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 prices and factory demonstrations have gained increased media attention in recent weeks. The aggregate beef price, at €3.70/kg excluding VAT to end August for R3 steers, is running around 6% lower than 2018 levels and 4.5% behind the five-year average. The challenge, with stagnant EU demand, Brexit and potentially a Mercosur deal on the horizon, is that it’s unlikely there will be any significant improvement in the short-term, bringing with it huge uncertainty for many within the sector.
Pressure on sheep
The sheep sector is also experiencing downward price pressure (-7.7% year-on-year to end August) 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 on-farm milk price. 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, although with some hiccups, generally favourable weather aided the harvest, with strong yields and good quality in many parts. Currently, cereal markets point to a green grain harvest price of between €145 and€150/t.
To finish, looking to the pig sector, prices of €1.70/kg ex VAT at the end of August, were almost 25% 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 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 fever. 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. Allied Irish Banks (AIB) understands 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. Early engagement is key.
For more information visit aib.ie/farming.
*Market data is sourced from Bord Bia and the Central Statistics Office
Allied Irish Banks, p.l.c. is regulated by the Central Bank of Ireland. Lending criteria, terms and conditions apply. Credit facilities are subject to repayment capacity and financial status and are not available to persons under 18 years of age. Security may be required.