Profitability of Organic Farming Systems
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Profitability of Organic Farming Systems
Mr. James McDonnell, Teagasc
Teagasc National Organic Conference 2009
Outline
Conventional v Organic Sources of financial information
NFS EPM Teagasc Budgets
Beef production Rearing systems Non breeding/ other systems
Dairy production Tillage production
Conventional v OrganicWhy?
Government 5% targetSource of new organic participantsOrganic farming systems
Are they difficult to manage?Do they have lower cost of production?Are they more profitable?
How profitable are conventional systems?
Why is Profit important?
The business needs profit to…Pay the manager/ investor ( i.e. YOU)Reinvest in new business assets so that the
business will grow and generate more profit (building up cash is also reinvesting)
Pay back lenders the principal that was borrowed to get the business to its current state
Cattle Systems in Ireland
Cattle rearing systems
Non Breeding / other systems
Cattle Rearing Systems EPM V NFS
-400-200
0200400600800
100012001400
GrossOutputValue
VariableCosts
TotalCosts
NetProfitexcl.
Premia
TotalPremia*
€/h
a
Top 1/3
Average
Bottom 1/3
NFS
€420 / ha difference
Non Breeding / Other Systems - conventional EPM v NFS
-300-100100300500700900
110013001500
GrossOutputValue
VariableCosts
Total Costs Net Profitexcl.
Premia
TotalPremia*
€ / h
a
Top 1/3 Average Bottom 1/3 NFS
€501 / ha difference
Organic V Conventional
-400
-200
0
200
400
600
GrossOutputValue
VariableCosts
GrossMargin
FixedCosts
Net Profitexcl.
Premia
TotalPremia*
€ /
ha
Organic Conventional
€100 / ha difference
Beef Systems
Target Range NFS 2007
Physical
Farm Size ha 19.7 - 84 34.6
Stocking Rate LU/ha 1.3 – 1.4 0.77-1.36 0.5
Financial €/ha
Gross Output Value 1000 346-1061 156
Variable Costs 465 112-582 101
Gross Margin 350 233-479 55
Fixed Costs 200 162-415 139
Net Profit excl. Premia 150 71-131 -84
Total Premia* >325 324-553 517
Organic EPM Results v NFS 2007
Organic Dairy Farming
Comparison with Conventional Winter Milk
E profit monitor results 2008
Winter Milk EPM v Organic Milk EPM
0
10
20
30
40
50
Gross Output Total VC Gross Margin Total FC NM/litre
Cen
t / li
tre
Average c/l Top 10% c/l Organic Milk Median c/l
Winter Milk EPM V Organic EPM(Net Margin / Ha)
€1,708
€2,987
€1,418
0
1000
2000
3000
4000
Average W.M Top 10% W.M Organic Milk Median
€ /
ha
NM/ha
Winter Milk EPM v Organic EPM(Net Margin / Cow)
€790
€1,350
€958
0
200
400
600
800
1000
1200
1400
1600
Average W.M Top 10% W.M Organic Milk Median
NM/cow
Organic Tillage
Suits mixed farms2 operations on most farmsGood marginsCrop rotation critical
Organic Tillage
Description Production Levels
Yield - tonnes/hectare (t/ac) 4.0(1.6) 5(2)
Output at €350 per tonne 1400 1750
Material Inputs €/ha
Seed (220kg @ €930/tonne) 205 205
Lime 20 20
Machinery hire €/ha total 390.5 393
Organic Scheme payment up to 55 ha * 106 106
Gross Margin per ha (excl SFP) 900.5 1238
Conventional Tillage - 2008
Preliminary resultsGross margin over materials
(seed, spray, fertiliser etc)Winter Barley G.M/Ha €686Winter Wheat G.M/Ha €710
Machinery costs average €300 - 400
Take Home Messages
Beef Huge variations in performanceOrganics more profitable
Milk attractive up to 1.7L.U. per ha
Tillage Excellent margins
Thank you
for your attention
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