This year’s extreme weather could lead to smarter approaches on farm fodder requirements, writes
THEY say that it is an ill wind that does not blow somebody some good. Well, the past 12 months have certainly had their share of ill winds but maybe, just maybe, those ill winds have blown some good that might extend long into the future.
I am thinking of how the demand for fodder and forage has resulted in massively increased straw prices, lifting cereal margins from virtually zero to a place they haven’t been for quite some time.
The purchase of immature cereal crops as whole crop has emerged as a possible outlet for the tillage farmer, as has the growing of grass, maize and fodder beet for sale.
Overall, these developments may not be just short-term responses to rare weather conditions, but may set a pattern for the future whereby the more intensive farm operators contract out part of their winter fodder requirements.
This can have the effect of killing a number of birds with the one stone, such as an assured adequate winter fodder supply along with the creation of an enlarged and possibly better grazing platform.
Desperate situations can
CONTRACT GROWING
Last April I viewed with interest the launch of Teagasc’s Contract Forage Agreement Template.
It was as if they had a premonition of what lay ahead.
Its launch was proven to be timely as we were just nearing the end of a six-month period of non-stop rain, hurricane conditions and snow the like of which we had not seen for decades — conditions that had wiped out all reserves of fodder in the country.
Little did Teagasc or anybody else know that we were on the cusp of the worst drought in most people’s memories, and instead of planning to re- build fodder reserves, the focus quickly changed to addressing a serious fodder shortage.
Acquiring replacement fodder will be the main focus for the next six months but planning for the future must also be part of this process.
We need to do everything we can to prevent a recurrence of the scary level of uncertainty that many farmers are experiencing as we face into the winter.
CONTRACT BENEFITS
From the dairy or livestock producer’s perspective, entering into a crop supply contract virtually ensures supply and price certainty and is one less worry for the farmer to contend with.
It may also enable him/her to embark on a whole farm reseeding programme that may alleviate fodder shortages in the future while also having a very positive effect on production.
The benefit for the tillage farmer is that it offers a guaranteed outlet for his crop with price certainty.
This may make costly crops such as maize or fodder beet an attractive alternative to cereals, particularly where initial and interim payments are written into the contract.
TYPES OF CONTRACTS
There are two types of contract that could be considered.
The Teagasc template is essentially a contract crop production agreement based on a minimum supply undertaking where the contract is based on a specified acreage in a specified location and a specific variety.
While the template suggests price per tonne as being a basis for payment, it could also be based on a price-per-acre figure.
The alternative type of contract is simply a supply contract where the grower enters into a written agreement with the purchaser to supply a fixed tonnage at a fixed price referenced to dry-matter analysis by a specified date.
Such an agreement may suit the larger grower, who will have the comfort of knowing he has a guaranteed outlet for his produce at a guaranteed price.
It will also suit the purchaser as it lessens pressure on his grazing platform and assures him that a proportion of his winter fodder needs are secured.
CONTRACT CONDITIONS
A contract cropping or supply agreement will set down a number of undertakings and the conditions attached.
I have set out a summary of the main constituents of a typical agreement in Table 1.
The agreement, like any collaborative arrangement, must benefit both grower and pur- Do chaser and be built on honesty, trust and good open communication.
It is vital that both parties honour their commitment to the agreement in order for it to be successful and sustainable into the future.
That said, any such agreement is a legally binding contract and defaulting will have its consequences.
A copy of the agreement can be found at www.teagasc.ie, but intending farmers should seek guidance from an agricultural specialist who is experienced in this area.
Martin O’Sullivan
Martin O’Sullivan is the author of the ACA Farmers Handbook. He is a partner in O’Sullivan Malone and Company, accountants and registered auditors; www.som.ie