16 November 2001
Can lo-till help with cereals at 60/t?
Can we survive with cereals at 60 per tonne and will lo-till help?
I have just completed our annual analysis of client accounts for the 2000 harvest on 180,000 acres (73,000ha). I split the total into top 25% and bottom 25% in terms of management profit before rent and finance and before a return for the owner (therefore not the traditional net farm income).
Paid labour and machinery account for 38% of the cost of production for the top 25% of farmers, 41% for average earners and 43% for the bottom 25%. This excludes 55 drawings. They are also 70% of fixed costs excluding rent and finance.
Therefore the figures indicate that traditional farming cannot survive at 60 but farmers are relying on other income such as contracting, straw and hay sales and quota leasing, rental income etc to reduce the cost per tonne down to 45 (top 25%) and 59 (average).
The bottom group cannot survive. They are living off their capital and have been doing so since the last time they made any profit, which was in 1995.
I think we have to be careful with lo-till. It is all very well achieving production targets based on economic criteria, but survival means generating profit in the overall business.
It may sound great to reduce the crop establishment time from say 70 minutes per acre (173mins per ha) to 35 minutes per acre (86mins per ha), but the trick is to turn that time saved into cash.
We as an industry are in danger about getting excited about the production economics and forgetting about the second part – profit and cash in the bank.
Reducing a cultivation pass only reduces the variable cost such as the diesel and only labour if it is in overtime – the large cost of ownership of the machine is still in the business.
I think that lo-till can help reduce costs, but can only economically be introduced when a worker retires and is not replaced or when a machinery syndicate is formed to fund the new equipment.
Otherwise, overall savings are unlikely.