Teagasc Forecasts Pressure on Farm Incomes in 2002
Issued 11thDecember 2001
Teagasc has forecast a tougher year for farming in 2002 with overall farm income unlikely to reach the level achieved in 2001.
Teagasc economist, Liam Connolly, told a Teagasc conference on the the 'Situation and Outlook for Agriculture' in Dublin today that next year is likely to see some slide in the performance of dairying, sheep, pigs and tillage farming. Beef markets, while more stable than this time last year remain difficult with continuing pressure on margins.
The conference was presented with detailed analysis by Teagasc economists of the performance of the major enterprises in 2001 and the prospects for 2002.
While milk producers received the highest prices ever for manufacturing milk during the past year, a steep rise in production costs resulted in margins being at the same level as in 2000.
According to Teagasc economist, Billy Fingleton, a major fall in market prices for the main internationally traded dairy products will lead to a reduction in producer prices next year. As production costs remain high the result is a serious squeeze on margins. He said net margin per litre could fall to its lowest level since 1991.
In beef production, while the trade in 2001 was seriously disrupted due to BSE and foot and mouth disease, the Purchase for Destruction Scheme and increased direct payments ensured that average margins were just marginally lower than those achieved in 2000.
Economist, Liam Dunne, said that while cattle prices are now more stable than this time last year, beef producers are still facing considerable uncertainty in 2002.
He said farmer margins could be maintained if significant volumes of beef were exported to Egypt and other markets outside the EU and the system of direct payments which applied in 2001 were again adopted in 2002. This involved bringing forward some of the direct payments due in 2002 to the autumn of 2001. Increased participation of beef producers in the Rural Environment Protection Scheme (REPS) and additional headage payments to farmers in the disadvantaged areas would also help incomes, he said.
The Teagasc report states that last year was exceptional for sheep producers with lamb prices up by almost 50% and margins up by one-third. This was due to the exclusion of British lamb from the French market due to foot and mouth.
While buoyancy in lamb prices will not be maintained in 2002, Teagasc says that an expected increase in the EU ewe premium will help to cushion the drop. Margins are likely to be around 10% lower than in 2001.
In relation to tillage farming, economist, Dr Paul Kelly said the good performance of the past two years is unlikely to be maintained. The prospects for 2002 point to a small decline in margins from grain due to increased costs and no increases in prices or EU payments to growers.
He said the recent agreement on sugar beet prices should have the effect of maintaining margins in 2002. Potato growing was the most profitable farm enterprise in 2001 with an estimated increase of over 80% in margins. While margins will drop significantly next year, they are still expected to be well above the 2000 level.
Teagasc Chief Pig Adviser, Michael Martin, told the conference that in 2001 pig production continued to recover from the international slump which affected the sector from mid 1998 to early 2000. Average pig prices last year were higher than at any period since 1996. He said higher feed costs combined with increased environmental and animal welfare compliance costs are expected to contribute to a slowdown in profitability in 2002.
