Farm Ireland

Thursday 22 March 2018

Analysis: It’s a good time to be a dairy farmer, but Brexit means income volatility lurks on the horizon

Louise Hogan

Louise Hogan

It was undeniably a tale of two halves when it came to what farmers had in their pockets this year.

You’d be forgiven for thinking you had donned a pair of rose-tinted spectacles when looking at the headline figures from the Teagasc Annual Review and Outlook, as it depicted an outperforming sector, with farm income surging by around 30pc to €31,900 – a sharp rise from €23,500 in 2016.

Yet it was, as the Teagasc economists cautioned, driven in the main by the “dairy story”.

As the figures show, margins from suckler cows remained relatively stable, beef farmers saw income lift 8pc, while pig, cereal and sheep farmers also saw improved prices.

However, the average market-based net margin in tillage stood at just €50 a hectare – a stark difference from the €1,800/ha net margin in the dairy sector.

None of the other sectors came anywhere close to the dramatic rises in the dairy sector.

After prices plummeted in 2016, many of the country’s 18,000 dairy farmers who had taken out loans for infrastructure to expand in the new, post-quota Europe were showing unhealthy levels of stress.

Yet over a year later, prices were back up and hit an average of 36c per litre. As the Teagasc figures show, dairy farm income soared to €91,000 on average, the highest-ever figure and up €40,000 on the 2016 level.

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However, as the economists cautioned the average farm carries 1.4 labour units, so the figure is the return for family labour employed in the business, plus the major land bank and capital assets used in running the business.

The average figures can also mask that some farmers have only marginally increased their operations, while there are now some major operators, with around 4,200 farmers milking more than 100 cows last year.

It was an “unprecedented” year that saw prices for the now-in-vogue butter shoot up to record highs, while the protein element of milk – the skimmed milk powder – was left lingering in intervention after Europe stepped in to buy it due to low prices.

Yet there are many issues overhanging the agri-sector, not least the concerns of Brexit, with a third of Irish food and drink exports valued at €4.13bn destined for the UK and the future of the stockpiles of skimmed powder awaiting a buyer.

Already, the economists are predicting that milk prices will fall around 10pc in the course of next year.

The importance of climate change and the environment is ever to the fore when it comes to the rapid expansion of the sector, while major labour issues have been well flagged for the dairy sector, with 6,000 people needed to enter dairying by 2025 to keep it operating.

Yet, volatility is the name of the game in the dairy sector post-quota.

Hopefully, some of this year’s windfall is being put away for that inevitable rainy day that is never too far away.

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Irish Independent