Family farm incomes to rise 5% next year: Teagasc review

Incomes improved considerably on cattle farms in Ireland in 2015, but those of dairy farmers’ declined dramatically. That sums up the annual performance review of the agriculture sector conducted by a team of Teagasc economists.

Excellent weather in 2015 meant growing conditions were better than normal, which boosted grass growth and cereal yields.

Lower input expenditure has been a feature of all grassland enterprises in 2015, driven by lower levels of feed and fertiliser use, as well as reduced feed and fuel prices.

Teagasc said family farm incomes fell 9% in 2015. Pig prices were also down. Sheep prices were up, while the output from the tillage sector was down slightly due to a lower area sown.

Income levels increased across most farm systems, except dairy.

Buoyant beef and lamb prices boosted incomes on livestock farms. However, average farm income still decreased due to the effect of the falling milk price.

“This demonstrates the growing importance of the dairy industry to Irish farming,” said Teagasc economist Thia Hennessy.

Traditionally, beef farms produce the lowest incomes in Irish agriculture but price improvement provided an income boost of €2,700 for the average suckler farmer.

“The lower numbers of animals available this year and the strength of the euro helped to boost cattle prices,” said Teagasc economist Kevin Hanrahan.

Strong demand for younger animals also led to price improvements and higher incomes in other beef systems.

Prices of finished cattle, in 2015, recovered almost all of the ground lost during the ‘beef crisis’ of 2014.

Price of calves, weanlings and store cattle also increased strongly with weanling and store prices up by 15% on 2014 levels.

With largely stable costs of production and strong growth in output value, margins on single suckling and cattle finishing enterprise increased strongly in 2015.

An average single suckling enterprise is estimated to have earned a small positive net margin per hectare (€19/ha), while the negative net margin earned on the average cattle finisher declined by 46% to -€77/ha.

The end of the milk quota system allowed dairy farmers to expand milk production to partially offset the fall in milk sales resulting from the lower milk price.

Favourable grass growing conditions allowed these additional litres to be produced at a lower cost than would otherwise have been the case.

“Mainly due to a 9c per litre (24%) fall in milk prices, average dairy farm income is estimated to have fallen from around €68,000 in 2014 to €48,000 in 2015”, said Teagasc’s Trevor Donnellan, one of the review and outlook authors.

Teagasc estimates that on the average dairy farm the production of an additional 35,000 litres, or 10% of total supply, allowed for a 9% reduction in the cost of producing a litre of milk.

A favourable summer meant cereal yields for major crops were above normal in 2015.

However, a large global harvest has meant that the low cereal prices of 2014 persisted. Following three consecutive bumper global cereal harvests, cereal prices stayed low, impacting on crop farm incomes.

This led to lower animal feed prices helping to boost the income of livestock farmers.

“Future markets are now suggesting a slight recovery in cereal prices in the second half of 2016 which will just about counterbalance the impact of a reversion to trend yields”, said Fiona Thorne, another of the Teagasc report authors.

Sheep farms have also seen lamb prices improve and sheep farms with a minor beef enterprise also benefitted from the improvement in beef prices.

Income on the average sheep farm is estimated to have increased by over €2,000.

Pig producers saw a large decrease in pig prices, mainly due to the impact of the ongoing Russian embargo and the return to the global market of US pork exports following the end of a disease outbreak in 2014.

Looking ahead to 2016, Teagasc economists say family farm incomes may rise 5%. The removal of milk quotas has seen dairy cow numbers rise sharply. Further expansion in milk production is expected.

This, coupled with a modest improvement in prices, should see dairy farm incomes continue to recover.

Some of the beef price increase in 2015 is anticipated to be reversed.