The status for each of the sectors, dairy, beef, sheep and tillage, is outlined.
Starting with dairy, the current situation is positive, milk prices are up, with dairy farmers having enjoyed resurgence in milk prices this year, now hovering around the 34c a litre mark, up from average prices for 2016 of 25c-29c.
Meanwhile, feed and fertiliser costs have remained low, and milk volumes continue to expand, potentially topping 6% growth for 2017.
For beef farmers, the current situation is described as negative.
Output prices are lower than 2016 levels, but profit margins are expected to hold relatively well, because slightly lower costs of production are experienced this year.
For sheep farmers, the impact of Brexit, and more particularly, the drop in the value of sterling compared to the euro, is affecting prices attainable on the UK market,
Nonetheless, increases in farm efficiency are expected to deliver an improved margin.
At the time of printing of their report, Teagasc noted improving market sentiment for an expected uplift in harvest prices for green grains. But this seems to have unravelled over more recent weeks. However, most green prices will not be set until late September, or October.
With the expected increase in straw prices and a slight decline in costs, it is hoped that tillage farmers would fare better in 2017 than 2016.
On the global economy, Teagasc highlight new protectionist trade policy positions as a source of concern for future growth prospects.
It is important for farmers to understand prospects for their own particular enterprises.
To be forewarned is to be forearmed.
The reality is that the observations of the current situation and the outlook are just snapshots in time, and the outcome for any sector may vary significantly from the projections.
Planning ahead can help you take the shocks out of the system, and develop mitigation strategies.
For instance, dairy farmers know the milk price is relatively strong at present, compared to the historical average.
Over the medium term, strong milk prices will encourage additional supply, especially so when feed prices are relatively low (and falling).
As the saying goes, nothing fixes high prices like high prices.
The dairy sector is almost unique in that there is a long lead in to ramping up production. Typically, it takes two to three years for a farmer’s change in breeding strategy to materialise into additional heifers calving down, and producing extra volumes of milk.
In 2016, many farmers in the EU scaled back production, and others are only just emerging from the extended depression of milk prices throughout 2015 and 2016.
Therefore it will take a while for the change in sentiment to feed into additional production.
This brings us neatly to the opportunity for dairy farmers to lock in prices through fixed milk contracts.
Two major players in the milk processing market have announced options for their farmer members to lock in prices over three-year or five-year contracts, at a price of approximately 31c/litre, including VAT.
Given the current milk price of 34 cent, farmers may be slow to commit to such deals, seen as negative compared to the current prices attainable.
As a dairy farmer, you should ask yourself can you afford to produce milk without a fixed milk price contract?
What would a price of 25 cent a litre or less do to your business?
Farmers can mitigate risks of low output prices in other ways, such as retaining sufficient cash reserves in the event of another price shock.
For tillage farmers, the high prices of 2012 have been followed by five year of stagnation.
Oil prices tumbled from a high of $125 in 2012 per barrel to less than half of this price for 2015 and 2016.
Cheap oil prices drive cheap food prices, because maize and other commodities are diverted from bio-fuel production into the feed markets, and cheaper oil drives additional fertiliser usage. While the Teagasc document is useful for framing where Irish agriculture is at, it is perhaps most interesting to note the huge variety of external factors on the horizon, from Brexit to protectionist trade policies, and the expansion of shale oil production, which will shape the prospects for Irish agriculture over coming years.
Source: Irish Examiner
Link: http://www.irishexaminer.com/breakingnews/farming/fixed-milk-prices-offer-a-rare-certainty-in-these-risky-times-803225.html
