Improved profitability predicted for cattle and sheep farmers this year

By Stephen Cadogan

Thursday, November 05, 2009

PROFIT margins may increase on cattle and sheep farms this year, but not enough to generate income, predict Teagasc experts.

They blame weak sterling primarily for an expected 8% fall in prices for finished cattle. The reduction in the suckler cow payment also hits output.

However, production costs are between 16% and 18% lower this year on the average cattle farm, which is predicted to lift the gross profit margin by between 7% and 16%, compared to last year.

This will still leave a negative net margin on the average cattle enterprise.

The outcome is similar for sheep, according to a mid-year situation and outlook update by Rural Economy Research Centre staff, published in Teagasc’s TResearch magazine.

Sheep prices are running more or less equal to last year, with exports to France escaping the euro-sterling exchange rate effect.

The average sheep farm is expected to exceed 2008 gross profits by about 7%, but not enough to generate a positive net margin (exclusive of decoupled payments).

Grain growers’ gross margins are predicted at €110 per hectare for winter wheat, and minus €80 for spring barley. With overhead costs of about €480 per hectare, cereal farms will record negative net margins.

Assuming an average milk price of only 23 cent (compared to 32 cent in 2008), the average gross margin is predicted at 12 cent, leaving many farmers struggling to record a positive net margin.

This appeared in the printed version of the Irish Examiner Thursday, November 05, 2009