There will be a “sharp decline” in the incomes of grassland and tillage farmers in 2022 due to surging input costs, according to Teagasc’s Outlook 2022 Economic Prospects for Agriculture, which was published today (Tuesday, December 7).
Despite output prices across various sectors being stronger in 2021 compared to previous years in several sectors, these prices will either remain unchanged or decrease in 2022.
This means that many farmers across all sectors will see increasing input costs – particularly the skyrocketing price of fertiliser – drive down their ‘take-home’ money when the bills are paid.
The Teagasc report notes that market prospects for 2022 are dominated by cost pressures that have built up over the second half of 2021 and which will impact to a greater extent on incomes in 2022 than they did last year.
While fuel and feed will see increases next year (in the order of between 12% and 20% for fuel and 6% for feed), the main area for concern, as noted above, is fertiliser.
Fertiliser costs could increase by about 120% next year – well over double their average 2021 figures.
The high price of natural gas, a key ingredient in fertiliser production, has caused disruption to production in the international fertiliser industry this year.
This escalation in natural gas prices is “unprecedented”, Teagasc says, and has been caused by a reduction in the supply of gas available on the European market, which is increasingly dependent on imports.
These very high natural gas prices are expected to remain in 2022. As a result, availability of fertiliser as well as cost will represent serious concerns.
Some grassland farmers may cut back on fertiliser use in this case. However, this may lead to a decrease in grass production and a fodder shortfall, something farmers will have to manage if it arises, Teagasc says.
Tillage farmers will have less discretion when it comes to reducing fertiliser use, given the impact lower usage would have on tillage yields.
Higher production costs are forecast to impact on all sectors in 2022. Output prices are likely to adjust and reflect this increase in production costs, with farm incomes therefore likely to decline.
Relatively small positive output price adjustments are forecasted in 2022 for pigs and tillage, in the range of 2% or 3%.
Irish milk prices are not forecast to change significantly in 2022, with only small changes in cattle prices anticipated. Sheep prices, meanwhile, are forecast to be down 5% on their recent high level.
As a result of this general output price stagnation – combined with the input costs – a “sharp decline” in incomes for grassland and tillage farmers are expected next year, while average dairy income is set to fall by 16% in 2022.
The higher cereal yields achieved in 2021 are unlikely to be repeated in 2022, with average tillage incomes forecast to fall by almost 35%.
Average incomes on sheep farms are forecast to decline by 14%, reflecting the lower prices for sheep expected.
Average incomes on cattle farms in 2022 will fall sharply, with sucklers bearing the larger burden here – a 31% decline in incomes on cattle rearing farms is forecast, while ‘cattle other’ farms (mainly finishers) will see a 18% decline in incomes.
Pig prices are expected to increase in 2022, but any benefit farmers might have seen on this will be cancelled out by increased production costs, with margins to decline further.
Across the whole agriculture sector, the average farm income is forecast to decrease by 19% in 2022.
However, the forecast is uncertain, Teagasc warns, and final 2022 figures will depend on a number of factors, including the impact the coming winter has on silage stocks; fertiliser market developments in 2022; the weather conditions that will follow; and the strategies farmers adopt in reaction to these external market circumstances.