Farm Ireland

Thursday 23 November 2017

Farmers counting the cost of weather and prices double whammy

Eddie Punch (left) pictured with Patrick Kent at the 2016 ICSA Annual Conference. Photo: Michael Donnelly.
Eddie Punch (left) pictured with Patrick Kent at the 2016 ICSA Annual Conference. Photo: Michael Donnelly.

Louise Hogan and Derek Casey

Farmers will be counting the costs of spring 2016 for months to come, as banks and farm advisors predict a severe tightening of cashflow.

Farmers suffered a double whammy when bad weather forced the purchase of extra feed stocks at a time when prices in some sectors were stagnant or falling.

Some sectors have been particularly hard hit with milk and grain prices plummeting this year.

Advisors are now reporting that farmers are looking at delaying major capital projects and building work until prices improve.

Cork agri advisor Mike Brady said there were signs of a reduction in capital projects, with a number of his clients delaying spending on infrastructure where possible.

"The chequebooks are firmly in the drawer - they're not even in the pocket or in the jeep," he said. "Fellows are only buying tractors when they have to. People are putting off capital expenditure but are not ruling it out longterm.

"The average age of a farmer is 58 or 59 and they have been through cycles, good and bad, before. The price of milk can't stay where it is, as if it does there won't be milk produced in the world."

He warned cashflow on dairy farms was tight after three months of around 25c/l. "This time next year we will see real tightness if it stays at that for 12 months," he said.

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Teagasc economist Trevor Donnellan said the figures are likely to show a rise in feed usage from January to April due to the slow grass growth.

"Dairy farmers will feel they are getting pinched from both sides with lower milk price and higher costs of production," he said.

Mr Donnellan said there has been a reduction in fertiliser prices of 5pc compared with last year, with electricity and feed down slightly at 3pc and the drop in the price of a barrel of oil bringing fuel down 12pc.

However, the IFA says further savings on the price of fertiliser are being held back by high EU tariffs.

The ICSA's Eddie Punch said he expects farmers to move slowly to draw down finance for projects approved under schemes such as TAMS II.

"When farmers batten down the hatches the effect is felt across the rural economy," he said. "Discretionary spending, such as repairs and maintenance, are all being examined."

Meanwhile, the FTMTA reports tractor sales were up 12pc in January and February before dropping 4pc in March, with 840 registered in the first quarter compared to 779 last year.

The FTMTA's Gary Ryan said it expected registrations to be quieter during April, with weather also a factor, with around 1,800 sales expected by year end.

However, he said trade was far tougher in the UK which was also feeling the impact of prices combined with the Brexit uncertainty.

He said sales of grassland machinery have been slower so far but it was "impossible to sell machinery to people when they can't use it".

Indo Farming