Background Paper

Cereals, Horticulture and Organics

Note: The views expressed in this background paper do not purport to reflect the views of the Minister or the Department of Agriculture, Food and the Marine
Cereal/Tillage Sector

1. Overview of the Sector

The cropped area in Ireland extends to 378,000 ha or 9% of the area farmed. Cereals account for the main acreage under tillage at around 300,000 ha. The national tillage sector is compact, comprising of approximately 11,000 growers, of whom 4,000 have tillage as the primary farm enterprise. It is estimated that a further 15,000 people are employed in the crop based food processing sector. Annual combinable crop output amounts to between 2.0 and 2.5 million tonnes accounting for approximately 1% of EU production. Irish cereal yields are among the highest in the world and, despite reaching a plateau in recent years, have the potential to increase by up to 1% per annum.

Tillage crop production in Ireland has traditionally been based on the provision of feedstuffs to the livestock sector and feedstock to industries such as malting, milling, sugar, breakfast cereal, distilling and food.

Approximately 1.5 million tonnes or 75% of the annual national cereals harvest are used to produce animal feedstuffs with the remainder of the harvest going to on-farm feeding, production of seed, export, or use in the food and industrial sector. The farm sector has also developed cheaper processing options for direct on-farm use of cereals, such as crimping and wholecrop, and the production of feed crops like triticale, forage maize, fodder beet and kale for livestock feed. The volume of grain exports is volatile in nature but is usually between 200,000 and 300,000 tonnes of grain (mostly wheat and barley) per annum, mainly to Northern Ireland and Great Britain for feed. Some malting barley is periodically exported, mainly to Belgium, and there are some exports of grain to other EU countries, notably to the Netherlands and Germany. 3,000 to 4,000 tonnes of grain is exported annually to the USA.

There is scope for increased production from tillage to replace a proportion of imported cereals used for animal feed. Native cereals provide home-grown traceable feed that helps to underpin expansion in the dairy and livestock sectors. They also provide a good source of quality traceable raw material for malting, milling, distilling and breakfast feeds and oils.

Over 50% of tillage production in Ireland is carried out on leased or rented land and this is one of the most significant features of the sector, with implications for expansion, profitability and capacity to compete with other farming enterprises.

2. Market Prospects

The 2013Teagasc National Farm Survey ([1]Hennessy et al., 2013) indicated that the average family farm income for mainly tillage farms was €28,800 compared to an average family farm income for all farms of €25,000.On average,income on specialist tillage farms declined by 22%in 2013 over 2012. Despite yieldsimproving relative to 2012, lower prices anddeclines in average area harvested per farmmeant that crop output value declined by 13%.Despite lower direct and overhead costs, thisdecreased value of output led to reduced incomes in2013. Teagasc estimates that the cereal harvest for 2014 will reach or exceed 2.5 million tonnes. However, due to a buoyant EU and world harvest, prices for green wheat and barley are likely to remain very weak in the short term.

Table 1: Area, Yield and Production of Cereals 2014*

Area YieldProduction

(000 ha)(T/ha)(000 tonnes)

Wheat 70 696

Winter 64 10.0 642

Spring 6 8.5 54

Barley 214 1,699

Winter 60 9.1 541

Spring 154 7.5 1,158

Oats 18 146

Winter 10 8.5 84

Spring 8 7.5 62

Totals 302 2,541

Source: Teagasc estimate (Rounded)

*refers to all production, which is subsequently sold or used alternatively typically for feed

Extreme world cereal price volatility has been witnessed over the past 5 – 10 years due to low world stocks, the rise in global cereal consumption and biofuel production. This volatility is expected to continue into the medium term, hence uncertainty about the production response and price stability is expected to remain for some time. For example, after some years of tight supplies mainly due to poor harvest conditions in the main cereal producing regions of the world, the 2014 world harvest for cereals and other combinable crops was extremely good. This in turn resulted in one of the lowest Irish green cereal prices for a number of years.

According to the latest International Grain Council Market (IGC) report for August 2014 global grain production for 2014 is up 17m/tonne to 1,976m/tonne which is only marginally below 2013 largely because of better than expected results in China and Russia while production levels have decreased in the USA and Canada. World production of wheat has been driven by animal feed use.

The latest EU cereal balance sheet estimate for 2013/14 shows total cereals production of 302m/tonnes with consumption at 271m/tonnes and current stocks of 31 m/tonnes. The EU Cereals area for 2014 is estimated (September 2014) at 58m/ha which is similar to the previous year.

3. Potential for future development of the cereals sector

The Tillage Sector Development Report of 2012[2]assesses projections up to 2020 for nine major crop categories. As crop yields and areas sown can be quite volatile from year to year, the base-line figures for area and output were based on the four year average from 2008 to 2011. The individual crop projections for 2020 are based on the potential for that crop under favourable conditions. However, it is important to bear in mind that these projections represent only the potential for each crop and are not targets as such. In reality any increase in the area of a given crop would depend on profitability, competition from other crops, land availability and also competition from other farm enterprises, most notably from dairying post 2015. The end date for these projections could also be taken as relevant for 2025.

