Financial Planning for a Farmer Undergoing Organic Conversion

Dan Clavin, Teagasc, Athenry

Pat Barry, Teagasc, Moorepark

Teagasc National Organic Conference,

Athlone, 2nd April 2009

Profitable Organic Farming• Preparation

• Premium market price

• Productivity-keep high

• Payments - REPS 4 and Org. Farming Scheme

• InPuts and cost reduction

Preparation• Neighbouring organic producers

• Advisers/Planners/OCBs

• Demonstration Farm Open Days

• Educational Sources-– Teagasc/NOTS/Organic Colleges

• Conferences/Seminars

• Publications

Premium Organic Prices-Follow the Market

• What products are in demand?

• Organic premium prices vary

• Where can I sell my produce?

-processor, direct selling, marts,

or other farmers?

• Obtain premium for in-conversion produce

Maximise Productivity

• How do I grow enough grass?– Clover the driver of

organic production

• Cereals and Horticulture

– Rotations– Expertise - Fertility/Weed &

Disease (horticulture) management

Reduce Inputs and Costs

• Watch out for

– Info. and experience gathering costs

– Fixed costs - new investments, certification fees

– Variable costs–different to conventional

– Lack of access to premium prices during conv. period

Maximise Direct Payments

• REPS 4 and Organic Farming Scheme– Two separate schemes

• REPS 4 + Organic + one supplementary measure (Owned NATURA land, LINNET, Traditional Rare Breeds, Traditional Orchards, Riparian Zones)

• Organic Scheme – Extra top-up for hort. only farmers– Green manure payment for stockless

non-REPS farmers

REPS 4 and Organic Payments

Ha €/haREPS 4 first 20

20 - 4040- 55

55+

234 205 8210

Organic

- in conversion

first 5555+

212 30

- full organic first 5555 +

106 15

Green Manure up to 40 240

Farm Business Planning

Farm Planning ProcessGather and Analyse Information ↓ Setting Goals ↓ Draw up a Farm Plan ↓ Implement the Plan ↓ Control/Modify the Plan

6 year sample case study 2008-2014

Baseline plan – stay conventional• Part-time farmer, 44ha reasonable to good grassland

• S.R. 1.66 L.U./ha - 32 sucklers,40 0-1yr, 40 1-2 yr

• Finish approx. 36 cattle/year. Assumed €3.20/kg conventional beef price.

• Direct payments €35,186 (2008)-high

• Joining REPS 4, Feb. 2009

• Inflation 3%/annum on costs

Organic scenario assumptions• Commence organic conversion early 2009

• Reduce cow numbers, purchase extra org. weanlings (15/year). S.R. 1.48 L.U./ha

• Finish approx. 36 cattle/year. Assumed €4/kg organic beef price

• Cost assumptions- no fertilizer bill v’s straw bedding, organic feed concentrates, transport for weanlings, organic clover, certification and other minor fees

• Inflation on costs 3%/annum on costs

Gross Output-Conventional vs Organic

50000

55000

60000

65000

70000

75000

80000

2006 2008 2010 2012 2014 2016

Year

Gro

ss O

utp

ut

(€)

Conventional

Organic

Variable Costs-Conventional vs Organic

18000

20000

22000

24000

26000

28000

2006 2008 2010 2012 2014 2016

Year

Var

iab

le C

ost

s (€

)

Conventional

Organic

Direct Payments-Conventional vs Organic

25000

30000

35000

40000

45000

50000

2006 2008 2010 2012 2014 2016

Year

Dir

ect

Pay

men

ts (

€)

Conventional

Organic

Net Profit-Conventional vs Organic

10000

15000

20000

25000

30000

35000

40000

2006 2008 2010 2012 2014 2016

Year

Net

Pro

fit

(€)

Conventional

Organic

Take Home Messages

• Prepare before jumping!

• Making profit in organics depends on-choosing right market-maintaining productivity high-minimising inputs-maximising REPS, supp. measures and OFS

• Teagasc Farm Business Planner creates a clear financial roadmap for your farm

Best of luck in your decision making!

Thank You