Feed and fertiliser costs hit DairyBeef 500 monitor farm profits
Increased spending associated with higher feed and fertiliser costs were pinpointed as major contributing factors to a reduction in the profits witnessed on DairyBeef 500 monitor farms in 2022.
Speaking from the DairyBeef 500 Spring Conference, Alan Dillon, campaign coordinator, presented average eProfit Monitor returns from the 15 demonstration farms enrolled.
With an average farm size of 51.2ha, stocked at 2.3LU/ha, the average net margin – excluding subsidies – recorded was €516/ha. When compared to year earlier returns, that’s a reduction of 21%, back from the €650/ha posted in 2021. This occurred despite beef prices rising 18% between 2021 and 2022.
Although many of the farmers involved in the programme have optimised and streamlined their systems over the past numbers of years – achieving a gross output of 1,358kg/ha, which is almost three times higher than the national average – Dillon noted that the additional variable cost spend is a concern.
“Our variable costs hit almost €2,000/ha last year, which is significantly higher than what we would have seen in the past and that’s no surprise given the cost of inputs. Variable costs increased by 27% and the vast majority of this is made up by feed and fertiliser,” he said.
Table 1: Average physical and financial performance of the DairyBeef 500 farms
| 2021 | 2022 | Change (%) | |
|---|---|---|---|
| Grassland stocking rate (LU/ha) | 2.31 | 2.30 | 0 |
| Grassland organic N (kg/ha) | 183 | 183 | 0 |
| Gross output (kg/ha) | 1,427 | 1,358 | -5 |
| Gross output (€/ha) | 2,882 | 3,236 | +12 |
| Variable costs (€/ha) | 1,541 | 1,953 | +27 |
| Gross margin (€/ha) | 1,341 | 1,284 | -5 |
| Fixed costs (€/ha) | 692 | 768 | +11 |
| Net margin (€/ha) | 650 | 516 | -21 |
| Avg. Irish beef price | €4.05 | €4.78 | +18 |
Airing caution for the year ahead, he noted that much of the spending rise on meal was due to higher meal prices in the second half of the year, which have continued into early 2023, adding: “Feed cost is the big one that I’m worried about. In 2021, €554/ha was the average spend on meal. It went to €740/ha last year, but probably 50% of that meal was bought at €300-320/t, whereas today we are looking at €400-450/t. If these high meal prices remain for the year or fall back towards the end of the year, we will have to wait and see.”
Table 2: Main input costs on DairyBeef 500 farms
| Input | 2021 average (€/ha) | 2022 average (€/ha) |
|---|---|---|
| Feed | 544 | 740 |
| Fertiliser | 212 | 346 |
| Milk replacer / calf ration | 135 | 241 |
| Machinery running | 110 | 139 |
| Vet | 120 | 125 |
Although fertiliser spend did increase on the monitor farms from €212/ha in 2021 to €346/ha in 2022, changes in on-farm practices in terms of quantities purchased, better use of low emission slurry spreading technologies and the introduction of clover – both red and white – helped to partly insulate the group from the full extent of record fertiliser tonnage prices recorded nationally.
It was also noted that the outgoings on milk replacer and calf ration did increase significantly, with the average spend climbing by €106/ha. In addition, the fixed cost spend on these monitor farms also rose by 11% through the additional costs associated with making capital investments in their farming businesses.
Commenting on the overall level of profit achieved from these farms in 2022, Dillon noted: “It’s a small margin game per kilogram. It’s all about kilograms of liveweight output. We are only making less than 40c/kg liveweight, so we see the importance of having volume.”
“To maintain our margin [witnessed in 2021], we were probably short 20c/kg in terms of beef price. An average of around €5/kg would have maintained our margin from last year, but it just fell short,” he said.