Europe continues its fascination with farm equipment

Friday, April 4, 2014

European crop growers use at least twice the horsepower per acre compared with their North American cousins – and this reflects on the resultant profit margins.

by NORMAN DUNN

The figures indicate that European farmers have a fascination for mechanization. There are 13.7 million farmers in the European Union (EU) and, although big spreads are common in central Spain, northeastern France, Britain's East Anglia and in eastern Europe, the average holding is still a tiny 30 acres.

Most farmers still like to own their own machinery and this means the fields everywhere seem to be full of tractors during crop establishment in fall and spring. Just on an anecdotal basis, the German Thünen Federal Research Institute puts the mechanization average per (large) farm at five to six sizeable tractors. It adds that a North American unit would typically get by with a single over-350-hp tractor backed up by maybe two 200-hp machines for 5,000 acres.

In dollars and cents, Thünen researchers reckon labour and machinery costs at C$128 per tonne of wheat produced on a northeastern German farm, about double those of a North American wheat farm during the 2013 season. This has nothing to do with wage levels, because these are about the same. And in dollars per horse, both standpoints cost around C$750 for 900 hp. The disparity in growing costs is mostly all down to the power put into the ground, with the Thünen Institute recording 60 to 80 hp for 250 acres on its typical German units compared with just 13 to 17 on Australian cropping farms and 20 to 38 on, for instance, Canadian example farms (in Saskatchewan).

Maybe it's because EU farmers can expect a direct EU payment equivalent to between $70 and $105 per acre over and above any margin from crop growing that other strategies are not being applied on any large scale. For instance, it's 40 years since direct drilling was successfully tried out by most research institutes throughout Europe, showing that substantial cuts in machinery input were possible. And it's 50 years since minimum cultivations proved their cost-cutting effect in similar trials; more than 50 per cent of growers in Britain still stick with the plow and a much higher percentage do so in Germany.

One of the arguments here is that yields suffer when the plow is not used. But looking at the situation in Germany and comparing admittedly large-scale (up to 4,500) acres farms in northeastern Germany, the Thünen Institute found minimum cultivation wheat averaging 1.6 tonnes an acre and wheat after plowing at 1.8 tonnes an acre – not much of an argument, and certainly not enough extra margin to pay for plowing!   

At the other end of the season, even the specialized grain growers amongst European farmers think they're doing extremely well if they manage 1,200 acres per year with a single combine harvester. Now, most accept that the traditional structure of small fields and narrow country roads means that Europe will always need more machinery per farm.

But there are strategies that have tried hard to change the general picture. Farm contractors hiring out machinery and operators represent an established part of the countryside in the United Kingdom and Ireland, for instance. This certainly cuts down on machinery bought per farm, although a closer look at most of these businesses shows that there are still a large number of machines needed. For example, a typical operator in England reported in 2013 that he was cutting around 17,000 acres of combinable crops per season and using a fleet of seven combines, all working flat out when the weather allowed.

Talking of climate, this factor – at least in the northwest of the continent – is another reason why Europe needs a lot more machinery per farm. The required weather windows can be very small, and so-called global warming isn't making them any wider.

So it looks like labour and machinery costs will continue to whittle away at crop growing margins in Europe, a happy development for machinery manufacturers involved – at least in the short to medium term. And certainly good news for lower-cost grain growers across the Atlantic! BF

Norman Dunn writes about European agriculture from Germany.