The Department of Agriculture, Food and the Marine has released its Annual Review and Outlook 2020, examining the recent developments across the sectors, and what the outlook is going forward.
The exhaustive document is divided into separate chapters, one of which is on agricultural commodities and inputs.
One of the first things addressed in this chapter is the impact of Covid-19.
This reduction in food demand has led to a production surplus, which has been reflected in lower commodity prices in 2020. Although there are signs of price stabilisation, lower prices are expected to persist into 2021.
In the short-term, the ability of farmers to cut production in response to falling prices is very limited, as production decisions for the year have largely been already made. The relatively fixed nature of supply will exacerbate the short-run price reductions, the document states.
Dairy
Looking at the individual sector, the report finds that the long-term fundamentals of the global dairy market are strong, with growing global demand projected from fast developing countries with increasing middle classes and growing demand for protein.
While significant challenges have continued throughout recent years, there is confidence that the Irish and EU dairy sector is well placed to gain from the opportunity presented by expanding global demand.
However, the need to be able to adapt and respond effectively to changing societal and consumer trends and concerns regarding sustainability, alternative protein sources, the environment and animal welfare will be a constant challenge for the industry in the years ahead, according to the outlook.
The outlook for Irish dairy in the period 2021-2022 indicates that opportunities, globally, for growth in butter, cheese and yogurt still remain positive and are largely being driven by innovation in new flavours, product varieties, portion sizes and pack formats to meet changing consumer demands. Increased focus on health issues will be a critical factor for the future.
The continued strong birth rates demonstrate potential for milk and dairy products, as does the growing ageing population and increased life expectancy.
Irish dairy exports should be able to build on their continued growth into international markets in the short to medium term, with the potential to increase the volume and value of exports into the over 140 countries worldwide to which Irish dairy produce are exported.
Cattle
For cattle, the challenges of a low-margin industry heavily dependent on export markets was acutely felt over the last two years. The low level of income and profitability in Irish beef farming in general, along with the long supply cycle, limits the potential of the sector to absorb shocks.
Increased department supports for the beef sector in 2019 through BEEP (Beef Environmental Efficiency Pilot) and BEAM (Beef Exceptional Aid Measure), as well as a reduction in input costs relative to the previous year, assisted farm incomes in 2019 following difficulties in 2017/18, but finished cattle prices decreased due to adverse market conditions.
In terms of the outlook for 2021-2022, short and medium-term forecasts indicate that lower levels of price are likely to be the continuing reality. The global situation (for example, predicted increased output from the US, Brazil and Argentina) is likely to put pressure on producer prices throughout Europe but most especially in those member states dependent on exports, such as Ireland.
The challenges faced by Ireland as a major exporter of beef with a high degree of dependency on the UK market must also be acknowledged in the light of Brexit uncertainty, the reports notes.