Farm Ireland
Independent.ie

Friday 22 September 2017

Farm profits slip despite price lift

Darragh McCullough

Darragh McCullough

Farm profitability is lower now than 10 years ago, despite recent price surges, according to Professor Alan Matthews of Trinity College.

He told delegates at an agri-business conference in Dublin last week that output prices had failed to keep ahead of the rapid increase in input costs over the last 10 years.

The professor of European agricultural policy said that input costs had increased by 68pc in the decade since 2000, while output prices had only increased by 41pc during the same period.

"We allowed ourselves to become high-cost producers during the nineties, when the level of inputs used on Irish farms significantly increased," he said, before adding that this shift to a higher cost base remained unchanged ever since.

CULPRITS

The professor singled out meal and fertiliser costs as the main culprits, despite the rapid rise in labour costs during the same period.

He stated that there was a real need to address the declining terms of trade if the farm sector was to have any hope of competing on the global stage.

However, he remained optimistic that the agricultural sector would eventually meet the targets set out in the Food Harvest 2020 report, albeit not within the timeframe set out in the report.

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"We've seen the agriculture sector increase output by an average of 2.5pc per year during the 1970s and '80s but something will have to change to allow this to happen again," said Mr Matthews.

"The fact that agriculture still enjoys more than double the level of support compared to manufacturing within the EU has facilitated costs rising to meet what the market will support, which inevitably tends to be higher than regions without agricultural subsidies. For example, the same brand of fertiliser is more expensive in the EU than in New Zealand simply because the manufacturers know that farmers can afford to pay more for it."

Mr Matthews said that the main threats to the agriculture sector reaching its targets were the possibility of reduced decoupled payments, further rises in input costs and the relatively modest profitability of farm enterprises which would limit the scope for investment in expansion.

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