Teagasc: Agri-business to stay flat in 2012 but pig sector will enjoy lift

IRISH agriculture is set to consolidate its position in 2012, following two years of impressive growth, according to a new Teagasc study.

The Teagasc Outlook 2012 report finds that prospects for Irish agriculture, while still broadly positive, are not as good as they were this time 12 months ago — though the pig sector is likely to enjoy a considerable uplift.

The report was unveiled at yesterday’s Teagasc Economics conference in Kilkenny. The report also contains insights into cost areas such as feed, fertiliser and currency trends.

Teagasc economist Trevor Donnellan said: “Little change is expected in overall production costs for most sub-sectors of agriculture, with lower feed prices being offset by increased fertiliser prices.

“Overall, most Irish farmers are likely to experience a decline in profitability in 2012, but the sector will remain in a much better position than it was at the onset of the recession.”

Nonetheless, Mr Donnellan also said that the forecast for the sector as a whole remains highly dependent on circumstances in the wider EU and in the developing world. He said that higher agricultural commodity prices over the last two years have made most sectors of agriculture more profitable, and farmers around the world have responded by increasing production.

However, with the EU likely to enter recession for a period in 2012 and the US economy also struggling, demand for agricultural commodities in advanced economies may weaken in 2012.

Mr Donnellan said: “There will be a drop in profitability, but nothing near as bad as the situation in which farmers found themselves in 2009. Six months ago, people had genuine fears that 2012 could be as bad as 2009.

“Those fears have faded. In 2009, output prices fell and costs of production remained static, so profits fell sharply. Even though the costs of production are climbing again, the overall picture is more positive now.”

Mr Donnellan said that collectively all of these factors above suggest that most agricultural commodity prices are likely to fall slightly in 2012, but not to a degree to cause undue worry.

Farmers are becoming used to volatility in the price of farm produce and their costs of production, and this pattern is set to continue.

“The big uncertainty is what will happen with the euro, sterling and the dollar,” said Mr Donnellan.

“A weaker euro would make Irish exports more competitive, but would also generate inflation in the price of imported farm inputs such as fertiliser and fuel.”

Meanwhile, Teagasc pig specialist Michael McKeon said that profitability in the pig sector is set to be restored in 2012 as pig prices rise and the cost of feed decreases.

The Teagasc expert pointed out that the pig sector — which endured considerable losses in 2011 due to high pig feed prices — is likely to be an exception to the generally flat trend for agriculture in 2012.