What lies ahead for tillage margins?
As part of the Teagasc Outlook 2025, Economic Prospects for Agriculture, Dr. Fiona Thorne of the Teagasc Agricultural Economics and Farm Surveys Department provided a forecast for 2025 tillage margins.
The forecast for net margins on tillage farms in 2025 is for an increase in margins, owing to a return to trend yields, a slight increase in harvest prices and limited movement in direct costs.
The overall picture for cereal crops is that in general average net margins should be higher than those achieved in 2024, but remain significantly lower than the high margins received in 2022. The upward movement in margins forecast for 2025 will mean that cereal based net margins will be positive on approximately 70% of specialist tillage farms in 2025.
Direct costs
Direct costs are forecast to be similar in 2025 relative to 2024, due to the forecast for little movement in fertiliser costs, seed costs and fuel. Some direct costs of production are forecast to increase by small amounts in 2025 - crop protection by 4% and all other direct inputs by 1%.
Whilst some direct cost items may increase in 2025, the general trend is for little movement in costs compared to 2024, resulting in total direct costs in 2025 which should be similar to 2024 levels, on a per hectare basis.
Output value and gross margin
Furthermore, output value on average is forecast to be higher than 2024 levels, due to the forecast increase in cereal yields when trend yields are assumed, coupled with a slight increase in cereal prices. Figure 1 presents the actual gross margin for each of the main cereal crops in 2023, and the respective estimates and forecasts for 2024 and 2025.
Figure 1: Actual 2023, Estimate 2024 and Forecast 2025, for Cereal Crop Gross Margins
Source: Teagasc, National Farm Survey Data and Author’s estimates for 2024 & forecast for 2025.
The net effect of input price, output price and volume movements is on average, forecast to have a positive effect on gross margins for 2025. For example, gross margins for winter wheat and winter barley are forecast to increase by approximately €320 and €200 per hectare respectively, while gross margins for spring barley are forecast to increase by approximately €85 per hectare. The overall story for the 2025 forecast is for an increase in gross margins as a result of achievement of trend yields, an increase in cereal prices and little change in direct costs.
Forecast net margins
The forecast net margins for 2025, are presented for the cereal enterprise on specialist tillage farms, as well as the population of such farms disaggregated into one-third groupings based on margins obtained. Figure 2 shows that the forecast net margins for the cereal enterprise in 2025 are higher than in 2024 and 2023.
The upward movement in margins (compared to 2024) is associated with the yield and price forecasts for 2025 and a decrease in some key direct cost items. Overall, the net margin for the average cereal enterprise in 2025 is forecast to increase by about €200 per hectare relative to 2024.
Figure 2: Net Margin Actual 2022, Estimate 2023 and Forecast 2024 for the Cereal Enterprise on Specialist Tillage Farms
Source: Teagasc, National Farm Survey Data and Author’s estimates for 2024 & forecast for 2025.
The above was adapted for use on Teagasc Daily from Dr Thorne’s paper titled: ‘Review of Tillage Farming in 2024 and Outlook for 2025’ as published in the Teagasc Outlook 2025, Economic Prospects for Agriculture.
Tillage Edge podcast
On a recent episode of the Tillage Edge podcast, Teagasc Economist, Dr. Fiona Thorne discusses the key findings from the recent Teagasc Outlook 2025 conference.
Listen in below: