Cereal margins up on the back of global yield drop

Teagasc released its ‘Annual Review and Outlook 2019’ report this week.

2018 will no doubt be remembered as a year of low cereal yields, both globally and at home. A wet spring led to late sown crops and the summers drought seriously impacted on grain yields, but dry conditions allowed for a good harvest.

In its report, Teagasc estimates that winter wheat yield in 2018 was down by 14%, while spring barley yields dropped by an average of 30%.

As a result of the drop in global yields, grain prices went up. Straw prices also soared near home as the drought caused a lower straw yield and a shortage.

Also Read: 2018 harvest: Lowest average spring barley yield since 2002

Direct costs up overall

Most direct costs remained similar to 2017. However, fertiliser and fuel changed. Fertiliser prices increased by 3% on 2017 levels, while fuel prices were up 10% on 2017. This led to an overall increase in direct costs.

Teagasc also warned that predicted higher prices for fertiliser are a cause for concern in 2019.

Margins

The gross margin of the average spring barley crop was reduced by €35/ha, while the gross margin of a winter wheat crop was up €400/ha on 2017 levels.

Overall, the average net margin of a cereal enterprise was up €150/ha.

The graph below shows the actual net margin for 2017 (green) and the estimated net margin for 2018 (blue) for cereal enterprises on specialist tillage farms.