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Improved Prospects for Dairy and Cereal Farming in 2010

The average farm income in Ireland in 2009 is estimated to have declined by 30 per cent to €12,000 per farm, the lowest income since 1999. However, delegates at the Teagasc Outlook Conference 2010 – “Economics of Agriculture” which is taking place in Portlaoise today, Friday, 14 January heard that an improvement in farm income is likely in 2010.

Speaking at the event, Liam Connolly, head of the National Farm Survey said that farm-gate prices plummeted last year and resulted in the largest annual decline in farm incomes in decades. The dairy sector suffered the largest decline in incomes due to the drop in milk prices and cereal farming had another bad year.

However, Teagasc anticipates that milk prices and dairy farm margins should begin to recover in 2010, but it may be 2011 before the sector returns to normal levels of profitability. It is estimated that about half of the dairy farmers in Ireland recorded a negative net margin in 2009. A recovery in international dairy product prices is now underway and Irish farm gate milk prices should continue to improve.

The 180 delegates attending today’s conferences heard how Irish cattle prices suffered a significant fall in 2009 with finished animal prices down by 10 per cent, store cattle prices down by 11 per cent and weanling prices down by 15 per cent, compared to the previous year. Some recovery in cattle prices is forecast for this year given the decline in the size of the cattle herd both in Ireland and across the EU. Irish cattle prices are forecast to rise by 4 per cent in 2010, however, over two-thirds of cattle farms are likely to continue making a loss from cattle farming this year.

Teagasc economists predict an upward movement in cereal prices and a reduction in input costs in 2010, which are likely to result in an increase in cereal crop gross margins in Ireland this year. Given the low gross margins in 2009, net margins are estimated to have been negative for all cereal enterprises when overhead costs are taken into account. Despite forecast improvements in input and output prices, the net margin for the average cereal producer is likely to remain negative in 2010

Pig production was profitable in the early part of 2009, but a serious decline in pig prices in the autumn meant that producers made losses in the latter part of the year. With the declining pig supplies in the EU, pig price prospects should be favourable in 2010, but the impact of the global recession is still being felt.

The average gross margin earned by mid-season lamb producers in 2009 increased by 8 per cent to €404 per hectare. The pattern of higher lamb prices and lower input costs observed in 2009 is forecast to be repeated in 2010. The continuing contraction in EU production of lamb and sheep meat is pushing up lamb prices within Europe.

An estimated 6,500 hectares of new land was planted with trees in 2009 with the majority carried out in the Munster counties. Half of the land was planted under the Forest Environment Protection Scheme (FEPS). 2009 saw a substantial increase in the number of applications for planting approval. Funding to plant a further 7,000 hectares in 2010 was allocated in the recent budget.

Farm households have observed a significant decline in household incomes relative to non-farm households over the past 20 years. Dr Cathal O’Donoghue, head of Teagasc Rural Economy Research Centre warned that there is a continuing trend in higher rural poverty. He pointed out that farmers have been hit hard by unemployment with 30 per cent of farmers losing their off-farm jobs between 2008 and 2009.