Milk predictions go awry
You can tell the authors are honest in their intentions, because they admit they got their previous predictions completely wrong.
They had said Irish wheat and barley areas would decline significantly.
However, the markets changed rapidly, resulting in stable prices in the medium term, well above recent averages.
The FAPRI-Ireland Partnership team now say Irish wheat growing will increase by 7% between 2006 and 2016, barley by almost 10%, and maize will increase too. The dairy boom has also exceeded their expectations.
They won’t get any medals for guessing now that dairying prospects are good. However, members of Agriculture Minister Mary Coughlan’s new Dairy Consultative Committee should note their prediction that a free milk quota increase of close to 20% between now and 2015 would work out better for Ireland than only a 3% increase until quotas are removed on April 1, 2015.
The Consultative Committee are charged with briefing the Minister for the Common Agriculture Policy Health Check negotiations, which will start next month.
Milk quota decisions will be foremost in these negotiations, and the FAPRI-Ireland Partnership team says a slow rate of increase in the milk quota will depress milk prices while still constraining Irish milk production; a faster increase will make the milk quota largely redundant, even before its abolition, in much of the EU, and will allow Ireland the scope to increase production and reach its potential more quickly.
But if, as they recommend, the EU opts for a series of 3% per annum quota increases up to the removal of quotas in 2015, Ireland would be the only member state to fully take up the nearly 20% expansion over seven years.
Poland would be the only large member state to see a major increase in milk production.
It was noted that high feed costs have improved the competitive position of Ireland relative to feed grain based milk producers in the rest of the EU.
Additional processing capacity would be needed to handle Ireland’s extra one million tonnes of milk, but the bigger increase in quota would offset the milk price decline, resulting in an average dairy farm income increase of almost 15%. The researchers assume the quota increase of nearly 20% could be filled almost entirely from existing farm resources, by replacing beef cattle with dairy cows, without requiring additional land.
By 2016, Irish grain growers can expect wheat and barley prices still 9% and 6% higher than the average 2004 to 2006 prices, resulting in value of Irish cereals sector output growing 30%.
Unfortunately, the fortune telling turns sour when cattle, sheep and pigs are considered.
Increasing imports are the problem, from the point of view of EU cattle farmers. By 2016, EU beef imports would have increased by about 39%, relative to 2006, limiting Irish cattle price rises to only 4% — not an encouraging prospect. It will be more attractive for some Irish producers to cease production, and hence the Irish suckler herd shrinks by 10% in the next nine years, according to the FAPRI-Ireland Partnership crystal ball.
That would knock 14% off Irish beef production.
In a drystock double whammy, Irish ewe numbers are projected to decline by more than 16% between 2006 and 2016, reducing lamb production by 20%.
Those who stay in sheep can expect lamb prices to rise only 7% from 2006 — not enough incentive to stay in a business considered relatively labour intensive.
High feed prices over the next few years, coming on top of the Nitrates Directive in 2011, will make things difficult for pig farmers, according to the FAPRI-Ireland Partnership.
Loss of producers is expected to cut the value of output from the Irish pig sector by about 13%. For those who stay in, it is hoped that pig meat prices will be 4% ahead of 2006, by 2016, thanks to Ireland’s strong population growth and consumption growing by 17%.
It all has to be taken with a pinch of salt, given how inaccurate the previous set of predictions for Irish farming were.
All they say about milk after 2015, when quotas go, is that they see Irish milk production increasing again by 2016, when the milk price is projected to be stable at € 25 per 100 kg — nearly 33% off current prices.
At that point, they see production increasing in only a few member states with low costs.
To the thousands of Irish farmers who may have given up on cattle and sheep, dairying (and tillage) will look like the only future in farming.
Once again, the Dairy Consultative Committee should take note.