Table 2: Crop Yield and Area Potential 2008/11-2020

Crop / 2008/11
Tonnes / 2020
Tonnes / 2008/11
Ha / 2020
Ha / 2020
Increase Ha
Barley / 1,288,900 / 1,755,500 / 184,000 / 223,660 / 39,660
Wheat / 820,400 / 1,109,400 / 91,800 / 105,800 / 14,000
Oats / 158,420 / 246,320 / 21,100 / 34,860 / 13,760
Pulses / 18,700 / 64,700 / 3,560 / 10,300 / 6,740
OSR / 32,300 / 287,300 / 8,100 / 59,900 / 51,800
Maize / 313,000 / 463,000 / 20,875 / 30,875 / 10,000

Potential Increases in Value and Job Creation

If the potential increases in area and production outlined in the report were realised, this would also result in significant increases in the value of output and also in terms of new job creation as estimated in the Table 3.

Table 3: Potential Increases in Value Based on Increased Output Potential

Crop / Additional Value (million €)
Barley / 87.13
Wheat / 53.90
Oats / 16.32
Pulses / 9.74
Oilseed Rape / 101.90
Maize / 28.5

In a paper produced for the Food Harvest 2020 Report High Level Implementation Group, Miller et al., (2012)[3] estimated that there are 17 jobs associated with every million euro of domestic output in the cereal sector at farm level.

This figure is on a par with the employment associated with milk and beef production at farm level. Such figures are described as employment intensities and represent the average number of jobs associated with €1 million of output in the sector.

It would not be appropriate to assume that at the margin (i.e. additional output) an increase in output value of €1 million would be associated with a similar amount of jobs. In reality the marginal employment intensity would be lower.

Consequently, at farm level the job creation associated with increased tillage production is likely to be considerably less than would be suggested by the average employment intensities. Pressure to increase productivity at farm level will continue and given that production in the tillage sector tends to be capital rather than labour intensive, additional jobs within the farm gate would be limited.

Beyond the farm gate, there is also job creation potential associated with a higher level of tillage production.. The farm sector has strong linkages with a range of food, beverage and animal feed producers. Miller et al. in the same reportindicated that there are about 2 jobs associated with each €1 million increase in output value in the animal feed sector and the figure in the beverage sector is similar.

3.1 Barley

Barley is the largest cereal crop in Ireland accounting for some two thirds of cereal production or 214,000 ha in 2014. The total area of this crop fell for many decades but this has levelled off and increased somewhat in recent years, partly at the expense of winter wheat.The winter crop is increasing in popularity in recent years as a result of improved varieties and very high yield potential from six-row hybrid types.This is increasing the overall yield and total barley production.

Barley is primarily used for feed production but with a significant proportion of the area (23,500ha) used for malting and roasting. Demand for feed is likely to increase given the increased production targets for the livestock sector in FH2020. Demand for malting barley is also likely to increase with planned expansion by the malsters and increasing demand for barley and malt for distilling at home and abroad. In March 2014 the Irish whiskey sector formed the Irish Whiskey Association. The aims of the association are to double exports of Irish whiskey from 6 to 12 million cases per annum by 2020.This target is to be underpinned by an expansion in the number of distilleries from current 4, to 20 in the coming years. These additional distilleries are already at various stages of planning or advancement. In order to achieve the growth targets set out by the Irish Whiskey Association, consumption of barley for distilling would double from the present 65,000 - 70,000 tonnes per annum.

The principal constraint of expansion in the area of barley grown is the availability and cost of land and the competition for land between crop and animal enterprises. The greening measures in the CAP Reform will require a greaterneed for crop rotation thereby affecting the continuous growthof barley.

3.2 Wheat

Wheat production which accounted for 70,000 ha in 2014 has been somewhat erratic in recent years due to a combination of area planted and yield.The main area constraint relates to winter wheat planting which is often hampered by wet weather. As indicated earlier, this has resulted in an increase in plantings of barley at the expense of wheat.

Wheat has two main market outlets – feed and milling. The feed wheat market provides wheat for use in feed and for export. Overall demand can be expected to increase in the face of increasing livestock production and there is potential to displace a significant portion of wheat and corn imports for feed rations.

There is a domestic market for up to 50,000 tonnes of milling wheat annually. A very high average annual yield means that adequate protein levels are difficult to achieve on a constant basis. In addition, poor or variable harvests often result in the rejection of a significant proportion of the crop for milling due to excessive sprout damage and poor seed specific weights. Any further development of a market for milling wheat would depend largely on the availability of milling varieties more suited to our climate.

