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Financial Planning for a Farmer Undergoing Organic Conversion

Financial Planning for a Farmer Undergoing Organic Conversion. Dan Clavin, Teagasc, Athenry Pat Barry, Teagasc, Moorepark Teagasc National Organic Conference, Athlone, 2 nd April 2009. Profitable Organic Farming. P reparation P remium market price P roductivity-keep high

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Financial Planning for a Farmer Undergoing Organic Conversion

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  1. Financial Planning for a Farmer Undergoing Organic Conversion Dan Clavin, Teagasc, Athenry Pat Barry, Teagasc, Moorepark Teagasc National Organic Conference, Athlone, 2nd April 2009

  2. Profitable Organic Farming • Preparation • Premium market price • Productivity-keep high • Payments - REPS 4 and Org. Farming Scheme • InPutsand cost reduction

  3. Preparation • Neighbouring organic producers • Advisers/Planners/OCBs • Demonstration Farm Open Days • Educational Sources- • Teagasc/NOTS/Organic Colleges • Conferences/Seminars • Publications

  4. 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

  5. Maximise Productivity • How do I grow enough grass? • Clover the driver of organic production • Cereals and Horticulture • Rotations • Expertise - Fertility/Weed & Disease (horticulture) management

  6. 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

  7. 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

  8. REPS 4 and Organic Payments

  9. Farm Business Planning Farm Planning Process Gather and Analyse Information ↓ Setting Goals ↓ Draw up a Farm Plan ↓ Implement the Plan ↓ Control/Modify the Plan

  10. 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

  11. 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

  12. Gross Output-Conventional vs Organic

  13. Variable Costs-Conventional vs Organic

  14. Direct Payments-Conventional vs Organic

  15. Net Profit-Conventional vs Organic

  16. 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

  17. Best of luck in your decision making! Thank You

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