Monday 22 January 2018

Our farmers must keep their ears firmly to the ground

Darragh McCullough

Darragh McCullough

I WAS at a dairy farmer meeting last night when one of the men present said his favourite blog had posted that US wheat bushel prices were below the $5 (€3.9) mark for the first time since 2010.

Another remarked how he had been chatting with his New Zealand friends, who had informed him that cows had overwintered well after a drought last year that sliced more than 10pc off their national milk output. He reckoned the Kiwi's were ready to blow the lid off the milk tank with output over the next year.

The 24-7 flow of information into farmers' phones and email accounts has shrunk the world of food production. If anything, they'll need more of it in the years ahead.

Milk, beef and grain prices have all been at or close to record highs over the last year or two, largely on the back of weather-related events that have thrown production off target in various parts of the world.

It is also fuelled by a constantly growing global demand. In the case of dairy products, this equates to a 2pc annual increase. This is an additional 10 million tonnes of product every year.

This growing demand is underpinning governmental and industry plans to boost output from the Irish farm sector by up to 50pc by 2020.

It is also much of the reason behind the record attendance of farmers at the State's agricultural advisory headquarters in Cork last week.

The Teagasc Moorepark event attracted thousands of farmers who were told that even a 40pc increase in output here over the next 10 years would only result in an extra two million tonnes of product – "a drop in the ocean" in the words of Teagasc's head of dairy research, Padraig French.

But farmers are wary. In 2008, record milk prices were widely heralded by food analysts as "the end of cheap food".

But the 40c per litre farmers received for milk that year was followed by a miserable 20c the following year. Overproduction, demand 'burn-off' and slowing economic growth all contributed to a price that didn't cover the cost of production.

Industry analysts predict a 'soft landing' for prices next year. Rabobank's Tim Hunt said in a recent market review that the fall-off in dairy prices was "likely to look more like a deflating than a puncturing of international prices".

But farmers know if it takes little extra demand to shunt price moves into overdrive, so even a small dose of pessimism could send prices spiralling the opposite direction.

Hence all that talk about the US and New Zealand. The US may have the biggest bearing on the international picture. There was a time when Wisconsin was known as the 'dairy state' but the real action has now moved to corporate 1,000-cow-plus feedlots in the likes of California and Idaho.

They are less dependent on weather for growing grass. Instead they are reliant on grain and by-products. So when the price of grain falls, they can turn the tap on.

With good growing conditions and the biggest acreage under maize since 1936, the US looks set to smash previous records for grain yields in 2013. That's why bushel grain prices have slumped to $5.

Ambitious national targets for the Irish farm sector are laudable but farmers need to keep an eye on those blogs and phones if they want to be sure to weather the ups and downs of the road ahead.

Irish Independent

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