Average tillage farm to make a negative margin next year
The prediction comes despite the fact that the market-based net margin is forecast to increase.
Figures presented by Fiona Thorne showed that the increase in world grain stocks should ease grain price volatility in the short term.
The average cereal farmer will make a negative market based net margin in 2017, losing €30/ha after all costs paid - @teagasc— Farmers Journal (@farmersjournal) November 29, 2016
At the moment the futures market is indicating a 2017 harvest price that is 8% higher than this year. Thorne explained that this is due to an expected reversion to trend yields in 2017 after two record harvests worldwide.
The cost of some inputs are showing a reduction in cost for next year, particularly fertiliser and seed. But overhead costs such as fuel will rise.
'There isn't any great driver out there that will bring commodity prices back up' - T. Donnellan, @teagasc— Farmers Journal (@farmersjournal) November 29, 2016
This means that the forecast for gross margins is showing positive signs. For example gross margins in spring barley and winter wheat are expected to increase by over €100/ha, while winter barley is expected to rise by over €200/ha next year. This has a positive effect on net margin too, but the forecast still shows that the average farm will make a negative market-based net margin.
Responding to a question from Rowena Dwyer in the IFA, Fiona Thorne said that “the reduction in the BPS is having a significant impact on family farm income, particularly for those in tillage.”