A Good Year In 2021
2021 was a good year overall for tillage farmers; prices were up, weather across key times such as planting, growing season and harvesting was favourable. This resulted in solid yields across all the key crops and a strong profit margin on crops. While price inflation in fertiliser occurred in late 2021, it didn’t affect the 2021 crops’ profit margins. The real effect of the cost of producing a crop will be felt in the 2022 season.
Ukraine Effect
At present, there is huge uncertainty over whether European demand for animal feed can be met, with more than 20% of maize globally coming directly from Russia and Ukraine. The current war is estimated to create an 8 million tonne maize shortage, and six million hectares of wheat in Ukraine will not be able to be harvested. In response, Ireland is now actively promoting the planting of tillage crops in 2022.
Regardless of what measures Ireland or the EU put in place, tillage crop prices are expected to rise further over the next few months. This increase will have a knock-on effect across all parts of the food economy. We already see the impact in the pig sector, with the cost of feed per pig higher than the price paid for the pig.
Department Of Agri
Like all farming sectors, a “good CAP” is a crucial driver of profitability in tillage. The Department of Agriculture has confirmed that the protein payment is available in 2022, and they have also re-launched the straw incorporation for the coming year. In response to a possible Ireland and EU shortage, the Department of Agri has launched a scheme to promote tillage crops. A €400 a hectare payment on land previously not planted is being offered. The aim is to have an extra 25,000ha of tillage crops planted in 2022. This scheme has arrived late for the sowing season (mid-March), and it will be interesting to see the up-take in this scheme as a result.
Outlook 2022 and the future
Looking to the future, the area sown for winter crops has returned to normal levels. Forward green prices for harvest 2022 are in access of €300 for barley and wheat. For 2022, the issue isn’t going to be how much will you get paid per tonne as there is every indication it will be very strong. The main concern for 2022 will be the cost to produce a crop. The rapidly increasing cost of fertiliser through the end of 2021 and into 2022 has hit tillage farmers hard. At the time of writing, Urea quotes reached over €1,100 a tonne. Fuel is another concern as green diesel, like fertiliser, hits record prices, leaving contractors struggling to quote due to fuel price uncertainty. Time will tell over 2022 how raising costs and weather/ price will affect profits margins by year-end.