Brexit will be the great unknown factor in 2017 – IFA

The unknown impact of Brexit hangs over all predictions for farming in 2017, according to IFA Chief Economist Rowena Dwyer.

“Predictions for the outlook for farming in 2017 are framed in the context of the very uncertain impact that the negotiations on Brexit will have on key economic indicators, such as consumer demand, investment confidence, the exchange rate, and, ultimately, producer prices,” she said

“Exchange rate volatility between Sterling and the euro is certain to continue throughout 2017, as political events, such as the commencement of UK exit negotiations in Spring, and elections across the EU, will impact on investor confidence.

“There is a more positive outlook for Sterling as we enter 2017; however, the potential for it to weaken significantly against the euro as the exit negotiations proceed remains a concern.”

Product price and input costs

Dwyer said that the outlook for dairy prices in 2017 is positive, while there are challenges anticipated for the beef sector, arising from market conditions, increased supply, and the projected weakness of Sterling.

“For the sheepmeat and pigmeat sectors, while the price outlook is slightly weaker than 2016, significant price movements are not projected.

“On the inputs costs side, the reduction in fertiliser prices in 2016 is expected to have a positive impact on the cereals sector in particular in early 2017, while feed prices are likely to remain low, due to the strong supply from the 2016 harvest.”

Farm scheme funding

Dwyer believes that the increase in farm scheme funding of over €100m in Budget 2017 will have a positive impact on farm incomes at individual farm level, with increased places available for participation in the GLAS, BDGP and Knowledge Transfer programmes, and a new Ewe Welfare scheme, which, at €10/ewe will contribute payments of €1,300 on the average sheep farm.

The successful rollout of the Agri-cashflow loan fund at 2.95% will set a very important precedent for the costs of finance for farmers in 2017.

“The Government, through the SBCI, must continue to prioritise the delivery of lower cost borrowing options for farmers through sources such as the EIB, to stimulate greater competition in the banking sector as it continues to restructure,” she said.

General economic outlook

Turning to the general economic outlook, Dwyer anticipates the Irish economy to grow strongly in 2017, with projected growth rates of between 3-4%.

“Unemployment is projected to fall below 7% in 2017, with strong domestic demand and investment growth.

The key concern is around export growth, which could be impacted by external shocks in our main trading partners, the UK, euro or US economies.

“The uncertain growth outlook for the UK is of concern, with growth projections revised downwards in the recent UK Autumn budget statement.

Dwyer believes the election of Donald Trump in the US presidential elections in November has placed a significant degree of uncertainty on any further progress being made on the EU-US international trade negotiations (TTIP) in 2017.

“The ratification of the EU-Canada trade agreement is likely to have some impact on volumes of imports into the EU from Canada, particularly in the beef and pigmeat sectors, with potential for some increase in Irish dairy exports to Canada.”

Dwyer confirmed that September 2016 saw the EU Commission publish a comprehensive legislative proposal (‘Omnibus Regulation), which included a number of proposals for amendment to the CAP regulations.

These proposals follow on from the work already undertaken by Commissioner Hogan on simplification and streamlining of the CAP.

“The proposed changes to the regulations have no budgetary implications,” she said.

“At the EU Agriculture Outlook Conference on December 5-6, the Commissioner for Agriculture, Phil Hogan, formally announced that a consultation on the future of the CAP post 2020 will be launched in early 2017.

“Key principles of the future CAP identified are: Greater market resilience, more sustainable agricultural production; and progress on generational renewal.

“Overall, while there will be significant work ongoing in 2017 relating to the existing CAP reform implementation and future CAP structure, these will have no impact on individual farmer payments,” she said.