Rising yields unlikely to offset falling prices

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Fiona Thorne

The old saying 'be careful what you wish for' sums up the markets and income situation on tillage farms.

Things are vastly different from last year, with yields increasing - both in Ireland and internationally - but cereal prices decreasing substantially.

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The overall result is a likely reduction in income levels.

In 2018, the average family farm income on specialist tillage farms was approximately €40,000 - well below the€61,000 for specialist dairy farms.

Irish harvest

Teagasc's provisional harvest report estimates that total cereal production is up by approximately 15pc in 2019.

This is due to a combination of factors, including an increase in winter crop plantings and a favourable growing season.

The yields per hectare at harvest were up across all cereal crops, with spring barley recording the biggest comeback from last year, rising by over 30pc on average, or over 1.8 tonnes per hectare.

Production forecasts

The latest estimates from Stratégie Grains put total global production of wheat, barley and maize for 2019/20 up by nearly 25 million tonnes on 2018/19.

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Global wheat production is estimated to be up by 5pc and barley up by 8pc, but global maize production is down by about 2pc.

The total EU wheat and barley production forecast for this marketing year is up by nearly 20 million tonnes in aggregate.

The wheat harvest has provided mixed results, with excellent harvest results reported in France, but weaker performance in Germany, and central and the southeast of Europe.

Total EU grain maize for 2019/20 is expected to be up on the previous year.

Prices

Based on the global production story, it is not surprising that cereal prices at harvest have moved downwards on 2018.

While the main cereal buyers have not settled on final harvest prices yet, it is likely that prices will be down over 30pc on last year - well below the five-year average.

Likely price movements

If you are looking for indications of price movement in deciding whether to sell your grain now or hold on for another while, there are a lot of unknowns.

Over the past number of weeks the Agriculture and Horticulture Development Board in the UK have noted a number of factors pulling prices down, with the global market increasingly well supplied as the harvest progresses.

More locally, however, limitations on storage capacity could lift prices.

Then of course there is Brexit and its potential impact on cereal prices.

The overall assessment is that the uncertainty will translate into a set of negative consequences for the sector.

Dr Fiona Thorne is an agricultural economist with Teagasc

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