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2023 a challenging year, but Outlook for 2024 more positive

A new report, by economists at Teagasc, provides the latest estimates of average incomes for various farm types in 2023 and looks ahead to future prospects by forecasting farm incomes in 2024.

2023 a challenging year, but Outlook for 2024 more positive
Professor Frank O’Mara, Teagasc Director pictured with Jason Loughrey, Cathal Buckley, Fiona Thorne, Emma Dillon, Kevin Hanrahan, Anne Kinsella, Trevor Donnellan, Michael McKeon and Tom Houlihan at launch of the Outlook 2024 - Economic Prospects for Agriculture Report which took place on Tuesday, 28 November in Teagasc Ashtown.

A high production cost environment has dominated agriculture over the last two years. Looking at costs for the full year, there has been only a minor reduction in production costs in 2023 compared with 2022.

At the same time, there have been significant negative price movements in some farm output prices, especially for milk and cereals. Dairy farms and Tillage farm incomes are estimated to be down sharply in 2023.

Incomes on Cattle Rearing farms are estimated to be up from the particularly low level of 2022. Incomes on Cattle Other farms (mainly finishers) are expected to be relatively unchanged on the 2022 level, as the positive effect from higher finished cattle prices is offset by lower production volume. Incomes on Sheep farms in 2023 are also estimated to be relatively unchanged on the 2022 level.

With the sharp decline in milk prices and with average milk production costs of close to 37 cent per litre in 2023, it is estimated that the average dairy farm income will be down 60%.  This decrease would bring the average dairy farm income in 2023 back to €59,000. Irish milk production is expected to be down 1% in 2023 compared with 2022. While dairy cows numbers have increased marginally in 2023, this has been offset by slightly lower milk yields, in the face of low milk prices.

The average income on Cattle Rearing farms is estimated to have increased by €2,000 or 24% in 2023 and brings the average Cattle Rearing farm income up to about €10,300. This estimated increase is largely due to the increase in young cattle prices during the autumn and some declines in input expenditure. The introduction of the Suckler Carbon Efficiency Programme (SCEP), National Beef Welfare Scheme (NBWS) and the Agri-Climate Rural Environment Scheme (ACRES) provides important support to incomes for farms in this system. While weanling prices are estimated to be up 7% in 2023, elevated feed prices and overhead costs mean that the average net margin (profit exclusive of direct payments) on Cattle Rearing farms is in a break-even position in 2023.

The average income for Cattle Other farms in 2023 is forecast to be unchanged at about €18,600. The annual average finished cattle price was 3.5% higher in 2023. However, beef production decreased by 4% in 2023. The majority of farms in both cattle systems continue to benefit from the Fodder Support Scheme introduced in 2022.

Sheep farms have experienced a 3% drop in lamb prices in 2023 with reductions in total production costs. Sheepmeat output volume is up marginally in 2023. The average income on Sheep farms in 2023, which is further supported by payments form the Sheep Improvement Scheme, is estimated to about €17,000 about 4% higher than in 2022.

In the Tillage system, Irish cereal yields will be down significantly for many crops in 2023 compared to 2022 due to less favourable weather during parts of the growing season and again at harvest time. The Spring barley crop and Winter wheat crop were particularly affected with yields per hectare down 21% and 14% respectively. Irish cereal harvest prices were also down over 30% in 2023 compared with harvest prices in 2022, reflecting increased grain availability internationally due to favourable weather conditions in key production regions.

While some cost items such as fertiliser fell in price over the course of 2023, the decline came too late in the growing season to bring about significant savings for benefit cereal farmers.

While cereal farmers will benefit from a range of support measures in 2023, the average Tillage farm income is forecast to be approximately 60% lower in 2023 than in 2022. This would bring the average income in the system down to around €30,000.

Pig farmers incurred substantial losses in 2021 and 2022 due to low pig prices and record high feed and energy prices. However, Irish pig prices rose substantially in 2023 returning the sector to profitability. However, output volume was down in 2023, reflecting the contraction in the sow herd which occurred in response to the recent financial difficulties in the sector. It is estimated that the margin over feed in 2023 will be 69 cent per kg, which is above the five year average.

The average farm income in 2023, is estimated to be down 44% to just under €24,800, but the decrease is almost entirely driven by the drop in income experienced in the dairy and tillage sectors.

2024 Outlook

Looking ahead to 2024, modest economic growth is projected at the global level, reflecting the current high interest rates environment in Europe and the US and forecasts for more limited growth in international trade. However, the range of geopolitical uncertainties affecting the economic outlook has increased, which means that forecasts for economic growth rates could be subject to change.

The reduction in input prices that has emerged in 2023 should persist into 2024, meaning that input costs for 2024 as a whole should be lower than in 2023. A large drop in fertiliser prices is forecast in 2024. Smaller reductions in energy prices and feed prices are anticipated. However, overhead costs are set to remain relatively unchanged on the 2022 level. As general inflation slows, increases in the price of other input items should return to a more normal level.

Irish milk prices are likely to rise in 2024 by 10%, as global milk production growth slows and demand growth improves. The average milk price for 2024 should increase to just under 48 cent per litre.  Margins in 2024 should improve as producers also benefit from a slight drop in production costs. The forecast average dairy farm income in 2024 of €86,000 would represent a 46% increase on the estimated income level for 2023.

Cattle prices are forecast to increase marginally in 2024. The forecast is for a 3% increase in both finished cattle prices and young cattle prices in 2024 relative to 2023, while production costs are also expected to ease slightly. Average incomes are forecast to rise on cattle farms in 2024, with an increase of 12% in prospect for cattle rearing farms to €11,500, and an increase of 8% for other cattle farms to €20,100.  

Lamb prices in 2024 are forecast to remain at the 2023 level. With a forecast for declines in production costs, coupled with additional supports for the sheep sector, the average income on sheep farms in 2024 is forecast to increase by 8%, bringing the average income to about €18,300.

Cereal prices are forecast to be marginally higher at harvest 2024.  Under the assumption that trend yields are achieved, yields in 2024 would be up on the 2023 level. Factoring in a reduction in production costs in 2024, the average tillage income is forecast to increase by over 60% to €50,000.

Irish pig prices are forecast to continue to decrease in 2024 by 11%. A modest drop in production costs in forecast.  Irish pig production is expected to increase slightly in 2024 and the margin over feed should drop to 61 cent per kg.

The average farm income in 2024, is forecast to increase by 30% to €32,200, but the increase will be largely driven by improved incomes in the dairy and tillage sectors.

All of these income calculations are in nominal terms. This means that they do not factor in general inflation and the impact that this has on the purchasing power of incomes earned in agriculture. While the rate of general inflation has fallen to 5% in Ireland in 2023, it remains well above the ECB target level of 2%. In 2024, farms could still experience a decline in real income if consumer price inflation remains ahead of nominal income growth rates.

The Teagasc Outlook 2024, Economic Prospects for Agriculture, is available to view and download here