Net margins from mid-season lamb production are forecast to decline to about €60/ha, the lowest net margin/ha for this enterprise in a number of years.
This forecast is according to Teagasc’s Situation and Outlook for Irish Agriculture September 2022, compiled by Teagasc economists in an attempt to forecast average margins and incomes that will be achieved across the agricultural sector this year.
With direct costs on all farming enterprises this year increasing, the impacts of this, to no surprise, are set to affect sheep farms.
Increases in the likes of fertiliser, feed and fuel, coupled with some modest increase in feed use, are expected to lead to a 33% increase in the total cost of production for 2022, according to Teagasc.
Therefore, this year, margins earned from sheep production are forecast to decline from the record levels achieved in 2021.
The prices obtained this year will not be enough to cover the substantial increase in average production costs, the report says, with the average gross margin/ha in 2022 forecast to decline by over 11%, to just over €800/ha.
Stronger prices in 2022 to be eroded
Positives from the report include an 8% increase in heavy lamb prices in the EU this year above the same period in 2021, and that Irish lamb prices are 5% above 2021 levels to date, and well above the five-year average.
Annual lamb prices are forecast to be averaging about 5% higher than in 2021.
However, despite these, the end result is that all of this is to be eroded by increased direct costs, according to the Teagasc economists, with net margins on mid-season lambing flocks to hit their “lowest levels in years”.