Irish agriculture is continuously changing and, as we look forward to 2020 and beyond, farmers and the farming sector will face further challenges, which they will have to adapt to and further opportunities which must be grasped. But first it is worth reflecting on what has happened in recent years.

Since the Food Harvest 2020 report was published, considerable change has already occurred. The value of Irish agricultural output has increased significantly to €6.1bn in 2013, but so too has the cost of production, meaning that the aggregate income in agriculture, or the income accruing to farmers has remained stubbornly static in recent years.

At the same time, the value of Irish food exports has increased considerably, albeit much of this has been down to commodity price inflation, rather than an increase in production volume, or a switch into more value-added products. Putting the focus on increasing agricultural output value as a measure of the sector’s economic performance is misplaced. Increased output may not result in improved farm incomes unless it is accompanied at the same time by productivity improvements.

There is a growing dichotomy between the fortunes of dairy farmers and the rest. Dairy incomes have been rising, while incomes on other farms remain static. Drystock farms are heavily dependent on subsidy payments, which make up a large share of the income on beef and sheep farms. Overall, subsidy income has remained static in recent years.

While profitability is just one of numerous motivators that farmers respond to when making decisions on enterprise mix and land use, it is one of the most important.

Table 1 outlines the economic returns from different farm enterprise in net terms. It looks at the net profitability per hectare generated from production and excludes subsidies.

Figure 1 looks at overall family farm income for farms with different farming systems as measured by the Teagasc national farm survey (NFS).

Both give an indication of the economic motivation for farmers’ future decisions.

Developments post-2015

Irish agriculture will remain mainly based on grass-fed dairy, cattle and sheep systems and these sectors together account for 87% of agricultural land area and 87% of Irish farms. The decade ahead will see the expansion in dairy cow numbers continue due to the removal of milk quotas and the high profitability of the sector in comparison with other grass-based systems, as outlined earlier in the article.

Ireland’s unique grass-based milk production model is ideal for the post-quota environment. It is competitive, profitable, resilient and sustainable. Most of the expansion will come from existing milk producers, with the latest results from the Teagasc NFS showing that 60% of existing dairy farmers intend to expand their production in the two years following the abolition of milk quotas. It also shows that less than 1,000 (1.5%) drystock or tillage farmers may convert to milk production in the next three years. An even smaller number of farmers who previously went out of milk are thinking of re-entering the sector.

These plans imply a growth in milk production up to 2017 of about 18%. This level of planned expansion is in line with Food Harvest 2020 targets and the existing cohort of 18,000 dairy farmers will be the ones to drive milk production. Data on the numbers of replacement dairy heifers currently on the ground would support this level of expansion.

The relatively low number of converters to dairying is not surprising, despite the gap in profitability between dairying and other enterprises. Barriers such as financial capital, human capital, land availability and farm fragmentation are very real.

To consider converting, a particular skill set to run a successful dairy farming operation is required. In addition, the enthusiasm of youth, an available land block of sufficient scale, a desire to farm full-time and the ability to put together and stick to a realistic expansion plan are all important. The support of independent advice and research is also an important consideration.

Sucklers

In spite of milk quota removal, and increased numbers of dairy cows, it’s not anticipated that there will be a dramatic increase in the total cow and overall cattle numbers in Ireland by 2020. It is difficult to see Irish suckler numbers being sustained due to low profitability. If there is a long-term solution to the low profitability in Irish beef, it lies in increasing the scale of beef farms. It is difficult to see how the market could deliver an outcome that allows beef farmers to earn a full-time income on small farms.

Over 90,000 people currently have a cattle enterprise. Therefore, producers will continue to need to combine beef production with off-farm income, or else develop a beef enterprise at a much greater scale than the typical suckler farm at present.

In this regard, some of the challenges associated with dairy expansion, such as access to land, are again relevant. As dairy farmers increasingly focus on milk production, the availability of more male animals from the expanded dairy herd will provide opportunities for specialised beef producers to scale up and achieve adequate incomes.

