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Dairy bounce but grainmen stay in the red

Dairy farmers can look forward to a better year but incomes are not expected to return to "normal levels" until 2011.

However, although cereal prices are expected to recover in 2010, the net margins of the average producer will remain negative. Higher grain prices and lower costs will aid recovery in the tillage sector this year, Teagasc predicts.

But it may be 2011 before the sector returns to normal levels of profitability.

Darragh Clancy of its Rural Economy Research Centre in Athenry said that although there was considerable uncertainty regarding prices for the 2010 harvest, current futures prices suggested that cereal prices would be slightly higher than they were in 2009.

The gross margin per hectare on cereal farms is estimated to have decreased from €345/ha in 2008 to just €76/ha in 2009.

However, Mr Clancy indicated that there was some good news on the horizon.

"The price of key variables such as fertiliser, land rents and seeds are forecast to decline in 2010," he told the Outlook 2010 economics conference in Portlaoise.

"These forecast movements in input and output prices are expected to have a positive effect on margins for farmers in Ireland in 2010, relative to 2009."

Teagasc also predicts a recovery in dairy farmers' fortunes for the coming year. A recovery in dairy prices is already underway and Teagasc says an average milk price of 26c/l or higher may be achieved if dairy markets are in good shape through the peak milk production months.

However, dairy specialist Trevor Donnellan warned that the high level of dairy stocks and the uncertainty about the timing of their disposal made it difficult to predict milk prices.

"Production costs should continue to decrease but they will still be considered high relative to the cost level that prevailed in advance of the boom in commodities in 2007 and 2008.

"Therefore the recovery in farm margins in 2010 is likely to depend almost entirely on the extent of the recovery in farm-gate milk prices," he said.

Irish Independent