A sharp fall in family farm incomes this year has been flagged by economists at Teagasc, as the unprecedented hike in input costs wipes out commodity price increases.

The state body warned of “continued financial concerns” for Irish farmers over the coming months, as high costs continued to exert downward pressure on farm profitability.

An update of Teagasc’s Situation and Outlook for Irish Agriculture 2022 found that drystock and tillage farms will suffer the most severe income losses, with pig producers also badly affected.

The report contends that the continued surge in global dairy commodity markets will largely insulate milk producers from any major income losses. The exception will be dairy farmers who have big volumes tied into fixed milk price contracts.

However, the authors cautioned that weather conditions could significantly alleviate or compound the impact of higher input costs on farm incomes.

Teagasc predicts that the average income on suckler farms will fall by 25% in 2022 as a result of the spike in input costs, while other beef enterprises are forecast to experience income reductions of around 16%.

Sheep and tillage farmers are also forecast to see their incomes fall by around 20%, although the report concedes that it is very early to predict how crops will perform.

Teagasc has estimated that losses on the average pig finishing unit (600 sows) are likely to top €430,000 this year.

“It is estimated that the [pig] sector will return to profitability in March 2023 due to rising pig prices and a stabilisation in feed prices,” the report stated.

The report identifies the recent hikes in fertiliser, feed and energy prices as the primary contributors to input costs.

“Extremely high [fertiliser] prices for 2022 had been expected, on foot of rising European gas prices. The war in Ukraine has seen price increases accelerate further, with fertiliser prices in 2022 up in excess of 200% to 250% on their 2021 level,” the Teagasc economists pointed out.

Fuel costs will remain significantly dearer this year, the Teagasc economists’ predicted, with green diesel likely to be as much as 60% more expensive across 2022.

“Higher fuel prices and inflation in other costs, will mean that the cost of contracting will also rise considerably in 2022,” Teagasc warned.

Feed costs are also forecast to hold at current high levels, due to the disruption to cereal supplies from Russia and Ukraine.

While the Teagasc report concedes that Irish farm output prices have strengthened, it contends that these increases are lagging behind the hikes in production costs.

“It remains to be seen to what extent the increase in output prices will compensate farmers for the rise in their production costs. The net effect on farm incomes is likely to be sector and farm specific,” Teagasc stated.