Margins fell on most Irish farms in 2016

Analysis by Teagasc economists indicates that farm margins dropped on most Irish farms in 2016 after the fall in sterling. according to a review of 2016 by Teagasc presented at a conference in Dublin this week.

Teagasc Economist Trevor Donnellan said “Even though milk prices fell by over 10 per cent, Irish milk production increased by about 5 percent in 2016.”

“Dairy production costs fell, but Irish dairy margins were lower in 2016 due to the drop in the value of milk sales. However a late season rally in milk prices helped limit the drop in dairy farm income.”

Dairy sector competitiveness indicators produced by Teagasc also show that Irish dairy farms continued to be one of the lowest cost producers internationally in 2016, despite the fall in margins.

Increased supplies of beef and slowing demand led to lower cattle prices in 2016. Teagasc economist Dr Kevin Hanrahan said Ireland’s reliance on the UK market also contributed to a 5 per cent drop in Irish finished cattle prices after a fall in the sterling’s value.

Sheep prices fell marginally compared with 2016, but margins on sheep farms are estimated to have increased by 3 per cent when measured against the lower costs of production in 2016.

Margins were low for the Irish cereal sector in 2016 after a fall in yields amidst low cereal prices and another bumper global harvest, Teagasc economist Dr Fiona Thorne explained.

“The average cereal farmer will struggle to return a positive market based on net margin in 2016,” she said.

Michael McKeon of the Teagasc Pig Development Department said “Pig farmers had a year of two halves, with very low profitability in the first half of the year, offset by a significant improvement in the second half as China increased its pig meat imports.”

In spite of the fall in margins, agricultural income in Ireland in 2016 is likely to be broadly in line with the 2015 level, as receipts from the Basic Payment Scheme and GLAS should be higher in 2016.

The outlook by Teagasc for 2017 is mixed. A slowdown in global milk production should see dairy margins increase next year, with milk prices expected to rise by about 20 per cent.

The Irish beef sector is facing into a difficult year. EU beef supplies are forecast to increase, with demand for beef not particularly strong. Teagasc predicts beef prices are likely to fall by up to 10 percent in the EU, and it’s anticipated a weak sterling will also affect Irish beef prices adversely.