Half of our beef comes from farms earning €12,660 on average
Our one million suckler cows are the source of about half of Ireland’s total beef production, playing a vital role in our €2.4 billion beef exports business.
Sucklers are at the heart of our most important farming sector, the beef farms that produce over 30% of our gross agricultural output.
They make Ireland the largest net exporter of beef in the EU, and the fifth largest in the world.
However, only one in five of our estimated 35,000 farms with suckler cows is thought to be economically viable in the long term.
In 2015, the average farm income on cattle rearing farms where suckler cow production is the main enterprise was €12,660 (Teagasc National Farm Survey).
This is the lowest income of all farm enterprises.
Data from the National Farm Survey for the period 2012 to 2015 also showed suckler farms consistently had the lowest average farm income of all farm enterprises. The €12,660 income includes the Basic Payment and other direct payments. On average, a suckler farm depends 149% on the annual basic payment cheque from the EU (which is decoupled from production) and other such direct payments for its income.
In 2015, 45% of suckler farms were only sustainable thanks to off-farm employment, and things didn’t improve in 2016, as beef markets deteriorated, and farm earnings fell.
Weanling and store cattle prices decreased by 8% on average in 2016.
However, total suckler farm income for 2016 is expected to remain largely unchanged from 2015, due to payments from the Beef Data and Genomics Programme (BDGP) offsetting reduced sales.
The BDGP was launched in 2015 to inject up to €52m per annum for six years into the suckler beef sector, while accelerating genetic improvement and improving environmental sustainability.
But fewer than 24,000 of the original 29,862 BDGP applicants have been able to satisfy the scheme’s demanding requirements, and qualify for payments.
At the recent Beef Challenges 2017 IFA meeting in Tullamore, suckler farmers questioned their future in a loss-making enterprise that is clearly in decline.
IFA President Joe Healy said the Brexit and exchange rate impact on beef prices has been severe, with farmers having to “carry the can” of loss making autumn beef prices.
Mr Healy and Livestock Chairman Angus Woods said increased live exports and strong direct payments (French suckler farmers get €200 per cow, according to IFA) were needed.
For the struggling suckler sector, it’s a familiar refrain.
The six BDGP years to 2021 look like they could be difficult for the Irish beef sector.
When they are up, a wave of suckler farmers could turn their back on sucklers.
Participants are committed to a six-year contract, on pain of having payments clawed back if they don’t comply with scheme requirements for six years.
But the near 20% dropout rate shows how difficult complying with the scheme requirements is.
The Teagasc 2025 Road Map predicts the number of suckler beef cows will decline.
It bases this mainly on the 2013 CAP reform will continuing to eat away at suckler farmers’ EU Basic Payments, and a setback due to the EU exit of the UK, which takes nearly half of Ireland’s beef exports.
There is also the possibility of international trade agreements threatening the Irish beef industry, which will soon face competition from Canadian beef imports allowed in by the CETA agreement.
Farmers giving up on sucklers would have the newer option of switching to rearing and finishing the growing output of calves from the expanding dairy herd.
These factors could together spell the end for many suckler farms, unless the BDGP delivers major improvements in reproductive efficiency and breeding.
Along the way, suckler farmer will have to endure a challenging 2017, with Ireland’s highest beef cattle throughput in over 10 years expected. With 1.74 million cattle hitting the beef market, farmers cannot be confident about prices.
The glut stems from a 6.2% or 133,000 head increase in calf births in 2015 (including a 9% increase in the number of births in the dairy herd), and a huge 2016 reduction in live exports of about 20%.
A big fall in calf exports means an increased beef kill is also likely beyond 2017.
A big dairy cow cull in the Netherlands is the latest downside news for the EU beef market.
And with US and Brazilian beef production forecast to increase by a further 3% in 2017, the global market is unlikely to come to the rescue.
On the upside, farmers might hope for an export breakthrough to China.
The live export trade to Turkey proved critical for the 2016 weanling trade, and IFA says it is essential that the trade to Turkey is vibrant again in 2017. The recent re-opening of beef exports to Egypt also provided encouragement, opening the way for five Irish beef plants to commence exports, once the necessary technical arrangements are in place, and if the market proves profitable.
But Teagasc economists have predicted 2017 beef prices could fall 12%, if sterling weakens as expected due to the Brexit effect.
The Teagasc outlook is for young cattle prices to fall 10%, which could hit suckler farms hard, leading the economists to warn that the 2017 gross profit margin on suckler farms will fall 14%.
