Farm Ireland

Monday 24 July 2017

Poor weather elsewhere brings ray of sunshine here, but we can't rely on this

John Shirley

At the start of this year, dairying was the only sector of Irish farming that looked set for a price and income boost. And nobody was begrudging a bit of good fortune going to a sector that endured such pain in 2009, where farmers work so hard and that is such a big contributor to the overall farming economy.

But the 2010 dice have also fallen more kindly for sheep and tillage farmers. Even beef prices improved after a very slow start.

All sectors need money, but the tillage farms were badly dented by both weather and price in 2009. Previously strong farms were sliding into financial trouble.

Tillage was also the business that looked least likely to experience a windfall this year. That was until world weather delivered its direct hit on the big Canadian and Russian harvests -- the Canadians couldn't plant and the Russians couldn't harvest the wheat crop.

And like the fellow who had several birthdays at once, the weather came good for the 2010 Irish harvest, as well as price. I didn't get the cheque yet, but I expect my winter wheat return to be nearly €300/ac higher in 2010 than it was last season.

Sheep farming, too, has hit a little purple patch. Scarcity was beginning to put a floor under the sheep price, especially in the trade for cull ewes since last autumn, but nobody could have expected the factory lamb price to jump in August and not a foot-and-mouth disease scare in sight.

At the Sheep 2010 event in UCD in June, IFA sheep committee chairman James Murphy predicted the floor price for factory lamb for summer 2010 at €4.20/kg. That was his official stance. Privately, he hoped that prices wouldn't dip below the €4/kg. The happy reality is that most farmers got €4.40 to €4.50/kg for lamb in recent weeks.

That said, sheep farmers needed every cent of this price. Nobody could begrudge them their break. On the strength of one good season, they will hardly rush out to buy a Rolls-Royce or take a cruise to Bermuda.

The question now is how sustainable are the improved prices?

In this respect, sheep meat should be well placed. Muslim demand is providing a strong base, which is evidenced in the record prices for cull ewes. I wonder how much of the present strong price is due to the Ramadan and Eid festivals this year falling in August and September, rather than later in the year. Sheep farmers can thank Allah for Europe's growing Muslim population.

Across the world, there is a structural sheep deficit. In New Zealand, the sheep flock at 34-million-head is back to the level of 60 years ago. The Australian flock is down to the level it was in 1905. Neither country anticipates any immediate change in the downward trend. So, hopefully, the long-suffering Irish sheep farmer gets more than one good year.

In its 2008 forecast for farm commodities, Teagasc's economics unit FAPRI forecast a very strong future for EU grain farmers, predicting that energy crops would eat into the world grain supply. Then came the big world harvests of 2008 and 2009.

Others believe that there is huge world capacity to increase cereal output and that this can be switched on within a 12-month period. Given the big swings in grain price, large growers (and there are lots of these) can reap serious profits in the better years.

FAPRI also predicted huge volatility in the prices of all farm commodities in the absence of any meaningful EU food policy. This is certainly being borne out.

Irish grain producers will be dependent on weather disasters elsewhere to boost prices. It's a case of waiting for the best years and hanging in there in the bad ones, and hoping that the market for straw remains strong. This is not a secure basis to plan a future.

Plus, Irish grain farmers are losing out on the GM technology. Maize yields continue to forge ahead, making Irish wheat and barley less competitive.

Most forecasters predict a good future for milk production. FAPRI maintains that the Irish milk price in seven years' time will tend towards 30c/l. The one good thing about Irish milk is that we are competitive at farmer cost level and let's hope that costs are way less than 30c/l by 2017.

However, the last few years have shown how milk prices, too, can swing widely. And as is the case with the other products, there's damn all the Irish farmer can do about it. Watching the macro prices is one matter. Getting these prices back to the farmer is another.

The overwhelming issue for Irish farmers (and for farmers everywhere) is their declining share of the end price of the food products. Incredibly, despite us being a major food exporter, and having low commodity prices, a recent Eurostat survey showed Ireland to have the second highest food and beverage prices in the EU.

In Ireland, the margin in the middle between the farmer and the consumer is growing inexorably. I believe that within the Tesco group, Ireland is known as Treasure Island. No wonder.

The response of the Irish Consumers Association was that we need another large supermarket group to come to Ireland. My fear is that having yet another retail multiple in an overcrowded Irish retail market would mean just another buyer to screw the farmer.

Transparency in retail marketing is non-existent. When wheat prices went up in 2007, this was used to jack up bread prices. When wheat price fell, did the bread come down? No. When the milk price shot up in 2008, this was used to bump up cheese prices in supermarkets. When milk prices to the farmer fell, did cheese prices fall? No.

Scarcity has given Irish farmers a price lift in 2010. To get a more permanent boost, fundamental structural flaws, such as the power of the giant multiples, must be addressed.

Irish Independent