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Teagasc Forecasts Substantial Increase in Dairy Farm Incomes

Teagasc has published its mid-year commentary on the economic performance of Irish Agriculture '17. It forecasts very strong growth in dairy incomes, with broadly stable incomes forecast for drystock and tillage systems.

Teagasc has published its mid-year commentary on the economic performance of Irish agriculture in 2017. It forecasts very strong growth in dairy incomes, with broadly stable incomes forecast for drystock and tillage systems.

Costs of production on farms have entered a benign period, with prices for feed, fertiliser and fuel well below the levels seen during the commodity prices boom earlier in the decade. Aside from fuel prices, which are likely to average higher than in 2016, there are no signs of imminent production cost inflation in the agriculture sector in Ireland.

Irish farm milk prices have rebounded strongly over the last 12 months. Having been at their lowest level since 2009, milk prices are now back to 33 cent per litre and are providing the impetus for a continuing increase in milk production, which could be up by 7 percent nationally in 2017 relative to last year. With recovering milk prices, higher milk production and a static cost environment, average dairy farm margins could double in 2017. Average dairy farm incomes are forecast to increase to between €75,000 and €80,000in 2017, which would make it a record year for dairy farm income.

In the case of beef, the larger Irish cattle population is contributing to an increase in beef output this year, although slaughter weights are down slightly due to the increasing presence of dairy genetics in the national herd. In spite of the weakness of sterling, which has an impact on returns from Ireland’s key beef export market, strong demand for beef at the EU level and growth in exports to non-EU markets should lead to a small increase in beef prices. With little change in production costs, margins on single suckling farms will be largely stable in 2017, while margins on cattle finishing farms will be 11% higher than in 2016.

On the sheep side, production in the EU and in Ireland is increasing in 2017, but this is being offset by a lower level of imports from outside the EU. Lamb prices in 2017 are likely to average out at broadly similar levels to those observed in 2016, while costs are likely to remain relatively unchanged. In spite of the stable output prices and input costs, sheep farms should experience an increase in income due to improved farm productivity, which is forecast to boost both the volume and value of output at the farm level and lead to a small increase of 4% in gross margin per hectare.

On the tillage side, yields are likely to be lower in 2017 than had been expected due to unfavourably dry conditions in the month of April. On the flip side it looks like cereal prices in 2017 will be up slightly on last year. Tillage farmers will also benefit from the lower fertiliser prices associated with producing the current harvest. Overall, tillage farm incomes are likely to be up slightly this year, mainly due to lower production costs.

Head of the Teagasc Rural Economy and Development programme, Dr Kevin Hanrahan said: “For the agriculture sector as a whole, overall income is likely to increase in 2017, driven largely by the very strong recovery in incomes on dairy farms. Concern remains for prospects in 2018 with on-going uncertainty relating to Brexit a key issue.”

The Teagasc Situation and Outlook July 2017 document is available at https://www.teagasc.ie/media/website/publications/2017/Situation-and-Outlook-July-2017.pdf