Tips to reduce risk in what's set to be a testing year for tillage farmers
The recent Teagasc Outlook Webinar 2023 makes for some interesting reading from a tillage farm point of view. While the average incomes achieved on tillage farms were good in 2022, the outlook for harvest 2023 is a little bit more concerning.
As we all know input prices have increased dramatically in 2022 with fertiliser prices increasing by 195% however the volumes used were down, green diesel cost on average was up by 80% while white diesel was up by 40%, electricity +44% and feed for livestock +28 % all contributed to a significant increase in overall costs to the sector. However, these were more than offset by grain price achieved on average in 2022, which resulted in an increase of 34% in gross margin over 2021. Winter wheat gross margin were up by €500/ha, spring barley was up by €450/ha while winter barley was up by €235/ha, these all led to a positive news story that 90% of farmers earned a positive margin.
However the figures also showed some significant variation between farmers with high margin farmers achieving €1,350/ha but low margin farms only achieving €95/ha with the average at €745/ha.
Unfortunately, there is a lot of uncertainty of grain prices in 2023 with many predicting a decrease due to many factors including a “hangover” effect form the prices of 2022. The likelihood is that prices at harvest in 2023 will be somewhat lower than what was paid last year, however the real sting in the tail is that input prices will be as high this year, overall, as they were in 2022, although there is likely to be some difference between the different items. Some farmers have already forward bought fertiliser at 2022 prices, we will not know for a few months yet whether or not this was a prudent decision.
All this uncertainty makes crop planning and budgeting more difficult as there are a number of influences outside your control. The best you can do is to try to control what is inside the farm gate. So over the next few weeks there are a couple of decisions that can be made to reduce the risk.
- Assess winter crops. While many crops have escaped the worst of the winter weather, some crops have bald patches in different areas so a decision will have to be made at some stage whether to stick with the crop or re-sow. This decision should be based on the potential return from the field given the cost of inputs. In my experience, where there are only a few bare patches in a field, it rarely pays to re-sow crops, especially if growers reduce input costs accordingly. If you have more than 100 plants/square metre (150 for two-row barley) and they are evenly spaced, then stick with them.
- Crop choice will help to reduce risk. The new Teagasc Costs and Returns booklet, which will be published later in January, clearly shows that the new protein payment scheme will have a very positive effect on the margins that can be achieved by beans or peas, so if your land or rotation is suitable then these crops are worth consideration.
- Similar to 2022, fertiliser costs are going to be one of, if not, the largest costs on tillage crops and with yields in some winter crop already compromised then the total amount of fertilizer applied to these crops needs to be carefully planned. Last year there was plenty of advice to apply nitrogen up to the optimum Break Even Ratio (BER), this is the point above which, the response in yield terms is not economic. This BER needs to be re-assessed for many crop again this year, given that both the yield potential this year and harvest price are likely to be lower than 2022.
- Again similar to other seasons where we have had poor weather conditions at drilling time in the autumn e.g. 2019, some fields that were planned to be drilled in winter wheat didn’t get planted. Some of these fields will be sown in the spring with the winter wheat seed. Again, in my experience unless conditions are ideal in late January early February and we get a good growing season these crops struggle to pay.
- The under new nitrates regulations any tillage fields that don’t have up to date soil tests are assumed as index 4 for phosphorus (P) so carry out tests as soon as possible, especially if you intend to import organic manures to reduce the amount of chemical fertiliser. Don’t forget that the new Fertiliser Register will come into existence at some stage this year, so it is vital to have test results for all fields so as to properly plan your fertiliser allowances.
- Make sure you are aware of all the new rules and regulations that are coming into place with the new CAP schemes. For the most part tillage farmers will have lower payments due to convergence but there are opportunities in the new protein payment scheme, as mentioned earlier, which has a minimum payment of €350/ha to claw back some of the losses. The Straw Incorporation Measure is also available again in 2023 and is a guaranteed income for your straw.
Many exerts commented last year, that 2023 was always going to be a tricky year to navigate for tillage farmers than 2022, but with a bit of planning you may be able to reduce those risks to your farm.