Tillage Update - 2nd December 2021

As the year comes to a close it’s a great time to look at your farm records from 2021 to analyse your performance over the past year. Michael Hennessy, Head of Crops KT, discusses the importance monitoring your business in order to optimise performance for the year ahead.

It’s a topic which I always talk about because no matter what business you are in (and farming is included here) the saying of “If you don’t measure it you cant change it” or maybe a better way of putting this is “If you can't measure every part of your business, you can't manage or grow it”. We all have to recognise our successes, or what worked well last year, but equally look at the mistakes and areas for improvement for next year. 

It’s easy as a tillage farmer to look at your yields and say “I got a good yields this year so I must have made money” and this can often be followed by the thought “I will see how I did when the accountant looks at the accounts, and anyway the bank balance is not bad at the moment”. All seem reasonable but both of these statements can be misleading in terms of how well the farm did this year.

Firstly, this years accounts (purchases and sales) for 2021 wont be looked at by the accountant until 2022 (probably until October 2022), if your tax year runs from January to December. Your accounts accumulate all sales and purchases giving you an overall figure for each and the tax due is calculated from this starting point. The accountant generally wont calculate the margin of different crops never mind calculating the margin of each crop or field. This is a job for you and possibly in combination with your advisor!

Secondly looking at the bank balance alone can give some indication of your cash flow but wont give the true reflection of your profitability. The balance also misses out on costs like machinery and building depreciation which are significant on many farms. Where a farmer has a lot of owned machinery these machines are generally losing money each year as they are wearing out and in a sustainable business these machines will need to be replaced therefore the business needs to account for this expenditure i.e. depreciation.

Analysing your business ideally starts with a margin in each field or block of land with the same cropping patern. This will quickly identify a poor yielding or more importantly a poor margin from a field. IT can also identify a field that may have yielded reasonably well may leave a poor margin due to high spends on inputs such as fertilisers and herbicides. Combining these field based figures to compare both different blocks of land and crops across your farming business will give you further insight. 

Completing this analysis this year and every year will allow you to spot trends in crops which are doing well or badly on your farm. It also allow you to spot an error or success in a particular year which could be repeated or not in the coming year.  It’s often best to bring a second set of eyes to these figures to ensure all the trends are identified and this is where your agriculture advisor can help.

There are many programmes which will help you collate your purchases and sales from each field, some more complicated than others and a number of farmers either use the Teagasc eCrops (excel based) or their own excel based program. It doesn’t matter which one you use as long as you collate your figures.  But most importantly bring the fields together and analyse these crops.

The Teagasc e-Profit Monitor is an excellent analysis tool to help with comparing crops or indeed comparing the tillage enterprise as whole to a livestock enterprise on the farm.

To give you a few figures from a couple of years ago paints a picture as to the highs and lows but importantly you must remember the farmers completing these analysis are generally good farmers. Also remember some of the lows or high may be for a small area on the farm in that year.

Teagasc eProfit Monitor (example taken from 2017)

*excluding Direct payments

The differences between the highs and lows are significant but the most striking is the difference in net margin. Check out the full Crops eProfit Monitor results from 2016 to 2018 here.

How does your crop margins look for 2021?

Contact your local advisor or Teagasc advisor who is more than willing to help you get these figures together and analyse your results.