Large On-farm Investment Planned for 2008

Irish farmers are planning to invest €1,124 million on their farms in 2008, according to a survey carried out by the Teagasc Rural Economy Research Centre.

Speaking at an agri-economic conference in Tullamore today, Tuesday, 11 December 2007, Teagasc economist, Liam Connolly said that a survey carried out by Teagasc this autumn showed that over 32,000 farmers plan to invest an average of €34,500 on their farms next year. Farm buildings account for over 80 per cent of this planed farm investment for 2008. This comes on top of a high level of investment made by farmers in their business in 2007. The actual investment in 2007 exceeded that which was planned and totalled €1,390 million. Dairy farmers account for the bulk of the planned investment.

At the Teagasc conference titled ‘Situation and Outlook in Agriculture 2007/08’ short-term outlooks were presented by Teagasc economists for each of the main farm enterprises. Opening the conference, Teagasc director Professor Gerry Boyle said: “Overall farm income in Ireland increased in 2007 but the story of farm income on Irish farms is a mixed one. The improvement in dairy income is extremely welcome and the rise in cereal prices is positive, but beef, sheep, pig and poultry producers face a more difficult market situation.”

Teagasc economist, Thia Hennessy said:”The average milk price for the year is estimated to be more that 25 per cent higher than the average 2006 price. With substantial increases in milk price and only marginal increases in costs, net margins on dairy farms are expected to increase from 7 cent per litre in 2006 to almost 13 cent per litre in 2007. The outlook for 2008 remains positive, albeit not as good as 2007. Net margins for 2008 are estimated to be 10 cent per litre.”

In relation to beef, Teagasc economist Liam Dunne said: “The current year was the first time since decoupling in which Irish cattle farmers were fully released from the knock on impacts of animal based direct subsidy payments, but they simultaneously experienced a year-on-year decline in cattle prices. The overall impact is an estimated decline of more than 10 per cent on the already modest margins. A recovery in cattle margins to about 2006 levels is anticipated next year, driven by the combination of an increase in cattle prices and realignment of the input mix in response to changing costs.”

There has been a steady decline in both sheep numbers and those involved in this enterprise. The number of sheep flocks has declined by a third since 1993. The size of the Irish sheep breeding flock has fallen by 1.27 million head since 2000. Gross margins for both early and mid-season lamb producers are estimated to increase in 2007 and the forecast for 2008 is for a slight increase for mid-season producers while gross margins for early lamb will remain relatively static.

Gross margins for Irish cereal crops this year were significantly higher than in the previous year, however increased grain production both globally and nationally is likely to lead to a reduction in cereal prices in 2008.

Irish cereal prices in 2008 are forecast to be 20 per cent below their 2007 level, but this is still 40 – 50 per cent higher than in 2006 depending on crop type.