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More than 3,400 farmers from across the country attended the open day on the Farmers Journal suckler and sheep demonstration farm in Tullamore on Tuesday.
The mood was generally positive, no doubt a reflection of the strong trade for beef and lamb, and live cattle.
Listen to "Tullamore Farm: Reaction from Ciaran Lenehan" on Spreaker.
Factory price
Factory price has outperformed even the most optimistic of forecasts from the start of the year, with the base price for beef continuing to sit well above the benchmark €4.00/kg.
A combination of improved demand for manufacturing beef across Europe and in third country markets for several months now, with a steady steak and hindquarter beef market, has meant an almost ideal carcase balance.
There is no doubt that factories are also keeping a close eye on the live export trade. While numbers are relatively small, the shipment of 2,000 forward bulls to Turkey this week will certainly not go unnoticed.
Since taking up their respective posts, Minister for Agriculture Michael Creed and IFA president Joe Healy have made opening up live exports and improving international market access a top priority. Their focus is certainly yielding dividends.
Welcome change
The positivity in the market is a welcome change for an industry that is generally associated with bad prices and lack of margin. We shouldn’t shy away from saying that our beef sector can be profitable.
It won’t generate the same return on a per-hectare basis as dairying, but this ignores issues around land fragmentation, land type, small-scale operations and the part-time nature of suckler, beef and sheep farmers.
A farmer with a large suitable land block would be more profitable in dairying than beef, but to how many existing suckler and sheep farms does this apply?
this would show the potential to achieve a net profit margin of between €800 and €1,000/ha
Adam Woods calculates that at a beef price of €4.20/kg for suckler-bred stock and a lamb price of €4.50/kg, Tullamore Farm will create a surplus of €51/ha when stocked to capacity.
It is a modest sum but one that includes a fixed cost charge of €500/ha plus a full labour charge of €616/ha, an interest charge of €301/ha (100% of the money to fund the enterprise is borrowed) and a land rental charge of €346/ha (100% of the farm is rented).
In this context, the more relevant figure is the fact the projected gross margin for the farm will be €1,816/ha.
On a typical farm system where there is a mix between rented and owned land, and more modest levels of debt, this would show the potential to achieve a net profit margin of between €800 and €1,000/ha, excluding labour but also excluding any basic payment.
There is no doubt that this is at the top end of the range. Key to Tullamore Farm achieving this is running at a stocking rate of 2.7LU/ha and producing 14t grass DM/ha.
Of course, it would be naive to suggest that all suckler and sheep farms could grow enough grass to operate at this stocking rate. While the 14t figure is a stretched target for Tullamore Farm, equally, given the range of land type, growing 8t/ha could be a real achievement on some suckler and sheep farms.
Realistic targets
So, what is a realistic profit margin for efficient suckler and sheep enterprises? If the targets set for Tullamore Farm are achieved, then we have a road map for €1,000/ha net profit for an efficient, high-output system at current market prices.
While the efficiency message is the same for those on more marginal land, the lower stocking rate is going to reduce profit-generating capacity – by what percentage will largely depend on the ability of the farm to grow and utilise grass.
The real challenge for suckler and sheep farms is to drive output by focusing on growing and utilising more grass, and for this grass to be grazed by a productive cow/ewe.
These are the areas over which we have control. We shouldn’t get hung up on the starting position and end targets. Instead, simply ask: how can we help farmers increase output by utilising an extra 2t of grass?
If we look at the Tullamore example, all of the investment has been aligned to achieving this through improvements in soil fertility, roadways, fencing and installing a water system. With the exceptions of sheep fencing, none of this work was eligible for grant aid.
In this current CAP reform and the potential for increased flexibility as to how each member state invests in their respective sectors, there is the potential to look at what direction we want to drive our suckler and sheep sectors.
This starts by creating a vision for the sector and then investing through CAP in the areas that will deliver this vision.
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