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Weather impacts on farm income in 2018, but some growth in prospect for 2019

The adverse weather that blighted agricultural production earlier this year has had a significant negative impact on Irish farm income in 2018. In their newly released Outlook 2019 report, Teagasc economists estimate that average farm income in 2018 fell by 15% relative to the record level in 2017.

Weather impacts on farm income in 2018, but some growth in prospect for 2019
Prof Gery Boyle, Director Teagasc with Emma Dillon, Teagasc, Liam Herlihy, Chairman Teagasc, and Kevin Hanrahan, Teagasc, at the launch of the Teagasc Outlook 2019 report.

The long winter led to increased early season production costs in 2018 due to delayed turn out of animals to grass. In turn, the extensive drought during the summer led to a collapse in grass growth and meant that farmers had to use additional concentrate feeding.

Fears of a large scale winter fodder shortage have been averted by autumn weather conditions that were highly favourable to grass growth and grass utilisation. Good autumn conditions also facilitated late season silage production.

Differences in stocking rate, soil type and farm location, meant that some grassland farms coped better with the dry summer conditions than others. Nevertheless, dairy, beef and sheep farms saw a substantial increase in their expenditure on feed in 2018. On the typical dairy farm feed expenditure is estimated to have increased by about 50%.

Tillage farmers had serious difficulty with spring sown crops in 2018, with yields well down on normal. However, yields of winter crops were not affected to the same extent. Cereal and straw prices at harvest in Ireland increased substantially on 2017 levels due to limited supplies.

While they did not have to face the challenges presented by the poor weather in 2018, pig farms saw margins squeezed by a severe drop in pig prices at a time of rising feed costs.

Overall, average farm income in 2018 across the various production systems is estimated to have fallen by 15%. The largest reductions are likely to have occurred on dairy farms, where the average income reduction in 2018 is estimated to be 22%. Farms that are highly stocked and operating on light soils, particularly those in the South East, are likely to have been worst affected by the drought conditions.

Pig prices should recover in 2019. Output prices in the drystock sector should remain relatively stable, while a slight reduction in milk prices and a more substantial reduction in cereal prices are forecast.

With the assumption that weather returns to normal in 2019, there should be a major reduction in feed expenditure on grassland farms, which will help to lift margins in the dairy, beef and sheep sectors. In terms of other inputs, the main concern in 2019 will be an increase in fertiliser prices, with less movement likely for feed and fuel prices. Some dairy and drystock farms will have a need to re-build fodder reserves in 2019.

Better weather should lead to a recovery in yields in the cereals sector, but the outlook for tillage margins will depend on harvest prices in 2019. Current expectations are that cereal prices in 2019 will be lower.

Overall, this should lead to an 8% increase in the average farm income in 2019, with income set to recover on dairy and drystock farms. In spite of a return to trend yields, lower prices and rising costs are forecast to lead to a fall in tillage farm incomes in 2019. With higher pig prices, pig producers should see a rise in margins in 2019 from the exceptionally low levels observed in 2018.

For more information on the Outlook 2019 Report please click on this link:

https://www.teagasc.ie/media/website/publications/2018/Outlook2019.pdf