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IFA optimistic on price prospects for the year ahead

Strong prices for farmers are predicted to continue into this year. The upbeat forecast comes from the IFA's annual review, despite the easing in international commodity prices.

The report highlights beef as one of the commodities most likely to continue on an upward trend due to a deficit in supply into the EU market.

However, it warns that the major threat for Irish agriculture in the coming year are the ongoing Mercosur discussions between the EU and South American countries.

It also points out that current financial turmoil that has gripped the euro will be a double-edged sword.

While a weak euro will make Irish food exports cheaper in countries outside the EU, imported inputs will be more expensive. Depressed economies both at home and in our biggest export markets in the UK and EU also threaten to dampen prices.

However, Irish farmers managed to side-step much of the 10pc hike in input costs courtesy of the favourable weather last year. Good growing conditions allowed farmers to reduce fertiliser usage by 7pc and feedstuffs by 2pc.

Combined with sharp increases in prices and bumper yields, farm incomes increased by more than 20pc last year.

This has resulted in a halt to the five-year decline in the sector's bank deposits coupled with a slight increase in borrowing, representing greater on-farm investment. While farm-related borrowing fell by more than €1bn during the Farm Improvement Scheme in 2009, it settled back at its historical average of €4.5bn in 2011. This equates to average farm investment of nearly €6,000 a year. While grant aids made up nearly 75pc of this figure in 2009, this has fallen to 25pc in the most recent data. With another €12.4bn to come out of exchequer spending over the next four years, this will keep farm schemes under further pressure for cuts and weaken domestic demand.

The report claims that the reductions in the ECB headline interest rate and the recent announcement that it will provide almost unlimited funding for the European banking sector for the next three years will ease the availability of credit and any further increases in the cost of borrowing.

While it was a good year for the majority in the farm sector, the IFA also highlights that the numbers of beneficiaries from the means-tested Farm Assist scheme reached a record high of 11,300. This is a 50pc increase since 2008. The average payment through this scheme was €190/week last year.

It also shows that the estimated average farm income of €21,500 is still less than half of the €46,400 in the public sector. When inflation is factored in, the IFA calculates that total earnings have fallen in real terms by nearly 30pc since 1995.

Indo Farming