How the genomics scheme saved suckler farm margins in 2016

Payments made to suckler farmers under the Beef Data and Genomics Programme in 2016 will offset falling margins associated with lower cattle prices, Teagasc’s Kevin Hanrahan has said.

The Teagasc Economist presented data on the current state-of-play in the Irish beef industry at Tuesday’s Teagasc Annual Review and Outlook Conference.

Hanrahan said that the average gross margins on single suckling farms are estimated to have not fallen in 2016, with reductions in cattle prices being offset by lower expenditure on direct costs and receipts from the genomics scheme.

“If they are not in that programme their margins will be a lot lower,” he said, with Teagasc estimating the payments to be worth €45/ha for suckler farmers.

“Overall the story for single suckling farms is one of stability, as we move through this year and onto next year.”

On average single suckling farms are estimated to have earned marginally positive net margins in 2016.

The Teagasc representative also said that Irish cattle prices, across all categories, declined this year relative to 2015.

Prices of finished cattle in 2016 have declined relative to the levels observed in 2015, with R3 steer prices being 5% lower than in 2015, while weanling and store cattle prices have dropped by 7% on average.

However cattle finishing enterprises, that are ineligible for genomics payments, will see lower margins this year on the back of falling beef prices.

The gross margins on these enterprises are estimated to decline by 3%, while net margins are estimated at -€47/ha.

Will 2017 be much better?

A weaker Sterling following the Brexit vote in June will have an affect on Irish cattle prices in 2017, Hanrahan said.

But even in the absence of a Brexit dynamic, he said cattle prices looked likely to fall in 2017 anyway, mainly due to increasing supplies and low consumption rates.

“European consumers are eating a little bit more beef every year, the problem next year is we are going to have an extra supply over and above what they are going to eat,” he said.

The outlook for Irish cattle markets in 2017 is negative but also very uncertain.

Supply developments for beef in Ireland and across the EU during 2017 are likely to mean that cattle prices in Ireland will decline relative to the average levels received by Irish farmers in 2016, he said.

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