Agri Market Review & Outlook
2019 proves a mixed year for the sector as Brexit uncertainty looms writes Tadhg Buckley, AIB Head of Agriculture Sector.
As the Brexit storm clouds loom and the possibility of a no-deal exit still a possibility, 2019 to date overall has been a mixed year for the sector. On the one hand, favourable weather conditions have boosted livestock performance and crop growth in many parts of the country (leaving pits and yards across the country stocked with plentiful supplies of fodder reserves for the coming winter) and resulted in a return to more normal feed usage levels. On the other hand, output prices are under pressure in a number of sectors and the price of some of the main inputs have also increased. With the exception perhaps of dairy and pig farming, aggregate market incomes may well be below 2018 levels for many.
Taking a closer look at the individual sectors, beef price and factory demonstrations have gained increased media attention in recent weeks. While not part of ongoing discussions, aggregate beef price, at €3.65/kg excluding VAT to mid Sept for R3 steers, is running c. 7% lower than 2018 levels. The challenge, despite welcome additional bonuses and QPS eligibility concessions, is that with stagnant EU demand, Brexit and potentially Mercosur on the horizon, is that it’s unlikely there will be any significant improvement in the base price in the short-term, bringing with it huge uncertainty for many within the sector. The sheep sector is also experiencing downward price pressure (-8% year-on-year to mid-September) due to reduced EU demand for heavier lambs, yet trade for smaller store lambs remains particularly strong as grass buyers and diversifying beef buyers put a floor under price.
Turning to the dairy sector, increased on-farm supplies (+10% H1 2019 vs H1 2018) and more normalised feed expenditure should help alleviate, at least to some extent, the lower milk price received, currently running at 27-29 cent/litre excluding VAT. The danger, despite constrained EU and global supplies, is that on-farm milk price may slip even further in the months ahead. Similar to the Beef sector, the outcome of Brexit could also have a negative impact on the dairy sector which is also significantly exposed to the UK market (although not as heavily as Beef).
2018 saw a welcome increase in margins for tillage farmers following a number of difficult years. In 2019, early winter crops harvested well, with both high yield and quality reported. The inclement weather in recent weeks has however impacted harvesting, yield and quality in many parts, with significant lodging also reported. Currently, cereal markets point to a green grain harvest price of c. €145-€150/tonne.
To finish, looking to the pig sector, after a very difficult year in 2018, pig price has been on an upward trend through much of 2019. Current pig prices, at €1.75/kg excl. VAT early September, are c.27% above 2018 levels, with some further uplift possible as seasonal demand exerts an influence alongside constrained EU supplies and strong Chinese demand. When coupled with perhaps lower feed prices, 2019 looks to be a very strong year for the pig sector. Much of the upward price trend has been due to the African Swine Flu. Nationally, it is imperative we endeavour to keep the disease out of Ireland.
To conclude, the outlook for the remainder of 2019 is heavily predicated on Brexit, the outcome of which may well present challenges to some sectors of Irish Agriculture. We understand that these challenges may mean some of our customers will experience cashflow difficulties. We are here to help, and will work with farmers on a case by case basis to find the most appropriate solution for individual needs. The long autumn evenings provide us opportunity to review and reflect on farm performance – both financial & technical – and to put our plans in place for the weeks and months ahead. Early engagement is key.
* Market data is sourced from Bord Bia and the Central Statistics Office
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