Farmers in the suckler, sheep, tillage and pig sectors are going to be worse hit by input price inflation when income figures for 2022 are finalised, according to Teagasc.
A new report by Teagasc economists attempts to forecast average margins and incomes that will be achieved across the agricultural sector this year.
Along with other sectors of the economy, Irish agriculture has been hit by substantial input price inflation. However, there have also been significant movements in farm output prices over the course of 2022, the report notes.
Despite the lateness in the year, making accurate income forecasts across the various farm systems for 2022 is challenging due to the difficulty of obtaining data relating to the usage and volume of farm inputs.
Dairy farms are forecast to achieve higher incomes in 2022 compared with last year, while incomes on ‘cattle other’ farms (mainly finishers) are forecast to remain unchanged.
Incomes on cattle rearing (suckler) farms, sheep farms, tillage farms, and pig farms are forecast to be lower in 2022.
A significant increase in income in 2022 is forecast on dairy farms, with an increase of 30% or more on the 2021 level now forecast. This increase would take the average dairy farm income figure to over €130,000.
Irish dairy farmers have benefitted from a dramatic increase in milk prices due to the lack of growth in global milk supplies this year. However, on average milk production costs are likely to be about 10c/L higher in 2022.
For the first time since milk quota abolition in 2015, no increase in aggregate Irish milk production is forecast this year. Dairy farmers have adopted a cautious approach to further expansion given the large increase in input costs that have emerged.
The unusually dry weather conditions in July and August have also had an impact on Irish milk production and milk production costs in some regions across the country, and this will affect the extent of the income increase experienced on individual dairy farms this year.
The average income on suckler farms is forecast to drop by 17% in 2022, as higher production costs should cancel out the benefit of higher cattle prices.
This would bring the average suckler farm income back to about €9,000 in 2022. This decline is forecast despite the positive influence of the Fodder Support Scheme on farm incomes.
By contrast, the combination of higher finished cattle prices and the contribution from the Fodder Support Scheme should be sufficient to offset the increase in production costs for finishers. The average income for these farms in 2022 is forecast to be unchanged at about €17,000.
Sheep farms have benefitted from higher lamb prices in 2022, a year in which lamb prices still remained well ahead of the five year average price (2017 to 2021), but as with other farm enterprises, sheep farms have been hit by higher production costs.
Farm receipts from the Fodder Support Scheme in addition to the increase in lamb prices in 2022 will not be sufficient to offset the increase in production costs on sheep farms. The average income is forecast to drop by 15% in 2022. This would bring the average sheep farm income back to about €17,700 in 2022.
In the tillage system, favourable weather during the growing season in 2022 meant that Irish cereal yields were up for many crops compared to 2021.
There were some notable exceptions on the yield front, with disappointing winter barley yields in some regions attributed to virus impacts. Favourable weather conditions at harvest time will have also benefited moisture contents and crop receipts.
The tight global grain markets has also resulted in higher cereals prices. Additional support was also available via the Straw Incorporation Measure.
However, the rise in production costs on tillage farms has been substantial and is forecast to cancel out the benefit of increased output value and additional support received this year.
The average tillage farm income is forecast to fall by somewhere close to 10%, which would bring the average income in the system back to a little over the €50,000 mark.
Turning to the pig sector, low output prices have coincided with the sharp increase in feed and energy costs, pushing producers into negative margin territory.
Pig prices have risen gradually over the course of 2022 and the extent of the increase in now large enough to begin to restore profitability in the sector. Nevertheless, the average pig farm will have incurred losses approaching €350,000 in 2022.