The prospect of interest rates rising in both the UK and the United Sates should help to keep the Euro relative weak against the dollar and sterling, according to Teagasc economist Thia Hennessy.
“This is good news for farming in Ireland as it will ensure that our food exports to both these markets remain extremely price competitive.
“The exchange rate factor has been crucial in boosting the Euro value of Irish food commodities over recent months. And this has been reflected in farmgate prices.”
Last year Bord Bia said the euro weakened 16% relative to the US dollar and 10% relative to sterling in 2015. These developments helped to boost the competitiveness of Irish exports by around €950 million.
Growth of 7% in the value of food and drink exports to the United Kingdom (UK) led to the market accounting for 41% of the total at an estimated €4.4 billion. Meanwhile, North America recorded a 19% growth in exports, according to Bord Bia.
Hennessy is also predicting that international milk markets will remain under pressure over the coming months.
“But dairy prospects should improve during the second half of 2016.
“We made this prediction before Christmas and would still hold to this view.”
The Teagasc economists is of the view that pressure will come on dairy margins during the Spring months of this year.
“In such circumstances the standard advice applies,” she said.
“Farmers should not make unnecessary investments while, at the same time, making every effort to cut costs.”
Longer term, Hennessy believes that Irish dairy farmers should look at the option of forward selling a proportion of their milk pool.
“Most of the co-ops are now offering this option. It provides the means by which farmers can bring a degree of certainty to their businesses, particularly when it is linked to a cost of production index. “
Hennessy confirmed that profit margins fell on Irish dairy farms in 2015, relative to the previous year.
“But not by as much as the actual fall in market returns that was witnessed during the same period,” she said.
“Factors coming into play here were the excellent grazing season and the fact that farmers were able to produce large volumes of high quality milk at the back end of the year.”