Teagasc expects on-farm investment to shrink back to €363m next year

INVESTMENT on farms is expected to shrink back to just €363 million in 2009, Teagasc predicted at its annual situation and outlook conference in Tullamore yesterday.

Irish farmers invested a record €1.9 billion in their holdings this year as they upgraded facilities to comply with strict new EU environmental regulations.

This year’s investment was three times the amount invested annually between 2000 and 2005 and was equal to 100% of total farm income in 2008.

Liam Connolly, of Teagasc rural economy research centre, anticipates a huge decline in on-farm investment next year, as farmers return to more typical spending levels.

The Teagasc National Farm Survey has shown dairy farmers will account for more than half the planned investment in 2009 with cattle farmers making up a further 30%.

Income data for 2008 from the Central Statistics Office showed that farm incomes fell 12.8% compared to 2007.

When interest payments made by farmers are taken into account, Mr Connolly estimates that incomes in the agri-sector will have declined by 16.1% in 2008 compared to 2007.

The largest reduction came in the cereals sector where lower market prices and higher input costs squeezed margins, reducing tillage farmers’ income by one-fifth.

Input expenditure on nearly all farms increased in 2008 with a particular impact on dairy farms.

Teagasc estimates the net margin per litre of milk produced this year is 9c a litre compared to a 6c margin expected in 2009.

For cattle farmers 2008 has been a reasonable year, with the price for R3 grade steers running 16% ahead of 2007 levels.