Farm income pessimism was overdone this year, with this week’s new estimates from Teagasc painting a better than expected picture.
Earnings were expected to decline after a spectacular year of growth in 2017, and 2018’s very late spring and summer drought. There were estimates in the summer and autumn that dairy farm incomes might fall to nearly half their 2017 levels.
Instead, farm incomes overall are estimated to have declined by only 18%, and the dairy average is expected to fall from €86,000 in 2017 to €67,000.
Teagasc economic researchers this week revealed the figures behind their 2018 income estimates.
Milk production has increased by 3%, while cow numbers increased by 3.5% this year. Production costs increased 11% (including 33% higher concentrate feed bills).
And with milk prices down 7%, the reduction in dairy net profit margins is put at 34%.
Profit margins in cattle farming fell 10% from their already low level. Costs increased by 8% (including feed costs rising 31%) on cattle rearing farms, and by 12% on cattle finishing farms. Steer prices rose 1%.
The average income on cattle rearing farms is estimated at €10,200 for 2018, down 19% from 2017. Teagasc economists say the sheep sector had similar challenges to dairy and cattle, with input costs increasing 12%, including a 34% increase in concentrate feed costs.
But sheep farmers enjoyed a 10% rise in selling prices (up to the end of June). Overall, that left sheep farmers’ incomes this year falling only 1%.
Incidentally, output from the sheep sector has grown steadily for four years, and incomes are now 60% higher than on cattle rearing farms.
Tillage farms are the only mainstream sector to have an increase in incomes in 2018, according to Teagasc.
This 6% income gain was achieved despite lower yields, particularly of spring barley. The main contributor was a rise in grain and straw prices of 30-40%, more than offsetting a 4.9% decrease in the tillage acreage, and a 20% decrease in yields, which together cut cereal production by 23%.
Pig farmers have had a very bad 2018. Prices fell 13.6% compared to 2017, while feed prices rose by 5.2%. The profit margin over feed costs was as low as 33 cent per kg, compared with 59 cents in 2017.
Overall, 2018 farm incomes are 10% higher than 2016 incomes, according to the Teagasc economists.
They also predicted 2019 farm income trends, based on the assumption that some deal is done on Brexit. A favourable Brexit deal could see Irish farm incomes on average rising by 15% in 2019, said Teagasc, in this week’s Outlook 2019 report.
A dairy recovery is expected, with average income rising to €73,000, based on milk production rising 6%, milk prices falling 5%, and feed use falling 30%.
In 2019, beef prices are projected to gain 2%. And if expenditure on feed falls 20% from the high 2018 level, average income could recover 11%.
Sheep farming costs are also expected to decline in 2019, and if prices don’t change, income could advance 8%.
However, the 2019 outlook for cereals is not so positive. Prices are expected to decline by about 20%, because of increased supply coming from additional planting worldwide.
And costs are expected to increase. Income on cereal farms to decline from over €39,000 this year to below €36,000 in 2019, on average, is the Teagasc prediction.
In 2019, pig prices are predicted to increase by 7.8% over 2018 levels.
But if a hard Brexit arises, the 2019 farm income estimates may be over-optimistic.
The sectors hit hardest by a hard Brexit are likely to be beef and forestry, because so much of their output is exported to Britain.
A sector which could profit from a hard Brexit is sheep farming, which exports mostly to continental Europe, and could replace British supplies in this market.