Tullamore Farm 2020 financial analysis

Making ends meet on any drystock farm is difficult and Tullamore Farm is no different. Covering all farm costs including paying full land rent and full labour costs is difficult in a beef farming system.

When you throw in the fact that the farm has no Basic Payment Scheme (BPS) funding, it’s next to impossible to return a positive net margin. The reality is that at a beef price of €3.70/kg, there isn’t a hope of coming close to covering a land and labour charge on a beef farm.

The current farm system is 90 suckler cows with bulls finished at under 16 months and heifers sold as in-calf heifers at 19 to 20 months.

There are currently 230 ewes on the farm with plans to increase ewe numbers higher in the coming years.

The farm receives no BPS. However, it does receive animal-related support payments like the Area of Natural Constraints Scheme (ANC), Beef Environmental and Efficiency Payment Scheme-Sucklers (BEEP-S), Beef Data and Genomics Programme (BDGP), the Beef Exceptional Aid Measure (BEAM) in 2020 and the Sheep Welfare Scheme.

These payments amounted to €22,418 to the farm in 2020, with the cattle enterprise receiving supports of €19,447, while the sheep enterprise received supports of €2471.

The farm size is 80ha and it is currently stocked at 2.25 LU/ha. The farm is producing 870kg of output per hectare and the current figure for liveweight output per LU is 386kg.

Sales output

Total sales output for 2020 was €158,886 or €1,986/ha before any supports are added. When supports are included, this figure increases to €181,304 or €2,266/ha.

An interesting exercise we completed was looking at the effect of beef price and how recent increases would affect Tullamore Farm.

Average price for bulls killed in 2020 was €3.71/kg.

If we take today’s price of €4.40/kg for an in-spec quality assured U= bull, that means an extra €12,032 or €150/ha for the 2021 bulls at a similar weight and grade to last year.

Total variable costs came to €92,972 or €1,162/ha. This accounted for 51% of the total output figure. Concentrates accounted for the largest proportion of variable costs, coming in at €29,556 or 32% of total variable costs.

Fertiliser costs came in at €14,172, or 15%, with vet costs coming in at €16,372 or 18% of total variable costs. Contractor costs came in at €17,241, making up 19% of total variable costs.

The farm owns a small amount of machinery, with a lot of the machinery work on the farm being completed by contractors including fertiliser spreading and most slurry spreading.

When variable costs are taken off the gross output figure, this leaves a gross margin of €88,332 or €1,104/ha.

The farm is unique in that a full land charge and full labour charge is included in the analysis. The land charge for 2020 came to €29,400 with the labour bill coming to €55,570.

Given the investment that was made in infrastructure, depreciation costs are also high at €20,752. This leaves the farm making a loss of €69,923 before Basic Payment.

Table 3 outlines a scenario where the land is owned, with own labour, low borrowings and an average BPS payment.

This means a total of €70,429 would be available in this scenario to cover return on labour, further investment or profit.

The 2020 labour bill came to €55,970. This includes full labour costs including revenue and PRSI contributions. The farm has one full-time labour unit, Shaun Diver, the farm manager.

Relief labour is employed during certain times of the year and also at weekends when Shaun is not on the farm. This relief labour is also brought in when jobs like weighing, scanning, TB testing, etc, are taking place on the farm.

There is a big spike in labour requirements around lambing and calving. The farm probably has a high labour cost due to the nature of the project. There is a lot of extra recording and weighing completed as part of the project.

The farm also hasn’t got the luxury of family labour at weekends or evenings, so all labour has to be accounted for and paid for.

On the other hand, it’s important a figure for labour is included in any analysis. This is something beef farmers, in particular, are not good at doing.

Whenever we have visitors to the farm, it’s always one of the first questions we get – what is more profitable, the beef system or the sheep system? Table 2 outlines the comparison.

Because we graze the sheep and cattle together, it’s a little hard to split up the costs perfectly.

Concentrates and veterinary are split up on an actual basis. For some of the costs, we have used a 75% cattle and 25% split based on the makeup of livestock units on the farm.

No slurry and only being housed for two months means they have a lower contractor cost.

Output figures

The output figures for both systems are similar, with the cattle system delivering €2,037/ha of output and the sheep system coming in at €1,834/ha.

When supports are added, these figures change to €2,369/ha for the cattle system and €1,957/ha for the sheep.

Variable costs

Variable costs for the cattle system were €1,232/ha, while the sheep system variable costs came in at €952/ha. This left a gross margin figure of €1,139/ha on the cattle side and a €1,005/ha on the sheep side.

One point to note is the concentrate bill on the sheep side. The farm encountered drought conditions in May/June 2020 and had to wean ewes early.

This meant a lot more concentrates were fed to lambs in 2020 than what was budgeted for.

When supports are excluded from the analysis, the sheep system is performing better with a gross margin of €882/ha compared with a gross margin without supports of €807/ha on the cattle side.

There are no easy answers or quick fixes to the systems being employed on Tullamore Farm.

We could push output a little more but beef and sheep prices will have a huge influence here. I think it’s on the costs side where the largest improvements can be made.

Concentrate cost is one area where we need improvement.

We are currently looking at incorporating some red clover silage into the diet of the young bulls to reduce the concentrate bill. This has the potential to save €3,000 to €4,000 annually.

Sheep concentrate costs will also hopefully be lower in 2021.

Baling silage off paddocks is expensive and getting the balance between first-cut silage area and grazing demand is important in reducing contractor charges.

Fertiliser costs won’t change a lot except on price as we are still trying to build P and K indices.

An application is being made to join the REAP scheme.

The Tullamore Farm analysis demonstrates the importance of the BPS to any mixed farming system and the critical role that targeted supports also play in keeping drystock farms viable.

We talk to Dr Paul Crosson from Teagasc, Grange, about modelling some options or Tullamore Farm including taking a look at what the financial performance would be like if the farm system changed to producing weanlings, finishing steer beef or moved to using sexed female semen. We will also look at some of the physical and financial targets for the farm over the next few years.