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Positive Outlook for Agricultural Prices but Input Costs Rising

Recovery in the global economy is boosting food demand and continuing difficulties with supply from the southern hemisphere coupled with increasing costs of production means that the outlook for the vast majority of agricultural commodities in 2011 is positive. This was the clear message from the Teagasc Agricultural Economics Conference which is taking place in Portlaoise today, Thursday, 20 January.

Speaking at the conference Dr Cathal O Donohue, Head of the Teagasc Rural Economy and Development Programme, said: "2010 was a very good year for Irish farmers with output values up for all sectors and the average family farm income for 2010 is expected to return to 2008 levels, an approximate 40 per cent increase on the 2009 level. Food exports have been very strong, with agri-food exports growing faster than other exporting sectors."

Thia Hennessy, Head of the Teagasc Agricultural Economics and Farm Surveys Department said: "The outlook for 2011 is for continued buoyancy for most commodities, however rising fertilizer, fuel and animal feed prices are likely to negate some of this increase, leaving some farm systems no better off in 2011. Only dairy farmers are forecast to have sufficient increases in output prices to offset the increase in input prices."

2010 was described as a bumper year for dairy farmers with production and prices up. The outlook for milk prices for 2011 is good, with strong demand forecast on international markets. Increasing fertilizer and concentrate feed prices are likely to dampen some of the milk price increase. However farm incomes for dairy farms are forecast to be at least as good as 2010 levels this year.

Delegates at the Teagasc conference heard how gains were made in cattle prices in 2010 but that these gains were not sufficient to boost cattle farm incomes. The outlook for cattle prices is good and annual average prices are expected to increase by 5 per cent in 2011, however this will not be sufficient to offset rising input costs. Pig producers are suffering from their current exposure to high feed costs. At the moment costs of production are outstripping the prices being paid for pigmeat on the market and this is likely to continue to be the case well into 2011. An increase in pigmeat prices in the order of 10 to 15 per cent is expected by mid 2011.

Sheep farmers enjoyed a very good year. Lamb prices were up 17 per cent as a result of a declining world supply and favourable exchange rates for exporting. The outlook remains positive and more price increases for sheep are expected for 2011. Cereal markets continue to be characterised by volatility. Last year was a bumper year with income on tillage farms more than doubling on the depressed levels for 2009. Due to the continued market volatility, forecasting the 2011 harvest prices is difficult. However the grain price outlook is generally positive. Fertilizer prices are expected to rise and for the majority of tillage farmers this will leave farm incomes down slightly for 2011. Only spring crops are likely to produce profit margins similar to 2010 levels.

Over half a billion was invested on farms in Ireland in 2010, despite the poor overall performance in the economy and the poor availability of credit. The financial position of farmers improved considerably in 2010, with the ratio of debt to income declining. The outlook for investment on farms in 2011 remains somewhat depressed and little improvement is expected on the 2009 and 2010 levels.