Significant increase in dairy farm income forecast this year while other sectors see a drop

The impact of price inflation on agricultural incomes is now becoming clearer, Teagasc said.
Significant increase in dairy farm income forecast this year while other sectors see a drop

An increase of 30% or more in income on dairy farms is forecast. 

A significant increase in income this year is forecast on dairy farms, with a rise of 30% or more on 2021.

This increase would take the average dairy farm income figure to over €130,000, Teagasc economists have said in a new report.

Meanwhile, incomes on other farm enterprises are forecast to be lower in 2022.

The new report provides an update on the forecast average margins and incomes that will be achieved across the agricultural sector in Ireland in 2022.

Irish agriculture has been hit by substantial input price inflation, much of it prompted by Russia’s illegal invasion of Ukraine. 

However, there have also been significant price movements in farm output prices over the course of 2022, Teagasc said.

Significant increase in dairy farm income

Irish dairy farmers have benefitted from a "dramatic increase" in milk prices due to the lack of growth in global milk supplies this year, according to Teagasc. 

"However, on average. milk production costs are likely to be about 10c per litre higher in 2022."

For the first time since milk quota abolition in 2015, no increase in aggregate Irish milk production is forecast this year. 

"Dairy farmers have adopted a cautious approach to further expansion given the large increase in input costs that emerged. 

"The unusually dry weather conditions in July and August have also had an impact on Irish milk production and milk production costs in some regions across the country, and this will affect the extent of the income increase experienced on individual dairy farms this year."

Higher production costs

Meanwhile, on cattle rearing farms, the average income is forecast to drop by 17% in 2022, as higher production costs "should more than offset" the benefit of higher cattle prices. 

This would bring the average cattle rearing farm income back to about €9,000 in 2022. This decline is forecast despite the positive influence of the Fodder Support Scheme on farm incomes, Teagasc economists said.

By contrast, the combination of higher finished cattle prices and the contribution from the Fodder Support Scheme should be sufficient to offset the increase in production costs on other cattle farms. 

The average income for these farms in 2022 is forecast to be unchanged at about €17,000.

Sheep farms will have benefitted from higher lamb prices in 2022, a year in which lamb prices still remained well ahead of the five-year average price, but as with other farm enterprises, sheep farms have been hit by higher production costs. 

"Farm receipts from the Fodder Support Scheme in addition to the increase in lamb prices in 2022 will not be sufficient to offset the increase in production costs on sheep farms," economists said.

The average income on sheep farms is forecast to drop by 15% in 2022, bringing the average income back to about €17,700 in 2022.

Favourable weather conditions 

In the tillage system, favourable weather during the growing season in 2022 meant that Irish cereal yields were up for many crops compared to 2021. 

There were some notable exceptions on the yield front, with disappointing winter barley yields in some regions attributed to virus impacts, Teagasc said.

Favourable weather conditions at harvest time will have also benefited moisture contents and crop receipts.

"The tight global grain markets have also resulted in higher cereals prices. Additional support was also available via the straw incorporation scheme," Teagasc economists said.

"However, the rise in production costs on tillage farms has been substantial and is forecast to more than offset the benefit of increased output value and additional support received this year." 

The average tillage farm income is forecast to fall by somewhere close to 10%, which would bring the average income in the system back to a little over the €50,000 mark.

On pig farms, low prices have coincided with the sharp increase in feed and energy costs, "pushing producers into negative margin territory".

Over the course of 2022, pig prices have gradually increased, and Teagasc economists believe that the extent of the increase is "now large enough to begin to restore profitability in the sector". 

Nevertheless, the average pig farm will have incurred losses approaching €350,000 in 2022, Teagasc said.

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