The area of field vegetable production in Ireland is to decrease by 7% in 2023, Teagasc has estimated based on direct engagement with growers.
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In recent years, a significant number of primary producers in the vegetable sector and other horticultural sectors have ceased trading and early indications for the 2023 season show this continuing, Teagasc has warned in a new report.
Input price inflation in the horticulture sector in Ireland has taken a firm hold; it has its roots in Brexit, the covid pandemic, and more recently the illegal Russian invasion of Ukraine.
Teagasc has taken a snapshot of input prices in March 2023 and compared these to March 2022, with all sub-sectors of horticulture reporting significant input price inflation across most inputs.
While primary horticulture producers for the most part have received some output price increases in 2022, the continuing input price inflation means that achieving a margin over costs for many horticultural enterprises continues to be challenging, Teagasc has said.
The research body said that the importance of underpinning Irish horticulture production has never been more in focus following recent shortages of certain product lines and supply chain issues, and added that a market response will be required to ensure the viability of this industry.
Valued at €477m at farm gate, horticulture is the fourth largest sector after dairy, beef, and pigs in terms of gross agricultural commodity output value in Ireland.
The horticulture sector is diverse and covers plant and food horticulture. Horticulture food includes mushrooms, potatoes, field vegetables, soft fruit, protected crops, and outdoor fruit.
Amenity horticulture includes nursery stock, protected crops, cut foliage, and outdoor flowers and bulbs.
Dermot Callaghan, head of the Teagasc horticulture development department said that while Brexit, covid, and the continuing Ukrainian crisis have pushed input prices much higher in recent years, input price inflation continues in 2023.
"When we set this upward input price trend against the 15-year downward trend in fruit and vegetable retail prices as depicted in the report, it is clear to see how primary producers could be squeezed," Mr Callaghan said.
"A response from the market is required if the viability of the industry is to be maintained, and the flow of local, nutritious, fresh, top quality produce onto the supermarket shelves is to continue."
According to the report, for the vegetable sector, input price inflation is running at 7.9% since the last Teagasc Horticulture Input Price Inflation Report in March 2022 and by 35% since March 2021.
"The increased cost of many key inputs, primarily labour, packaging, land rent, and crop protection products puts field vegetable growers under further strain to take a margin after costs," the report says.
"Despite a favourable growing season from a weather perspective, there were shortages throughout the season on several vegetable lines, yet for 2023, the area under field vegetables is predicted to contract by 7%.
The estimate for field vegetable area in 2021 was 4,600 hectares.
The vegetable sector is very labour-intensive, particularly for crops harvested and graded by hand, the report highlights.
Labour is the most significant cost in vegetable crops accounting for an average of 36% of the cost of production. Labour costs have inflated by 11% across general operatives and other skilled labour such as tractor drivers since March 2022, Teagasc said.
"The seasonality of the vegetable sector means that businesses find it increasingly difficult to compete in the labour market, resulting in an increased cost of labour as they attempt to attract staff by offering increased pay."
Meanwhile, cardboard and plastic packaging that is required in the vegetable sector has increased by an average of 20%, although there are larger increases in some plastic packaging such as trays, punnets, and pallet wrap which are worst affected.
"Increases in the cost of raw materials, production and especially transport - all heavily linked to energy prices - are the primary reason for packaging price inflation."
Although energy prices have stabilised or reduced, this has not had a direct impact on packaging prices yet due to a lag in the supply chain, according to the report.
While 'spot' prices for fertiliser and energy have reduced since March 2022 after they peaked later in the year, the overall increases to date since March 2021, (200% on fertiliser, 100% on energy), are "significant headwinds".
The price of energy and fertiliser remains volatile, while the availability of fertiliser is still a major concern among suppliers and is a risk to growers.
Meanwhile, the report says that renting land is important from a rotational perspective, and the price of renting land for field vegetable production has "increased significantly, as growers compete", the report says.
"Rental land for vegetable production needs to be suitable to vegetable growing, and close to packing facilities to avoid excessive costs."
According to Teagasc, some vegetable growers have recently paid up to €2,500 per hectare to secure suitable land.
"On average, land rental price has inflated in the region of 11% for brassica crops and 15-20% for root crops and is becoming increasingly difficult to source," the report adds.