Margins rising steadily for Green Acres farmers

Two years into the Teagasc Green Acres calf to Beef programme , Gordon Peppard assesses the progress to date

HAVING completed two years in the Teagasc Green Acres Calf to Beef programme, it’s a good time to take a detailed look at the performance of the 10 participating farmers last year. The progress made from the beginning of the programme can also be seen in the adjoining tables.Table 1 outlines the average physical and financial performance across the participating farms for 2016.

What is very noticeable from the table of results is the huge variations across the farms. There are a number of reasons for this.

Many of the farms are still building stocking rates and improving efficiencies, while others are at or close to their planned levels.

There are also a lot of different management styles between farms in a number of the key areas such as calf rearing, animal health, grassland management, soil fertility and financial/farm planning.

Table 2, highlights the main performance indicators from the beginning of the programme to the present day.

GROSS OUTPUT

Gross output is the key driver of profitability on the farms. It is the amount and value of beef sold and is a product of the stocking rate, performance of each animal and price received per kilo of beef. Two of these three are within the control of the farmer and need to be maximised at farmer level.

The average gross margin across the 10 farmers is €2,101/ ha, with a huge range from €1,381 to €2,866/ha.

The figure of €2,866/ha clearly shows what is achievable at farm level. Output has been steadily increasing from the beginning of the programme.

VARIABLE COSTS

These are the main costs associated with producing an animal for sale. The average variable costs across all the farms is €1,234/ha, with a range of €454 to €1,719. Calf to beef systems are high cost systems and high output is required to carry these costs. The four highest variable costs on the Teagasc Green Acres farms are feed, fertiliser, vets’ fees and contractor charges.

Feed typically makes up half of the variable costs.

As can be seen from the table, variable costs increase as output increases but at a lower level. What is interesting is that the variable costs as a percentage of output have decreased from 65pc to 59pc over the course of the programme.

This shows that it now costs 6pc less to produce the same amount as before.

GROSS MARGIN

Gross output minus the variable costs gives you the gross margin. This is the amount of money that is left to pay the fixed costs, tax, new farm development and living expenses.

The average fixed costs on the Green Acres farms is €559/ ha, which is very typical of non-breeding dry stock farms which generally range from €450/ha to €650/ha.

The gross margin has increased steadily over the last two years, mainly due to the increase in beef output on the farms.

Fixed costs rose slightly in 2015 to reflect some on farm developments, particularly in the areas of paddock development on farms. In 2016 this figure has stabilised again at €559/ha.

NET MARGIN

The aim over the three years of the Teagasc Green Acres Calf to Beef programme is to have a positive net margin of at least €500/ha excluding all farm subsidies and schemes. Having started with an average net margin of -€40/ ha in 2014 has now moved to +€308/ha in 2016. This shows that the target is on track to be achieved.

KEY DRIVERS OF PROFIT

The key to achieving a strong net margin on any farm is to have a good output. There are three main drivers of profit on a farm: ÷Performance per livestock unit ÷Stocking rate ÷Beef/Sale Price

The first two are factors that can be controlled inside the farm gate by the farmer.

They are management issues and if the farmer can get these right he/she can achieve a good margin.

Unfortunately, the farmer has little or no influence over the final sale price of animals, unless they have a pre-arranged contract price agreed with their processor.

However, as can be seen from the adjoining table 3 and 4, performance (output) per livestock and stocking rate have been increasing nicely since the start of the programme.