Gross margins on sheep farms predicted to increase in 2019

According to Teagasc’s Annual Review and Outlook 2019 report for the sheep sector, the outlook for 2019 is more positive compared 2018.

According to Teagasc, the gross margin earned by mid-season lowland lamb producers in 2019 is forecast to be €764/ha. This is a 10% increase compared to the estimated 2018 figure of €693/ha.

Teagasc says that this increase in gross margin can be attributed to the relatively stable outlook for lamb prices in 2019 combined with the expected decrease in the cost of production.

In addition, 2019 margins earned on the average mid-season lowland enterprises will continue to be boosted by the receipt of the coupled Sheep Welfare Scheme payment.

Total overhead costs for the average mid-season lamb enterprise are forecast to increase by less than 1% in 2019. As a result of the forecasted large reductions in input volumes in 2019, total costs of production are expected to be 6% lower in 2019 than in 2018.

While the costs of key inputs for sheep production is predicted by Teagasc to increase in 2019, a reduction in the volume of inputs used will likely lead to a reduction in the cost of production.

Irish lamb price (c/kg of carcass). Source: Teagasc

In lowland mid-season lambing enterprises, concentrate inputs is the main cost of production. Teagasc predicts that concentrate prices will remain relatively stable during 2019.

However, the volume of feed used during 2019 is expected to decline by 28% to normal levels previously seen in 2017.

As a result, Teagasc predicts that the total expenditure on concentrates will decrease by 28%.

On most sheep farms around the country fertiliser is another key input. It was noted that the price of fertiliser is forecast to increase (+16%) in 2019.

Contractor charges are also expected to increase marginally in 2019. Overall, pasture and forage costs on Irish lowland mid-season lamb enterprises are forecast to increase by 3% in 2019.