BETTER farm: phase three highs and lows

Last week, we revealed the Teagasc/Irish Farmers Journal BETTER farm e-Profit Monitor results for 2019. These are the final results of the BETTER farm beef challenge, after the three-year programme came to a close on 31 January. With three years’ worth of financial data, as well as the baseline figures in 2016. Here we pick out some highs and lows from the third phase of the programme.

As we saw last week, the average gross margin for the 23 farms came in at €670/ha (Figure 1). As would be expected, this was the highest result in the three years of the programme but unfortunately it fell considerably short of the €1,000/ha gross margin target.

From the outset in 2016, the group’s average gross margin was moderate at €514/ha. The goal was essentially to double this. And after year one, the signs were looking positive with the group rising to €643/ha – a 25% jump. If the group could record similar 25% increases in both 2018 and 2019, they would have hit their €1,000 target. But this wasn’t the case. 2017’s progress was short-lived as torrid weather in 2018 caused havoc. The average gross margin fell by 11% to €570/ha. While the initial programme target was almost an impossible feat in 2019, it was pleasing to see the group finish on a high.

Improving performance and production is a key driver of farm profitability. Stocking rate and output (kg of liveweight per hectare) are two good measures.

Looking first to Figure 2, stocking rate has improved significantly. From a baseline of 1.7LU/ha in 2016, the group average is currently at 2.15LU/ha. With the average farm size coming in at 54ha, the rise in stocking rate is the equivalent to an extra 25 cows, 60 weanlings or 35 store cattle. The key to driving stocking rate has been grass. A combination of grazing infrastructure, grass measuring, nutrient planning and reseeding has paved the way for increased grass production and longer grazing seasons. And more stock can now be carried on the same amount of ground.

Carrying more stock then corresponds to pushing more kilos of beef out the gate. In 2016, output was at 572kg of liveweight per hectare. A large gain – 26% – came immediately in year one. As was flagged in last week’s analysis, the effects of the poor weather in 2018 weren’t really felt until 2019, with output climbing by a further 17% in 2018.

Factors such as calf mortality and loss of thrive in 2018 bubbled to the surface in 2019 and thus, output was stagnant.

As output climbed, costs naturally followed suit. However, as can be seen in Figure 4, they didn’t rise proportionally. As output climbed by 26% in year one, variable costs rose by 19%.

That’s still quite high, but reflects the added investment farmers made in year one. Once again, however, the problems hit in 2018. As output climbed by a modest 17% in 2018, costs ran out of control and climbed by 39%. As can be seen from Figure 5, feed costs soared by 50% and fertiliser and lime by 27% – but as a result of the weather, this was unavoidable. So in 2018, despite the aforementioned rise in output, the costs completely dominated the farm accounts. For 2019 – a considerably more favourable year weather wise – the freeze in output was offset by a 15% drop in costs.

Figure 2 also looks at net profit, both before and after direct payments and premiums are included. Without doubt, the technologies adopted as part of the BETTER farm programme have helped the 23 farms’ overall profitability to move in the right direction, albeit with a well-documented bump in the road in 2018. These farms started the programme losing money. The 2016 net profit was -€54ha. For 2019, this figure stands at €53/ha. But this does not include direct payments or premiums.

When we add on direct payments and premiums (including BEAM and BEEP) in 2019, the group is making an average net profit of €406/ha. On a per-cow basis, it works out at €399/cow, €346/cow of which is made up of direct payments and premiums. Interestingly, Figure 1 shows a significantly larger difference in net profit including payments in 2019 compared to 2016, 2017 and 2018. When calculated out, the average difference for 2016 to 2018 is €180/ha. In 2019, the difference is €353/ha. That’s over €170/ha in extra payments which can largely be attributed to the BEAM and BEEP schemes. All of the farmers in the BETTER farm programme applied for these schemes and they have made a significant difference to overall profitability. While all suckler farmers in Ireland rightfully demand a fair price for their produce, it doesn’t make sense to turn our backs on support payments when they are offered. The market is unlikely to ever return a price capable of making up the €350-odd per hectare in supports that we have seen on the BETTER farms in 2019.