Covid-19 impact on farm incomes ‘now likely to be more limited’ – Teagasc

The impact of Covid-19 on farm incomes is “now likely to be more limited” than initially thought, Teagasc has found in its Mid-Year Outlook for 2020.

At the moment, the fears over a “sharp drop” in farm incomes related to the virus outbreak “seem to have been averted”.

This, the agricultural authority notes, is due to a “gradual recovery in commodity prices and the provision of additional supports to the sector”.

Farmers are relatively powerless in the face of market disruption and as the extent of Covid-19 emerged in the spring of 2020, it appeared that the impact on agricultural incomes could be quite severe.

The concerns over commodity price falls have abated in recent weeks, with beef and dairy prices recovering faster than expected, the research indicates.

This has been coupled with a quicker-than-expected lifting of lockdown restrictions across Europe – though the possibility of a resurgence of the virus and a return to lockdown in some places remains. A “second wave” of the virus would likely place commodity prices under pressure again.

For pasture-based systems, a protracted period of dry weather through May and into June had an adverse impact on grass growth in many areas around the country. Soil moisture deficits were widespread, but were eventually addressed through higher rainfall levels over the summer, Teagasc notes.

Input prices have been favourable for farmers in 2020, with feed, fertiliser and energy costs all down on 2019 levels.

Dairy

The dairy cow population has continued to increase in 2020, and a further increase in Irish milk production of about 3% to 4% is likely if normal weather persists through the rest of the season.

According to the research, while a portion of the peak milk delivery season remains, if weather conditions remain favourable and milk prices hold, then the average income on dairy farms in 2020 could be close to the €67,000 achieved in 2019.

Cattle

Despite the recent recovery in cattle prices, Teagasc said that 2020 will remain a challenging year, but that the “additional support provided to the sector via announced pandemic support payments will provide support to cattle incomes”.

The additional Covid-19 support to be provided to cattle farmers should offset some of the negative impact on farm incomes of lower cattle prices. The average income on cattle (rearing) farms is forecast to increase by 5% (€9,700) in 2020, while incomes on cattle (other) farms are forecast to contract by 4% (€13,300).

Sheep

On the sheep side of things, prices in 2020 have been stronger than in 2019, with prices forecast to be more than 5% higher than last year.

Lower UK exports to key continental EU markets; reduced imports from New Zealand; and a contraction in EU production, combined to leave EU and Irish sheep prices higher, despite the disruption to demand caused by Covid-19.

Incomes on sheep farms are set to be up by over 15% in 2020, to more than €17,000, due to growth in output value; stable direct payments; and lower total costs of production.

Tillage

For cereals, adverse winter weather meant that there has been an increase in the area allocated to (typically lower-yielding) spring crops in 2020. Due to adverse weather at a critical stage in plant development, expectations are that yields for cereals in 2020 will be down on those achieved in 2019, according to research.

For wheat, prices are expected to be slightly higher at harvest 2020, due to international supply and demand. However, there will be very little change for feed barley prices. Forward contract prices are unlikely to be enough to offset a “significant reduction” in cereal volumes.

Straw prices are expected to increase in 2020, but volumes and output will be “much reduced”.

A large drop in cereal margins and incomes in 2020 is expected, with the average tillage farmer struggling to make an income of €30,000.

Conclusion

Overall, while the ‘worst-case’ impact of Covid-19 on the agricultural sector in Ireland would appear to have been avoided, farm incomes in 2020 are still likely to be generally lower than would have been anticipated at the outset of the year.

Teagasc has released its ‘Farm Enterprise Factsheets’ for 2019 based on its National Farm Survey, which provides a breakdown on the financial and technical performance of the main enterprises in Irish agriculture last year. These are available through the Teagasc website.