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29 June 2018

2018 - A Difficult Start But Signs of Improvement

Posted By: AIB Business
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There are certain years that remain in farmers’ memory long after they pass and though we are halfway through, there is little doubt that 2018 is a year that will not be easily forgotten by those involved in farming, Tadhg Buckley, AIB Head of Agri reports.

Thankfully the last few weeks’ weather has given a welcome respite and also offered the opportunity for farmers to get back on track after an extremely difficult 6-month period. Looking forward to the remainder of the year the outlook for 2018, in terms of farm-gate prices, is more positive than initial expectations. However, this is only part of the picture as increased costs will impact margins caused by a combination of weather effects (increased feed use and lower yields) and higher input prices (feed, fertiliser and energy).

Looking to the individual sectors, beef price has been on the upward trend since mid-February, with aggregate prices for R3 steers to early June running some 2.9% ahead of 2017 levels at €4.15/kg. Similarly, at €5.80/kg to early June, aggregate sheep prices are running almost 15% above 2017 levels. These should, notwithstanding the seasonal drop likely to come, at least to some extent help mitigate some of the increased expenditure incurred from the challenging Spring period but not cover it entirely given reduced livestock performance and increased levels of feed and fodder consumed.

Although milk price reduced somewhat through end 2017, the year as a whole was a positive one for Irish dairy farmers, with average aggregate farm incomes of €86,000 reported by Teagasc. After a period of downward price trend since, commodity prices have firmed. Notwithstanding, base milk price for 2018 is likely to be in the 31-33 c/litre range. When combined with increased costs due to the inclement weather, and reduced output, incomes on dairy farms will be below 2017 levels.

While margins were higher last year on the back of marginal increases in both yield and output price, the tillage sector has experienced a number of consecutive low margin years. 2018, thankfully, looks like bucking this trend however with green grain prices likely to be 10%-15% higher than 2017 with higher straw prices probable also.

Finally, 2017 was a year of high pig prices, well above those of 2016, until the seasonal decline began mid-year. Matching similar EU trends, Irish pig price, at €1.47/kg to early June, remains c. 13% below the corresponding period in 2017. Increased EU supplies and strong competition on export markets are likely to put further pressure on price, which, when combined with increased feed prices, will impact margins in 2018.

To conclude, 2018 is likely to be a more challenging year than 2017 for a combination of reasons. We are here to help farmers overcome these challenges which are in the vast bulk of cases, short-term in nature and can be solved by working together to find a solution appropriate to each farmers’ needs.

 

Please be aware that all of the views expressed in this Blog are purely the personal views of the authors and commentators (including those working for AIB as members of the AIB website team or in any other capacity) and are based on their personal experiences and knowledge at the time of writing.

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