Will cereal producers break even this year?
After a relatively good start, the majority of combines have ceased working in recent days – at least for the short-term.
Heavy rain and high humidity have seen tillage farmers struggle to save their crops; many are hoping that conditions will improve to allow them to cut the remainder of this year’s spring barley.
As it stands, not even half of this year’s spring barley crop has been saved and, unless things improve, farmers are facing the real prospective of seeing reduced yields due to straw breakdown and heads falling to the ground.
Early spring barley yields have been quite variable and yields of between 2.5t/ac and 3t/ac have been recorded. Meanwhile, winter wheat yields of 4-4.5t/ac appear to be the norm and, generally speaking, winter barley has yielded 3.5-3.8t/ac.
Although merchants have been slow to offer concrete cereal prices, €140/t is currently being paid for green barley and €150/t is available for green wheat in some locations.
Given the above mentioned yields and prices, it’s worth questioning will commodity cereal producers break even this year?
Costs and returns
Using the 2017 Teagasc Crops Margins Calculator to generate returns, we see that crops at the lower end of the yield scale will generate small gross margins and those grown on rented ground will actually result in a loss this year.
The Teagasc calculator incorporates the seed, fertiliser, spray and hired machinery costs required to grow various crops under Irish conditions.
Looking at spring barley, the variable costs associated with growing the crop stand at €376/ac and, at a price of €140/t, a yield of 2.69t/ac is required to break even.
At the lower end of the yield scale (2.5t/ac), farmers will generate a gross margin of €14/ac; this jumps to €44/ac for 3t/ac crops.
However, these figures do not include land rental. If such a charge was factored into the equation, it would see farmers make a gross loss from growing spring barley this year.
The gross margins generated from winter barley are a little bit better than spring barley and this is mainly due to the higher yields associated with the former.
At a yield of 3.5t/ac, spring barley is estimated to leave a gross margin of €69/ac in 2017; this rises to €71/ac for a 3.8t/ac crop.
When compared to both spring barley and winter barley cereal crops, the estimated returns generated from winter wheat this year look particularly favourable.
At a green wheat price of €150/t, a 4t/ac winter wheat crop is expected to leave a gross margin of €139/ac. In addition, a 4.5t/ac crop would generate a gross margin of €174/ac when grown on owned land and all of the machinery work was carried out by a contractor.