Weakening euro aids food exports as farm incomes rose 27% in 2011

THE weakening euro is providing a welcome boost for food exports, and helping to lift farm incomes, according to IFA chief economist Rowena Dwyer.

Launching the IFA Farm Income Review 2011, Ms Dwyer noted that farm incomes have increased by around 27% in 2011 up to €21,500, based on statistics from the CSO, Teagasc and the Department of Agriculture, Food and the Marine.

The IFA analyst said that the weakening of the euro in early 2012 is providing a welcome competitiveness boost for agri-food products. However, the underlying uncertainties in the eurozone, and weakness in the British market, remain a concern for product prices and incomes for the year ahead.

Ms Dwyer said: “2011 saw a continuing recovery in farm incomes, with price and volume increases in almost all commodities, partially offset by rising input costs. Overall, farm incomes increased by 27% in 2011, with average farm incomes of €21,500. While the outlook for 2012 is fairly positive, indications for international commodity prices suggest a slight easing back from the peaks of 2011, but this should be moderate.”

However, any price projections must be framed in the context of the major uncertainty created by the eurozone crisis. Ms Dwyer said that the turmoil in the financial markets is having an erratic impact on commodity markets, with no clear price pattern linked to supply-demand balances.

In addition, the lower revised growth forecast for the British market in late 2011 is a cause for concern as over 40% of agri-food exports go there.

The report also explains that gains in farm incomes are largely explained by the increased prices being paid locally and globally for farm produce. In the cattle sector, for instance, the value of output rose by 13%, or almost €200m, due to a price increase of 18%.

Milk prices continued to be strong in 2011, with an estimated increase of 12%, with the overall value of the sector up 18% via a mix of price and volume increases. Milk output volume is likely to be 6% above 2010. For the cereals sector, volume increased by over 30%, due to a combination of increased acres planted and yield.

The sheep sector saw a further increase on the 2010 price of 10%, with a small rise in volume of 1%, reflecting the stabilisation of the ewe flock.

However, this growth in production also creates a problem for the farming sector. The probable super-levy fine may be a significant cost to farmers in 2012, as every 1% produced in excess of quota incurs a fine of around €15m.

The IFA chief economist added: “Negotiations on the CAP post-2013 will intensify this year. The key issues of concern to Irish farming are flexibility for member states on the payment model for the Single Farm Payment; adjustments to the proposed greening measures; the criteria to determine our rural development allocation and the strengthening of the trigger mechanism for market support measures and provision of a dedicated funding stream within the CAP.”

Other indicators of note from 2011 included the continuing importance of the SFP and other direct payments for farm incomes, representing over 70% of national farm income; and the increase in recipients of Farm Assist, with 11,300 by end 2011, up from 7,700 in 2008. The IFA report also highlighted delays in payments continued to be an issue in 2011, notably for the agri-environment schemes, REPS and agri-environment options scheme; and a slight increase in borrowing and deposits for agriculture in 2011, indicating a return to confidence for the sector, and increased investment.