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Farms Benefit from Falling Production Costs in 2014

In its mid-year assessment of likely farm profitability in 2014, Teagasc economists have highlighted falling production costs as the main driver of farm incomes in 2014.

Speaking on the release of the Teagasc Mid-year Outlook for Irish Agriculture 2014, Teagasc economist Trevor Donnellan said; ”Following two high production cost years in 2012 and 2013, Irish farmers are finally now seeing a reduction in their input spending”.

With generally good grass growing conditions to date in 2014, the main driver of the fall in production costs has been reduced expenditure on concentrate feeds, which have now reverted back to a level which would be considered normal. Compared with this time last year, feed prices are also lower, bringing additional savings to livestock farmers.

So far this year, farmers have also experienced reductions in their fertiliser and fuel bills, while inflation in other costs continues to remain low.

As a result of these falling production costs, dairy, sheep and cattle rearing farms should see an increase in their gross margins in 2014.

However, Dr Kevin Hanrahan, Teagasc economist said; “It is not all good news, with the fall in the costs of production being insufficient to offset the fall in the price of cattle received by beef finishers, whose margins are now forecast to decline in 2014”.

With a large global crop harvest now forecast for 2014, it would appear that cereal prices this year will be lower than those of the 2013 harvest. Nevertheless cereal producers will also benefit from a reduction in their costs, although not to the same extent as grassland farmers.

Dr Fiona Thorne, Teagasc economist said; ”Even if yields in 2014 are to exceed average trend yields as indicated by crop growth and early harvest indications, it is unlikely that this would be sufficient to overcome the impact of lower cereal prices and therefore cereal margins in 2014 are forecast to be lower than in 2013”.

The Teagasc Mid-year Outlook for Irish Agriculture 2014 is available at Review-and-Outlook-July23_final