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Drystock farmers to see strong income improvement in 2015

It will be another year of mixed fortunes in Irish agriculture in 2015, according to Teagasc economists in a new report summarising their mid-year assessment of the sector’s performance. Drystock producers, who ordinarily have relatively low incomes, will see their farm profits increase in 2015. By contrast, dairy farmers who normally record the highest incomes each year, will see their farm profits fall.

In general farm input price movements in 2015 have been minimal. Upward pressure in fertilizer prices has been offset by lower feed and fuel prices. Weather conditions have not presented any serious headaches for producers. Current indications are that input usage levels this year are likely to be close to normal.

Price developments in the beef and sheep sector have been quite positive in 2015. Meat demand in the EU generally is stronger this year due to the continuing economic recovery. Favourable exchange rate movements have contributed to higher Irish prices.  Irish calf and weanling prices have moved strongly upward so far in 2015 as have finished beef animal prices. The weaker euro has made Irish beef exports to the UK more lucrative and has also allowed Irish lamb to compete more effectively with British lamb in the important French market.

Incomes on cattle finishing and single suckling farms are likely to increase by about 20% and 30% respectively.

While the harvest is lagging a few weeks behind normal, initial indications are that Irish grain yields in 2015 will be above normal. Increased demand should see grain prices increase in the 5% to 10% range at harvest 2015 relative to 2014.  Margins on tillage farms in 2015 should be at least on a par with 2014.

In dairy production, the average Irish milk price is likely to be around 28 cent per litre (vat inclusive) in 2014, down from 39 cent per litre in 2014.  Average production costs will be close to 25 cent per litre, but many producers have costs that lie considerably above and below the average figure.  In the quota era the fall in milk price would have represented the classic price cost squeeze. However, the removal of milk quota has allowed the more efficient producers to deliver more milk and partially offset the reduction in income due to the lower milk price.

Direct payments to dairy farmers, which average about €20,000 annually, will act as buffer against the fall in the value of the milk cheque, as will the higher 2015 dairy calf prices. Nevertheless, average dairy farm income is likely to be down 40% in 2015 from the €67,000 average recorded in 2014.

In spite of the upward income trend on drystock farms in 2015, when the decline in income on dairy farms is factored in, overall average family farm income is likely to fall by about 15% relative to 2014, leaving average income in the €22,000 to €23,000 range.

The report was prepared by Trevor Donnellan, Kevin Hanrahan, Thia Hennessy and Fiona Thorne who are based at the Agricultural Economics and Farms Surveys Department Teagasc. Download Situation_Outlook_July_2015, a more detailed report which provides greater sectorial detail.