Sheep farmers’ incomes are unlikely to bounce back up quickly in 2023 as lamb prices aren’t increasing, the head of rural economy and development programme at Teagasc, Kevin Hanrahan has said.
The average family farm income (FFI) on sheep farms in Ireland has decreased by 21% within one year to an average of €16,454, the Teagasc National Farm Survey 2022 shows.
Gross output on the average sheep farm increased marginally by 9% to €66,423 last year, which was driven by improved prices and increased opportunities for Irish lamb exports.
Strong growth in lamb prices for the last five or six years led to year-on-year improvements, he said. However, commenting that it’s hard to see how the sector could get back to that level, Hanrahan added:
“We may have relatively stable lamb prices but if costs of production stay where they are, the viability share of those farms that are making enough to remunerate their labour, is unlikely to improve.”
The proportion of viable sheep farms fell from 33% in 2021 to 22% and a total of just over 3,000 farms last year, the survey representative of approximately 13,979 sheep farmers shows.
Viability
A farm is defined economically viable if FFI is sufficient to remunerate family labour at the minimum wage in 2022 (€20,129 per labour unit), and provide a 5% return on the capital invested in non-land assets such as machinery and livestock.
The proportion of sheep farms found to be sustainable was 42%, while 36% were classed as vulnerable last year. The incidence of off-farm employment for sheep farms stood at 59%.
Farms that are found not to be economically viable, but have an off-farm income source within the household are considered to be economically sustainable.
Farm households are considered to be economically vulnerable if they are operating a non-viable farm businesses and neither the farmer or spouse have an off-farm job.
The situation on drystock farms remains challenging, particularly on cattle rearing farms of which only 14% or just over 2,400 farms were deemed viable in 2022.
The incidence of household off-farm employment for cattle rearing farms stood at 57%. The farming system also accounted for the highest share of pension income at 44%.
Pension contributions have been increasingly important on sheep and cattle farms for the last number of years which is unlikely to change, Teagasc research officer Emma Dillon said.
Lamb prices
Over recent years the sheep sector has seen a better evolution in terms of the lamb price than what we have seen in respect of cattle, research officer at Teagasc, Trevor Donnellan said.
Thus, up until 2022 sheep farm incomes were actually on a “fairly steady” increase, however, he said, some of that was lost last year and numbers suggest incomes have fallen back to an extent.
Lamb is considered a premium product, and there is a limited number of lamb producers in Europe, he said adding that there is not the same competition than in beef production.
The are some prospects for increased imports coming into Europe. UK trade agreements could mean there might be more UK lamb exported into the EU which could be an issue for prices, he said.