What are farming price and margin prospects like for 2020?

Next year will be a mixed year for farmers from a farm income and price perspective, depending on enterprise, according to Teagasc’s Economic Outlook for 2020.

While input prices look set to decrease next year, if things go as expected, marginal increases are anticipated for livestock farm prices – with gross margins for cattle finishing enterprises expected to actually decrease by 2%.

The outlook was launched by Teagasc yesterday, Tuesday, November 26, in Teagasc Ashtown, Co. Dublin.

Next year’s forecast was presented against a backdrop of Brexit and a world economy where economic growth is slowing down, with a slowing of both US and Chinese economies due to their trade war, and commodity prices easing across the board.

Inputs

From the outset, Teagasc stressed that the outlook for 2020 for the Irish agricultural sector as a whole is conditioned by the assumption that normal weather returns.

Feed prices are forecast to decline by about 5% in 2020 for the year as a whole. Fertiliser prices are forecast to decline by about 7% in 2020, with no change in fertiliser volume assumed.

Fuel prices are forecast to be unchanged in 2020 with a slight decline in crude oil prices and fuel prices likely to be cancelled out by carbon tax increases.

Dairy

In 2020 average Irish milk prices are likely to remain similar to the 2019 average, according to Teagasc’s outlook. Feed and fertiliser prices are forecast to fall and dairy production costs should therefore fall in 2020.

It is assumed that further milk expansion in 2020 will take place on 1% more land area than in 2019, while another assumption is made that, on average, milk production per hectare will increase by 4% next year.

In 2020 profitability per hectare, measured by net margin on the average dairy farm producing 4% more milk per hectare, will see an average net margin per hectare estimate of €1,514/ha in 2020 – up 12% on the €1,353 recorded for 2019.

This is based on a largely unchanged milk price for 2020, however.

Cattle

Prices of finished cattle are forecast to increase by 4% in 2020.

Prices of weanlings and stores are forecast to increase by 2% in 2020 but remain well below the levels observed in 2016 and 2017.

Gross margins on the cattle rearing enterprise and cattle finishing enterprise are forecast to increase by 1% and decrease by 2% respectively in 2020.

According to Teagasc, in 2020, gross margins for single suckling enterprises are forecast to increase by 1% to €416/ha.

Net margins for the the single suckling enterprise are forecast to improve slightly in 2020 but on average remain negative – a negative average net margin of €64 is forecast, the agricultural authority says.

Meanwhile, the forecast decrease in gross margin per hectare on cattle finishing farms of 2% is largely attributed to the positive impact of the exceptional aid package in 2019.

Net margins on average on cattle finishing farms are as a result forecast to decline in 2020 with a forecast average negative net margin of €60/ha.

Sheep

In 2020, with lower input expenditure, increased output volume and the relatively stable outlook for lamb prices, margins on sheep farms are forecast to increase from the levels estimated for 2019.

Sheep margins earned in 2020 will continue to be boosted by the receipt of the coupled sheep welfare payment.

The forecast 2020 gross margin per hectare for the mid-season lamb system is €636/ha – a 7% increase on 2019 estimates.

Total costs of production are expected to be 2% lower in 2020 than this year; with increased output value forecast, net margin per hectare is expected to increase to €118/ha for the average sheep enterprise, Teagasc forecasts.

Cereals

EU winter planted area figures for the 2020 harvest are forecast to be down on 2019 harvest levels, due to weather conditions in the western parts of the EU. Irish cereal prices at harvest in 2020 will be highly dependent on growing conditions globally.

On the assumption that EU and global yields are normal, supply and stock levels in 2020 are forecast to decline slightly relative to the 2019 level. Irish cereal prices are forecast to increase slightly relative to harvest 2019.

Overall costs on cereal farms look set to decline slightly. With a normal yield forecast and an increase in prices, margins for most crops in 2020 will increase on the 2019 levels.

Overall, the net margin for the average cereal enterprise in 2020 is forecast to increase by about €75/ha relative to 2019.

Pigs

Pig prices are forecast to rise by 28% in 2020 to 215c/kg deadweight. With pig feed prices likely to be up marginally, margin over feed is forecast to improve to 103c/kg – up 56% on the 2019 level.

If Ireland can remain African swine fever free, in 2020 the sector is expected to experience one of its highest levels of profitability in 40 years, according to Teagasc.

CLASSIFIED ADVERTS