Speech by Teagasc Director, Professor Gerry Boyle to the Teagasc National Tillag
Good morning ladies and gentlemen. You are all very welcome to the Teagasc National Tillage Conference. This year’s event takes place after a better year financially for most cereal producers. We saw a welcome increase in market prices for grain, while costs remained relatively static.
Good morning ladies and gentlemen. You are all very welcome to the Teagasc National Tillage Conference.
This year’s event takes place after a better year financially for most cereal producers. We saw a welcome increase in market prices for grain, while costs remained relatively static.
Optimistic Outlook for Tillage Sector
Tillage farmers are deservedly basking in the wake of the high prices of
But today all involved in the industry need to take stock of where the business is going for the future. The CAP ‘Health Check’ is an early warning that growers will need to face up to the challenge of farming without the Single Farm Payment, or, at best, a much lower level of SFP after 2013.
Cereal prices and resulting margins are likely to be again good for 2008 but costs will increase enormously in the case of fertilisers (up 50%), seed (up 40%) and chemicals (up 5%+). And growers must be sensible when bidding for conacre – avoid the trap of “irrational exuberance”!
Market Prospects for Cereals
World stocks of cereals are at the lowest level for 30 years. The extremely high level of prices in the July-September period of last year are likely to drop back by about €20-€30/t this year but this will still see them well above the levels that prevailed in 2006.
The high prices naturally have stimulated farmers to plant higher acreages.
The winter cereal area in Ireland is estimated to have increased by 25% to 120,000 has and winter barley is up 20%. Most of the oat crop is already in the ground with an estimated 18,000 ha sown – close to 50% up on last year. The increased area of cereals is driven by high grain prices, a zero set-aside obligation and poor margins in drystock farming.
Early indications from the EU are that the wheat and barley area will be up by at least 5%.
Business Decisions Needed
Now is the time to consider where the farm business is going in the medium term (5 years +). The whole farm needs to be considered and potential loss making enterprises eliminated. The aim should be to achieve an income that will sustain your life-style without the cushion of the Single Farm Payment (SFP). As I’ve said earlier, it is not clear at what level the SFP will be paid, if at all, post 2013.
Future grain prices are likely to be volatile and unlikely to remain at the recent high for too long. This must be kept in mind when making investment decisions – particularly when buying or renting land. An investment decision that isn’t justified if prices drop say 25% below what you think they might be should be avoided.
Talk to your agricultural adviser before making any significant investment. A whole farm plan is needed taking into account land, labour, machinery, buildings, family, retirement and tax implications.
Teagasc recently launched its new Business & Technology (B&T) Service with a renewed emphasis on farming for profit. There will be 17 dedicated B&T advisers in tillage crops. These advisers have been trained on financial and technical analysis and will use the Teagasc profit monitor and investment appraisal tools to provide farmers with a practical action plan for the future. In addition they will provide a tailored technical service which encompasses planning inputs and detailed agronomy advice.
These advisers are supported by Teagasc specialists and Oak Park researchers.
Tim O’Donovan and Jim O’Mahony will outline the importance of using best practices in business and technology for profitable tillage farming later today but you the growers need to challenge our advisers to help you implement these new methods!
Many of the factors that drive margins are outside your control such as product and input prices. These prices are driven by global forces beyond the farm gate and you can have little influence over them except to negotiate individually and collectively to achieve the best deal.
However, it is inside the farm gate where I think your primary focus and our primary focus should be. This is where Teagasc has most to offer in terms of the new technologies being generated through our research and the best advice being delivered through our advisory service.
Best use has to be made of the available technologies to maximise your cereal yields, through selecting the highest-performing varieties; through the timing and application of the best disease and weed control programmes; and by using the most beneficial crop establishment methods for your soil type and farm.
There are two other issues I also want to touch on this morning, namely Genetically Modified Crops and Biofuels, and I know we will be hearing more on both topics later this morning from our international speakers.
As you know, Genetically Modified Crops are being grown around the world by farmers. This technology is being widely used in many countries by our competitors. It is not just cereal farmers that are affected by the employment, or lack of employment, of this technology. Some of the products produced using this technology are already coming into this country. Two maize by-products, corn gluten and distillers grains, are vital ingredients in animal feed and account for up to 30% of feed rations for beef cattle and dairy cows. A total of 800,000 tonnes of these maize by-products are imported from the US every year by animal feed companies. EU policy decisions could effectively eliminate access to these imports with serious repercussions for the agricultural sector in this country.
As supplies of GM-free maize by-products are not available elsewhere, the Irish feed industry could be forced to source 800,000 tonnes of replacement products at an additional cost of up to €40m. This will have a serious effect on animal feed prices and on the competitiveness of livestock products on our major export markets.
The situation with protein feed is even more serious and most of the world’s Soya bean is now nearly all of the GM type. It is important that the EU approval system for these new products is not unduly delayed as otherwise there could be serious repercussions for the agricultural sector generally.
