Farm Ireland
Independent.ie

Wednesday 22 February 2017

Output prices to rise this year but margins tighten

Published 25/01/2011 | 05:00

FARM output prices are destined to rise through 2011 according to predictions from Teagasc's economic unit. However, profitability will be similar, if not lower than last year's levels for all enterprises, delegates at the Economic Outlook conference in Portlaoise were told last week.

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The cost of key inputs, such as fertiliser, feed and fuel, held relatively stable for most of last year, according to Teagasc's Trevor Donnellan.

This situation is expected to be very different for 2011. With cereal prices up by 60pc during the last harvest, the economist said farmers should expect a feed price hike of at least 20pc on average this year.

Mr Donnellan also predicted that nitrogen fertiliser prices would be 20pc higher this year, along with significant rises in potash and phosphorus too. The rising cost of oil would also feed into higher fuel prices, with delegates told to expect a 15pc rise in prices. Just 1pc of this increase would be due to the new carbon taxes that have been imposed in the last budget. Electricity price increases of the order of 5pc are also likely.

These increases would exceed any rise in farmgate prices for several sectors, including sheep, cereals and beef. The only exception to this would be the dairy sector, where margins could increase up to 11c/l, according to Mr Donnellan.

tillage

This would further widen the gap between the profitability of dairy enterprises compared to the other traditional livestock sectors of beef and sheep.

While they are predicted to average a net margin of minus €180/ha and €100/ha respectively, the dairy sector is expected to return €1,050/ha. Tillage farmers were expected to average a net margin of just over €200/ha, Mr Donnellan said.

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Meanwhile, Oliver Gilvarry, of Dolmen Stockbrokers, told delegates that the euro would continue its weak performance throughout this year. This will be good news for the agri sector, with a weaker euro expected to help exports of beef, sheep and dairy products.

Combined with strong growth in developing economies and China, this is expected to drive on prices for dairy products in particular.

The boost delivered by a weaker euro, as well as a fall-off in export volumes from key competitors such as New Zealand, would leave milk prices averaging close to 32c/l, Mr Donnellan maintained.

There was also a confident prediction of a turnaround in the negative margins that currently face pig producers by Teagasc pig specialist, Michael Martin.

However, pig farmers will be waiting until June before EU pigmeat supplies drop sufficiently to allow pig prices to cover spiralling feed costs. Mr Martin predicted that the breakeven price would be higher than 158c/kg.

Mary Ryan, of Teagasc's forestry unit, told the conference that forestry planting looked set to continue at similar levels to last year, despite reductions in planting grants.

The sector has benefited from strong export growth since the downturn in the construction sector.

The demand for thinnings continues to thrive on increased demand for biomass and wood chip for heating systems.

Ms Ryan said timber prices were down from their high during last year, but remained quite buoyant relative to historical levels.

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