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Lower Production Costs and Exceptional Aid Prompt Gradual Recovery in Farm Incomes

A new report by Teagasc economists estimates that the average family farm income (FFI) in Ireland increased by an estimated 7 per cent in 2019.  A key driver of this increase has been a reduction in animal feed use on dairy, beef and sheep farms, as well as additional subsidy supports channelled to cattle producers to alleviate the effects of falling beef prices.

The Teagasc Outlook 2020, Economic Prospects for Agriculture, is published today, Tuesday, 26 November at the annual Teagasc Economic Outlook conference in Dublin.

Farming in 2018 was dominated by unfavourable weather, but production conditions returned to normal in 2019.  This led to a substantial reduction in the amount that dairy, beef and sheep farmers spent on animal feed this year. There were also cost savings due to lower fertiliser use, as well as lower spending on silage production in 2019. However, price increases for animal feed and fertiliser in 2019, partially offset the cost savings relating to lower input usage.

The volume of milk and cereals produced in Ireland increased in 2019. The production of beef and sheep has been disrupted by the recent blockade of meat factories, which ended shortly after the publication of the Irish beef sector agreement in September.

The African Swine Fever (ASF) outbreak in China has resulted in a sharp increase in international pig prices, including in Ireland, returning the Irish pig sector to profitability this year. However, prices for milk, beef and sheep were all lower in Ireland in 2019 compared to 2018.

Looking across the sectors, average incomes on dairy farms have increased in 2019, benefitting from lower production costs and a further increase in milk production. By contrast, incomes on tillage farms in 2019 have fallen considerably, due to a sharp drop in cereal prices. 

Incomes on beef farms are up in 2019, largely due to the exceptional aid made available to offset falling beef prices in the fourth quarter of 2018 and the first quarter of  2019 and lower spending on inputs in 2019 as compared to 2018.

Looking ahead to 2020, a further improvement in average family farm income (FFI) is in prospect. The expansion in Irish milk production is expected to continue. The increase in fertiliser, and cattle and sheep feed prices in 2019, is set to reverse in 2020, leading to a slight drop in production costs across grassland and tillage farms. Cattle and cereal prices are forecast to improve slightly, while milk and lamb prices are likely to remain relatively stable for the year as a whole. While pig feed prices are set to rise slightly in 2020, this will be more than offset by a substantial increase in pig prices, due to the continued fallout from African Swine Fever  in Asia.

Family farm income should increase in 2020 on dairy, tillage and sheep farms, with minor changes in income forecast for cattle farms. Overall, the average FFI is forecast to rise by 7% in 2020.

That said, a wide disparity in average income levels exists across the various farm types.  Dairy and tillage farms typically located in areas with superior soil and climatic conditions and are on average much larger than other farm types. As a result, they continue to generate incomes that are substantially higher than beef and sheep farms.

The Teagasc Outlook 2020, Economic Prospects for Agriculture, is available to view at https://www.teagasc.ie/media/website/publications/2019/Outlook_2020.pdf