Tillage Update - 7th October 2021
Lower margins for 2022 with beans competing strongly with cereal crops is how Michael Hennessy, Head of Teagasc Crop Knowledge Transfer Department sums up this week's tillage update. He goes on to talk about fertiliser prices, grain price, expected yields in 2022 and factors to consider in budgeting
Similar to everyone else farmers are listening with a sense of dread to the increases in cost coming down the road. It’s clear the dramatic impact these costs will have on fertiliser prices for the rest of the year and well into next year.
Over the past six months fertiliser prices have continued to increase at alarming rates. Expectations of a doubling in the cost of nitrogen are being widely talked about for next year. The increases are driven by the continued rise in the cost of natural gas, which is a key input in the production of nitrogen fertilisers. Costs of other major elements such as Phosphorus (P) and potassium (K) have doubled in the past few months with these increases are expected to feed into costs for 2022. As fertilisers are one of the largest inputs to tillage crops these huge cost increases will severely affect profit margins in 2022.
Grain prices are near record highs compared to the past ten years but will these last until next year? Can tillage farmers achieve the same yields in 2022 as 2021? All of these factors must be considered when budgeting for next year.
Projected Margins for 2022
Teagasc have calculated the margins of winter wheat and spring barley to be more than halved next year compared to 2021. Where as crops which require less inputs such as beans will reduce by 25% and it makes beans a very attractive crops compared to cereal crops.
The 2021 margins are calculated using 2021 output and input prices with estimated national average yields. See the Teagasc Crops Costs and Returns 2021 for detailed input costs here at Crop Costs and Returns (PDF)
The 2022 margins are based on average yields, Sept 2022 forward grain prices (which is €30/t drop compared to 2021), and an increase in fertiliser prices of 100% compared to 2021 (with CAN @€450/t and 10.10.20 @€550/t).
Its difficult to know where cost of fertilisers will end up but quotes today (if you can get the fertiliser) will be in the order of €460 for CAN, €550 for 10.10.20 and €450 for O’s. These prices are changing daily so these may not be correct in your region.
The impacts of these cost increases do not take into account the price increases of diesel/oil and spare parts which have all risen in the past six months.
Land rental costs
Land rental is another very significant cost which needs to be factored in when calculating margins. Landowners have seen the returns from this year and expectations may be higher for rental in 2022. It may be an expectation but profitability of the exercise has to come into the frame also. Where rental land is run down and has a poor lime status with low soil levels of Phosphate and Potash then the required fertiliser to grow a crop will add up quickly and only a modest yield can be expected from this type of field. Factoring in land rental costs (unless land rental is very reasonable), a modest yield and much higher fertiliser costs, a loss making scenario is quite likely.
Analyse your own situation
In order to get accurate figures each individual farmer must complete an analysis for their own situation. We are urging Tillage farmers to complete a financial analysis of their business in 2021 and then project the effects of the increased costs on margins in 2022 for their farm. Teagasc advisors are available to help farmers with this analysis with tools such as The Teagasc eProfit Monitor (€PM) and other calculators. Contact your advisor sooner rather than later especially before committing to land rental or other major commitments for 2022.
Click on the image (right) to download the ePM Input Sheet
Planting certified seed is a costly exercise but farmers can often forget about the effort which goes into getting the seed to their yard with a high quality standard. In the Tillage Edge podcast Donal Fitzgerald, Goldcrop chats about the process of assembling seed and outlines the important checks in place to ensure quality. Liam Day, a Cork seed producer, also joined the podcast and talked about his experiences as a seed producer for many years.
Listen below to this week's Tillage Edge Podcast to learn more about certified seed
For more episodes and information from the Tillage Edge podcast go to: www.teagasc.ie/thetillageedgepodcast
Contact your local advisory office here Advisory Regions