Ireland’s ability to become a knowledge-based economy will strongly depend on developing a national capability to participate in, monitor and evaluate and where appropriate harness developments in biotechnology. National S&T policy has rightly identified biotechnology as one of the core technologies which Ireland and Irish industry must now embrace. The agri-food and wider bioeconomy sector can benefit significantly from the tremendous potential offered by modern developments in biotechnology. By its nature, biotechnology has many applications for almost all sectors of the economy, particularly the agri-food, pharmaceuticals, chemicals and beverages sectors. Biotechnology has the potential to radically improve the entire food production chain and to transform the synthetic chemical manufacturing processes used by Irish-based pharmaceutical plants. The food industry in Ireland is already using biotechnological processes in a wide range of areas and this will increase over the coming years. The biosector based on our natural resources of land and water has the potential to grow hugely as the world’s limited stocks of fossil fuels inevitably diminish.
The emergence of biotechnology, however, has also raised many questions of enormous public interest, including the safety of genetically modified organisms (GMOs) in food production and on the environment. To date based on the international experience their record has been very good. There are now 100 million acres of GM crops grown world wide; it has expanded by double digit growth rates every year since 2002. Currently, the debate in Europe around the risks and benefits of biotechnology and GMOs in particular has been somewhat polarised. It is, I believe, now widely accepted that the debate should be much more open, transparent and inclusive if a greater level of understanding is to be achieved by all the stakeholders. Openness and transparency are also required in the policy-making process.
In the absence of independent and credible information on biotechnology, the general public is not given the opportunity to gain an understanding of, and make informed decisions on, the use and potential of biotechnology in the agricultural and other sectors.
A number of years ago a national consultation debate took place on “Genetically Modified Organisms and the Environment” in response to the increased level of public interest and concern around GMOs. This debate highlighted the lack of independently validated information that would inform the public as consumers. The reporting panel recommended that “a greater effort must be made by the State to inform the general public about developments in modern biotechnology which involve risks, however small, for human health and/or the environment. Such information should be based on the needs of citizens and provided in language understandable to the lay person”. [The days when scientists spoke ex cathedra on such matters and the public passively accepted the received wisdom from on high have long gone.]
I am pleased to say that Teagasc in recent years has invested significantly in developing our research capacity in the biosciences and will continue to do so in the years ahead. As a State-funded organisation we see a particularly important role for ourselves in providing excellent, impartial and up-to-date information to all of our stakeholders on developments in biotechnology as they impact on the agri-food and wider bio-sector.
To move the debate forward there is a need for greater understanding of the issues on all sides; a need for the participation of all the stakeholders in the decision making process; and above all a need for transparency and openness. In this regard Teagasc will not be found wanting.
So the question is what the best position is for Ireland on this issue, and this is a politically sensitive one. It is not Teagasc’s role to get involved in the politics of this issue.
However, it is our job to examine the science involved. It is our job to research the technology, to evaluate its use in other countries, to determine the benefits and pitfalls of adopting GM technology. It is our job to use forums, like the one today, to stimulate debate on the issue.
And so I look forward to hearing the views of Ronan Hughes on this issue later this morning.
The possibility of using crops for biofuel is one of the most exciting developments in recent years and it is a positive development for both farmers and for the environment. It is already influencing your business, even though you may not have directly engaged in producing crops for fuel. The rise in grain prices globally last year was driven in part by the adoption of biofuel production in various countries around the world which tightened grain supplies and led to an improvement in the price for your products.
There is no doubt but that transport biofuel use will increase rapidly in the coming years. While much of this will be imported, there is scope for some increase in native production from tillage crops, and this needs to be developed to the maximum extent that our tillage land area will allow. While it is cheaper for Brazil to produce ethanol from sugarcane, than to produce it from corn grown in the US or from wheat grown in Europe, this does not mean that there will be no developments in this sector outside of Brazil. The current developments in the US ethanol industry demonstrate clearly how the impact of government intervention can stimulate developments, even over relatively short time periods. In the absence of such intervention there can be no doubt but that Brazilian ethanol would be by far the most competitive source.
In Ireland, research will be needed to maximize crop yields, find profitable uses for residue materials such as rape and cereal straw and rape-seed cake, to assure the quality of the biofuels produced and to evaluate all the environmental impacts of biofuel production.
There will be a big immediate and long-term increase in demand for solid lignocellulosic biomass, for heat production in chipped or pelleted form and for electricity production at the peat-burning power stations. We need to develop our production capacity to meet these demands. As an initial target a total of 200,000 ha transferred from dry-stock farming to biomass crops would allow several markets to develop without a major impact on food/feed production. Here again quality and environmental issues will need to be addressed.
In the longer term it is likely that technologies for liquid biofuel production from lignocelluloses – the so-called 2nd and 3rdgeneration biofuel technologies – will be a reality. The Teagasc Crops Research Programme in Oak Park has led the way in examining the technologies of producing biofuel and the agronomy of the relevant crops. Our new research projects will bring this to a new level examining the possibilities of producing second generation biofuels. This will be facilitated by recruitment of top plant bio-scientists. Technologies for conversion of biomass to other non-energy uses will also be well advanced and we have ambitious plans for our Oak Park Research Centre to lead the way in this exciting area in partnership with the main industrial players in this country. Plans are well advanced for the creation of a new competence centre at Carlow with IDA, Enterprise Ireland and Industrial support and I hope that these plans come to fruition in the not too distant future.
Prof Jimmy Burke and Jim O’Mahony and their colleagues have put together a very strong programme of international and Teagasc speakers to stimulate debate on the issues of concern to the sector, and I want to compliment everyone involved for organising this event here today. I look forward to hearing the contributions from the speakers and the debate they will no doubt generate.