Wheat is a high-cost crop and one of the principal constraints to maintaining or increasing wheat acreage is its vulnerability to increasing input costs such as fertiliser, fuel, crop protection products, machinery and land. Fungicide resistance and the threatened loss of at least some fungicides also pose a considerable threat.

3.3 Oats

There is a domestic market for oats of approximately 160,000 tonnes which slightly exceeds current national production.Oats are a very traditional Irish crop and are now grown largely for food (porridge oatlets) and premium feed for sport horses, with lower grade feed going into ruminant rations. The demand for oats both for premium feed and food is likely to expand further. Production of oats in both Canada and the US is contracting; both could be important outlets for Irish oats, with both Flahavans of Waterford and Glanbia targeting these potential markets, particularly the high-end premium oatmeal market in the US.

Notwithstanding these favourable developments, constraints remain on expansion of the present area of oats grown in Ireland. There has been an over-reliance on the variety Barra for food production, while difficulties with the crop remain in terms of disease resistance, crop standing power and stagnant yields. Some promising new varieties have emerged in recent years but none yet to rival the quality of Barra.

4. Other Arable Crops

4.1 Protein crops

The main protein crops of relevance in Ireland are the pulse crops, namely peas and beans. While Lupins are also a protein crop, their production here is marginal.

Production of pulses is traditionally low at around 4,000 ha grown annually, producing approximately 18,000 tonnes of protein feed. This accounts for a minor fraction of overall demand for proteins by the livestock sector so there is no barrier to increasing production of peas and beans.

Traditionally these crops have not been widely grown here due to variable yields and disease problems, created largely by adverse weather conditions and non-availability of varieties suited to our climate. The marginal nature of these crops has also meant that there has been a low investment into research on breeding and agronomics, production costs are relatively high and gross margins have been volatile. Also, the development of processing and production infrastructure has been slow for the same reasons.

The introduction from 2015 of a coupled protein payment of €250 per ha up to an annual national ceiling of €3 million will provide a significant boost to this sector, providing the possibility to expand production of supported proteins to 12,000 ha. Importantly for arable farmers, land under protein crops will be eligible to qualify as an Ecological Focus Area.

4.2 Oilseed Rape

The area sown to oilseed rape has remained low for many years due to the lack of price related profitability of the crop. This has changed in recent years with the acreage increasing from 2,300 ha in 2003 to a peak of approximately 17,000 ha more recently. However, due to weaker market prices, the area sown to Oilseed rape has reduced back to more traditional plantings of 8,000 – 12,000 ha in the last two years. The winter crop accounts for two-thirds of total production. To fully exploit the crop’s potential, a sufficient market would be necessary to facilitate crushing and utilizationnationally, leaving the protein feed for use in the livestock sector.

There is increasing interest in the use of oilseed rape oil as a food ingredient for cooking and salads. Expansion in this area looks likely to continue with potential for exports of the processed oil.

As with pulses, the current small scale of oilseed rape production has resulted in a shortfall in terms of the necessary infrastructure and a lack of investment in research and development.As the area increases, there is likely to be increased disease pressure which could impact on average yields.

4.3 Maize

Annual production of maize is around 20,000 ha. Maize is grown almost entirely for whole crop silage production, and can produce a high value high energy feed. Increasingly, maize has been grown under plastic mulches to extend the growing season and hence productivity.Maize can offer a less costly option for fodder production on outlying land than grass because there is only one harvest a year at a different time to other harvests, and as it has a greater transport density than grass,.The principal constraint to a significant increase in the area under maize is thelevel of seasonal variability which can only be addressed through improved varieties. Maize is also vulnerable to increasing input costs such as fertilizer, fuel and chemicals.

4.4 Beet

Sugar beet production ceased in Ireland in 2006 when production stood at around 1.2 million tonnes of sugar beet produced from 35,000ha. The agreement reached under the CAP Reform package in 2013 to abolish the sugar quota system for sugar beet from the 30 September 2017 sparked renewed interest in re-establishing a national sugar/bioethanol industry in Ireland. Proposals to revive the industry were initially submitted in 2011 to the Minister for Agriculture, Food and the Marine for consideration and at the time and many times since the Minister has stated that any new sugar production facility will have to be a viable commercial proposition and supported by a business case which is sufficiently robust to attract the funding from investors for the very substantial capital investment required. The future sugar prices will determine the feasibility of sugar production in this country as will the willingness of growers and others to invest in a brand new processing facility.

Fodder beet acreage of 8,000 ha has remained relatively stable since 2006. Most of this production is used as animal feed with the majority used on-farm and approximately 25% available for sale. The potential for fodder beet growth is limited due to transport costs and machinery limitations at farm level.

5. Animal Feed Sector

5.1 Feed Consumption

Animal feed for ruminants in Ireland comes principally from dry matter intake based on grass, hay or silage complemented, where appropriate, by compound feeds.