Cereal prices are expected to rise in 2015, but Irish tillage farmers will be aware that the exceptional yields achieved in 2013 and 2014 might not be repeated in 2015, according to Teagasc’s latest outlook for the cereal sector.
In its Outlook for 2015 Teagasc says given that world grain stocks remain at low levels, the outlook for cereal prices in 2015 is hugely dependent on how sowing and growing conditions impact on the size of the 2015 harvest. At present (November 2014) futures markets indicate that 2015 harvest prices will be about 10% higher than 2014 harvest prices.
Dr Fiona Thorne, Teagasc economist, also noted that income prospects for the sector in 2015 rest on growing conditions through the year. Dr Thorne said if a reversion to trend yields happens in 2015 this will mean that the average cereal farmer in Ireland will struggle to cover total costs of production next year.
Teagasc says costs of production on cereal farms are expected to increase very slightly in 2015, with key inputs such as fertiliser, crop protection and other direct costs set to decrease. Any decrease in fuel and seed costs forecast for 2015 are not enough to negate the cost increase in the other items.
Teagasc added that the net effect of an increase in output value, reversion to trend yields, and a slight increase in direct costs, means that the 2015 forecast for gross margins for most cereals is for a very slight increase over 2014 gross margins.
The gross margin for spring barley and winter barley is forecast to increase by less than €50 per hectare. However, Teagasc says due to projections for winter wheat yields it is forecast that gross margins could actually be slightly less than those achieved in 2014, by about €60 per hectare.
In its outlook Teagasc said that it must be remembered that these margin forecasts are very dependent on global growing and harvest conditions in 2015.
Bearing this health warning in mind, Teagasc says historic futures prices were evaluated to determine how accurate a measure of actual harvest prices they have been over the past decade.
This validation check was used to put a confidence interval on the forecast in cereal price for 2015. Therefore Teagasc says 2015 feed wheat price could be as low as €122/t or as high as €237/t.