Tillage

The Irish tillage crops sector is likely to remain similar in terms of overall size. Ireland is likely to continue to be a net importer of cereals due to a combination of our climate, farm size, economics of the enterprise and the fact that much of the land is unsuitable for tillage operations.

The number of full-time tillage farmers in 2020 will be about 1,000, with 11,000 others involved in tillage and energy crop production at some level. There are currently around 350,000 hectares under crops.

The agriculture sector in Ireland will remain significantly different to that of much of continental Europe where crop production dominates. In Ireland, livestock and milk production will continue to command most of our land base.

Sheep

The ageing population of sheep producers is an issue for the future development of the sector. The national flock has contracted annually between 1992 and 2012 and is currently around 2.5 million ewes. In the last two years, numbers have stabilised. Average flock size is just over 70 breeding ewes per flock, with just one fifth of the 34,000 sheep producers having a flock of over 150 head.

This places sheep as a secondary enterprise on those farms where sheep production occurs. The overall sheep sector is likely to remain more or less static between now and 2020.

White meat

Global demand for meat products is anticipated to increase and the two meats most likely to benefit from that are pig and poultry meat. However, from an Irish perspective, we do not have a natural advantage in monogastric agriculture, because we are net grain importers. This means Irish producers face higher feed costs compared with competitors in other countries.

We can only compete by having bigger and more efficient pig and poultry farms than our competitors internationally. Productive efficiency will continue to improve as farmers target more pigs reared per sow and higher carcase weights. For these reasons, the sector is likely to grow modestly to meet expected growth in domestic demand for pig and poultry meat.

Input trends

Inputs of feed and fertiliser are likely to increase, particularly on dairy farms as milk production expands. The quantities of artificial nitrogen used per hectare had been declining from 2000 to 2012.

This could be partly due to more efficient use of slurry or partially due to the rising price of nitrogen. In 2013, nitrogen (N) use rose again, most likely as a reaction to the experience of the fodder crisis and as farmers worked to rebuild stocks.

The expected increased milk production will lead to more N being used. Milk production has an N requirement per hectare that is typically three times that of beef systems. Feed use will be influenced by the ability of Irish farmers to grow and utilise more grass. Feed usage is likely to vary from year to year, but may trend upwards as farms become more intensively stocked and if land availability is an issue.

Grass production was two tonnes per hectare higher in 2014 than 2013. The effective utilisation of Ireland’s grassland will greatly benefit from the establishment of PastureBase Ireland, which will enable Ireland’s dairy farmers to readily benchmark their performance in grassland management.

Land base

Ireland has an area of 6.5 million hectares, of which about 4.5 million hectares is agricultural land. Eighty-one percent of agricultural land is grassland, with a further 11% classed as rough grazing.

This is the production base for our dairy, beef and sheep livestock systems. Eight percent of agricultural land is devoted to crops. Forestry occupies 11% of the total land area.

In the years ahead, more land will be devoted to specialist dairying. The current land area dedicated to dairying is 600,000 hectares. This could increase by up to 150,000 hectares with dairy farmers exiting drystock production and from those who convert from beef. Forestry area is expected to grow by 1% and to account for 12% of total land area by 2020.

These changes in land use are significant, if you consider that just one quarter of one percent of Ireland’s land is sold annually and just 17% of land is rented. Teagasc is working with farmers on different types of collaborative farming arrangements, through partnerships, share farming arrangements, contract rearing, and long-term leasing, to improve the availability of land to farmers wishing to develop. The recent announcements in the Budget were very welcome.

The fact that Ireland was successful in negotiating minimal change to the CAP payment system means that the impact of most aspects of the CAP reform, with the exception of milk and sugar quota removal, should be quite insignificant for the overall Irish agriculture sector. There are obviously changes to individual’s subsidy payments, with some gaining and some losing.

In summary, by 2020 there will be more cows in Ireland, certainly more dairy cows and probably fewer suckler cows. Dairy production will become more intensive, while beef production will probably be less intensive. These changes will mean that more fertiliser will be used and more animal feed may be needed. The crops, sheep and pig sectors will remain similar to current levels.