Farm incomes in 2016 will be driven down by falling commodity prices, the drop in the value of sterling and some unfavourable production conditions, Teagasc economists have predicted.
In their newly published mid-year economic assessment of farm income prospects for 2016, Teagasc’s economists say an oversupply in global dairy markets has led to a collapse in dairy commodity prices over the last 18 months.
The depressed dairy market has led to increased cow culling across the EU, boosting the EU’s supply of beef. EU beef prices have been lower as a result.
There is a similar supply and demand imbalance in other sectors.
Teagasc economist Kevin Hanrahan said: “The Brexit-related slide in sterling, has had an adverse impact on Irish commodity prices generally, notably in the beef sector, given the importance of the UK market in Irish beef exports.”
The supply of Irish sheep and lamb has increased in 2016. While production in the EU15 has been steady this year, there is likely to be a slower growth in sheep meat demand in the EU.
The impact of Brexit has made UK lamb more competitive, both in its home market and when exported to France.
Thus, Irish lamb exports are at a price disadvantage in Ireland’s two main lamb export markets. In spite of lower production costs this year, the lower lamb prices will make Irish sheep farm margins lower than in 2015.
Teagasc’s Trevor Donnellan added: “The protracted dairy commodity price slump means this period of low milk prices has persisted considerably longer than in the crisis of 2009.
“While global dairy commodity prices are now showing some signs of a recovery, it will be of little benefit to Irish milk prices in the current season. A sharp drop in Irish dairy farm incomes in 2016 is now inevitable from the near record levels of incomes in 2014 and 2015.”
Furthermore, the fall in oil prices over the last 18 months has now filtered through to many areas of the agri inputs market.
Teagasc’s Fiona Thorne said weather conditions for the 2016 cereal harvest have been much less favourable than in 2014 and 2015.
“It is likely Irish cereal yields will be well down this year on the previous two years,” said Dr Thorne.
“By contrast, it looks like being another good year in terms of international cereal production, which will mean international cereal prices are likely to fall this year compared to harvest 2015.
“With lower cereal yields and lower prices that there would be a considerable fall in tillage farm incomes in Ireland in 2016,” she said.
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