The Teagasc Annual Review and Outlook was published recently. The outlook previews what might be expected to happen in 2018. In this article, Jack Kennedy uses the information published to cast an eye out over the Teagasc team’s predictions for 2018

Global economy

Globally, the Teagasc economist team predicts that the euro will strengthen against the dollar and that sterling will continue to weaken as the UK economy continues to struggle. Overall, the outlook is positive for Irish agriculture, as emerging economies continue to grow and demand more protein.

Margins in 2018

Margins will vary, according to the economists – dairy margins back as milk prices slide, beef margins up as prices go up, sheep prices down, tillage unchanged and pig price down. Like every year, prices vary depending on market supply and demand, which varies so much that it is almost impossible to call.

BPS

Unchanged

Input costs

Slight upward pressure, according to the experts.

Feed prices

Slightly up towards the end of 2018.

Protein demand

Up for dairy, but flat at best for meats.

Irish unemployment

To fall to 5% – hence hard to get people to work in agriculture.

Weather

Assume the normal, but, as we well know, it all depends on what rain falls and when it comes that can make or break a good year.

Eurozone inflation

To remain low.

Oil prices

Slight lift, but still much lower than where it has been in the past.

Fertiliser prices

Slight lift on 2017 prices, as we have already seen a slight lift in early nitrogen quotes for 2018.

Overall average

National Farm Survey farm income forecast to be down 6% on 2017 incomes.

Summary

It’s good and necessary to see Teagasc making a call on it for 2018, but, as we all know, average figures or average estimates can be as far wrong as they are right. The biggest unknown is obviously the weather, because the dependency on inputs and hence margins varies so dramatically depending on rainfall levels.

Last year, the Teagasc expert team predicted dairy prices and volumes would go up relative to 2016 and they did. That was already happening by December 2016, so it was rock solid and hard to go wrong on that prediction. They predicted beef prices would go down relative to 2016, sheep would be stable, pigs down and tillage prices up.

In effect, what happened in 2017 was beef prices went up slightly, sheep went down rather than stable, pig prices went significantly up, not down, and tillage prices were more or less stable for the fourth year in a row. So as you can see, the prediction game is not an exact science and all the researchers can do is use the information available to make predictions.

Political decisions, weather events, or any number of other events can make a fool out of the best economist. Work out what is best for your existing farm resources, within your control, and de-risk your business to give you more consistent returns. By all means, watch what is happening globally, but don’t make big changes based on one-year predictions.