The gross margin for the average lowland flock in 2018 remained relatively unchanged at €693/ha, despite a jump of nearly 20% in the direct costs of production.

According to the Teagasc Annual Review and Outlook 2019, farm incomes were hit by 15% across the board in 2018.

Feed usage

The increase in direct costs for sheep farmers was driven primarily by an increased feed usage in response to poor weather conditions. Feed usage increased by 28% in addition to feed prices being 5% higher.

Receipt of Sheep Welfare Scheme (SWS) payments along with higher lamb prices, estimated to be up 6% on 2017 levels, boosted margins for sheep farmers.

In the absence of the SWS, gross margins in 2018 would have decreased by 13% instead of just 3% compared with 2017.

Despite gross margins remaining steady, increased overhead costs will see net margin decline to €182/ha.

Positive 2019

Forecasts for 2019 are largely positive for the sheep sector as a return to normal feed usage should lead to a reduced cost of production. This is despite a predicted increase in fertiliser prices of 16% on 2018 levels.

Gross margins are predicted to rise by 10% to €764/ha.

Lamb prices are predicted to remain unchanged, while the number slaughtered will be down slightly.

The increase in gross margin will carry through to net margin, which is expected to increase by 37% to €250/ha.

Farm incomes drop 15% - Teagasc

Sheep Welfare Scheme absorbs effect of 2018 concentrate usage

The poor weather conditions in 2018 saw a dramatic rise in feed usage on Irish sheep farms but payments under the Sheep Welfare Scheme prevented a major income drop.