Developments to date in 2014 are suggestive of another year of mixed fortunes, with milk producers likely to be more content with developments than drystock and tillage producers.
That’s according to Teagasc’s Mid Year Outlook for Irish Agriculture 2014 published today. It says costs of production in 2014 are certainly decreasing due to a combination of lower prices for key inputs, such as feed and fertiliser and lower feed volume requirements now that the effects of the fodder crisis have receded. However, developments in terms of output prices across the systems are more mixed and this is impacting differentially on profitability.
Looking back on 2013 Teagasc says it is difficult to generalise about the outcome for agricultural incomes as it was a year of mixed fortunes. High costs were a significant concern on all farms, particularly those experiencing increased feed requirements due to unfavourable growing conditions in the first half of the year.
While output prices for milk and meats were high, only dairy farmers managed to come out ahead, as high costs led to a fall in margins in the drystock sector. On the tillage side, high yields were offset by a fall in international and Irish grain prices, leaving producers worse off than in 2012.
Mid Year Outlook for Irish Agriculture:2014
Milk: Milk prices have been falling in the first half of 2014, but the decrease is from a very elevated level, and prices have remained ahead of the corresponding period in 2013. For the year as a whole, the annual average milk price should be close to that achieved in 2013. A significant fall in the cost of production should mean that margins in milk production in 2014 are up on the 2013 level. Given that the fodder crisis impacted to differing degrees on dairy farms in 2013, the extent of the improvement in farm profitability in 2014 will be quite farm specific.
Beef: The current price situation on beef markets is a source of concern for cattle producers. Production of beef in Ireland is up substantially in 2014 and a sizable gap has emerged between Irish factory beef prices and prices in the key UK market. The extent and nature of the change in beef farm profitability in 2014 will be quite farm specific. The adverse cost impact of the fodder crisis in 2013 was not uniform, the reduction in costs in 2014 will vary from farm to farm. In general, beef farmers who are not raising cattle to finish have seen smaller reductions in prices for cattle sold off of the farm than farmers bringing cattle to finish. As a result while margins for cattle finishers are likely to decline despite lower costs of production, margins for cattle rearing farms (and particularly those selling calves and weanlings) should improve in 2014 relative to 2013.
Sheep: With tighter supplies on EU markets, stable demand for lamb and lower volumes of imports from New Zealand and Australia, EU and Irish lamb prices have increased in 2014 as compared with 2013. Irish prices in 2014 are forecast to be 4% higher than in 2013. With significantly lower costs of production in 2014 compared with 2013, margins on mid-season lamb enterprises are expected to increase strongly from the low levels experienced in 2013. Better lambing conditions in 2014 as compared with 2013 should also contribute to increased margins.
Tillage: Forward contract prices for cereals have declined since April of this year, with 2014 harvest prices now likely to decline by about 10 per cent relative to the harvest prices received in 2013. This price drop is due to good growing conditions internationally, with an estimate of the second highest level of global cereal production ever recorded, and based on estimates would exceed world demand by about 3% and result in a slight increase in carry-out stocks.