The Initial Economic Assessment of the impact of Covid-19 on Irish Agriculture issued by Teagasc last week did not read positively for tillage farmers.
However, the overall impacts are still unknown and so Teagasc outlined three scenarios which place the reduction in income at either 6%, 23% or 41% on specialist tillage farms.
- Demand for maize for ethanol;
- Malting barley demand;
- Demand for straw for mushroom compost;
- Demand for concentrate feed due to the fall off in food service demand for meat.
To put things into perspective Teagasc forecast an income for 2020 if there was no Covid-19. The tillage farm income in this scenario was expected to be down 2% relative to 2019.
In this forecast wheat prices were expected to go up, barley prices were unchanged and cereal production was estimated down by 20%. The average income was forecast at €30,017.
Moving on, Teagasc then outlined three different scenarios for tillage incomes in 2020 where there is Covid-19.
- Wheat price up 10% compared to 2019;
- Barley price unchanged from 2019;
- Production little affected by Covid-19;
- Average 2020 income €28,198;
- Income down 6% compared to a no Covid-19 scenario in 2020.
- Wheat prices unchanged from 2019;
- Barley prices – 10% from 2019;
- Production largely unaffected by Covid-19;
- Average 2020 income €23,031;
- Income down 23% compared to a no Covid-19 scenario in 2020.
- Wheat prices down 10% compared to 2019;
- Barley prices down 20% from 2019;
- Production largely unaffected by Covid-19;
- Average 2020 income €17,829;
- Income down 41% compared to a no Covid-19 scenario in 2020.
Teagasc noted that tillage farms typically have other enterprises, most commonly beef, and so price reductions for beef were also factored into these incomes.
The report also stated that limited production adjustments are expected to take place. However, malting barley is an exception here and for the purpose of this report Teagasc assumed that 15% of malting barley tonnage is redirected to feed barley in 2020.
Non-Covid-19 impacts
Speaking to AgriLand, Fiona Thorne, an economist with Teagasc, outlined the reduction in winter crop area and the lack of rainfall affecting spring crops as challenges facing tillage farmers that are not due to the Covid-19 pandemic.
The reduction in production and yield of these crops will negatively impact on tillage farm incomes.
Yes, maize is having an impact on prices and as it stays at a competitive price grains will have to compete with the commodity, but as detailed in AgriLand‘s Grain Price Reports over the past few weeks grain production has been estimated down due to drought conditions and limited rainfall.
The IGC’s April forecast estimated global grain production to be down by 5 million tonnes from the month before, while the MARS report stated that winter crop yields are expected to decline.
Last week, November wheat here in Ireland was at a price of approximately €194/t (dried), crudely taking €30/t for drying and handling (this may be higher or lower) off this price to establish a green estimate puts the price at €164/t.
Covid-19 impacts on tillage income
As outlined at the top of the article, there are some main factors impacting tillage incomes as a result of the Covid-19 pandemic.
The potential reduction in demand for concentrate feed as a result of decreased demand for livestock and dairy products further displays Ireland’s dependency on the feed grain market.
As an example, the Teagasc report outlines that maize supply was plentiful in 2017 and the knock-on effect was a decrease in demand for feed wheat.
The potential decrease in straw demand due to a decline in demand for straw for mushroom compost could also impact negatively.
One cost that dropped on farms due to the pandemic was fuel. A 30% price reduction in fuel costs was factored into the scenarios outlined above.