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Crop returns increases for many Tillage farmers in 2018

These results from the e-Profit Monitor (e-PM) 2018 tells an overall positive story for tillage farmers. Despite the drought, and the effect it had on spring crops in particular, most farms returned good overall financial returns. Higher grain and straw returns in 2018 were sufficient to make up for lower yields.

Crop returns increases for many Tillage farmers in 2018

The average return for farms was €286 per hectare or 83% higher in 2018 compared to 2017.  For 2019, preliminary figures suggest a lower financial return (on average approx. 17% lower), despite higher yield in 2019.  This reflects the major effect of reduced grain and straw price can have on the returns for farmers.

Michal Hennessy, Head of Crops KT who analysed the figures said “The 2018 average financial returns disguise the top reforming and the bottom preforming farms.  Farmers who were more dependent on spring crops, especially in the south east, were worst affected by the drought and consequently had lower financial returns compared to farms with a good mix of winter and spring cereals”

Teagasc 2018 e-Profit Monitor results were highly influenced by a very unusual weather year with late spring sowing and a severe drought in the middle of the growing season. Grassland farmers were also badly affected with shortages of winter feed stuffs due to the cold and wet spring.  Poor grass growth during May and June resulted in lower than normal silage harvests.  As a consequence, prices for grain and straw increased on the back of a very high local demand and an increased world market price.

The overall trend in 2018 is a marked increase in income compared to 2017.  The ePM average tillage Net Margin of farmers analysed is €629/ha which compares to €343/ha in 2017.    Farms categorised as predominately spring cereals gave the lowest returns at €358/ha with farms categorised as winter and spring cereals returning an income of €646/ha.  The winter and spring cereal category of farm tends to give the highest returns (of the predominately cereal farms) reflecting a more diverse rotation on their farms.  These rotations allow increased scope for higher yields following a break crop and are more resilient during unusual weather years.   

The 2018 report tracked the incomes of a matched sample of 187 farms in 2016, 2017 and 2018.  These farms showed a marked improvement in Net Margin from €132/ha in 2016 to €572/ha in 2018.  These farms were categorised by Net Margin into three income brackets; top, middle and bottom groups.  In 2018 the top 1/3 of growers achieved an income of €950/ha compared to the bottom 1/3 who recorded a Net Margin loss of -€107/ha.   The figures point to a number of reasons for the differences.  Size does not appear to be a major driver with a similar average area farmed by both groups of close to 71 hectares.  However the bottom preforming group incurred over 90% more fixed costs (depreciation, interest, light, heat) etc., compared to the top group.  Significantly the bottom preforming group had a much higher proportion of land rented, at 63% of the entire area, compared to 26% of the area by the top preforming group.

Average figures can mask some important trends.  A sample of matched farms (187 farms) were divided into size categories of 50 hectares of tillage area farmed (range 0-50 hectares to 201+ hectares).  There were substantially less farmers in the larger size farmed brackets of farms reflecting the reality on the ground.  Farms in the size range of 151-200 hectares (average area farmed 175 hectares), made more total farm net margin from their tillage enterprise of €84,800 compared to the larger farms, 201+ hectares (average farmed 336 hectares),who made a total of €80,100.   The larger farms had significantly more rented land (72% on average) compared to the 151-200ha farmers (39% on average).

The figures show the value of farmers completing a financial review each year to spot trends on their farm so that prudent decisions can be made each year.  Farmers can contact their local tillage advisor to get their farm analysed through the eProfit Monitor.

The full eProfit Analysis of Tillage Farms 2018 is available on the Teagasc website at https://www.teagasc.ie/publications/2019/eprofit-monitor-analysis---tillage-farms-2018.php