tillage Conference by Eugene O’Sullivan.

Crops on the monitor farms were also included in a survey that was looking for evidence of resistance to fungicides by eyespot or rhynchosporium. Again the results of this survey were presented by Eugene O’Sullivan.

Concerns were expressed among farmers that the Teagasc nitrogen recommendations for winter wheat were not high enough. Some farmers were using higher nitrogen inputs on winter wheat than the Teagasc recommendations and were obtaining higher yields on their farms. A research programme was put in place and three of the monitor farms participated with Oak Park on this project. The initial observations indicate that the Teagasc nitrogen for winter wheat recommendations are correct.

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