As demonstrated by the fodder crisis of 2013, and the fall in product prices in 2014, price and cost volatility, coupled with the impact of severe weather events, remain a challenge for the primary agriculture sector.

There is a requirement for all involved in the agri-food sector – farmers, industry and policymakers – to develop long-term mechanisms to mitigate the impact of volatility on farm enterprises.

The outlook for product prices in 2015 is largely for stability or for a slight recovery for the beef, sheep and grain sectors, with a negative outlook for dairy prices in the first six months of the year, in particular, due to continued strong supply in excess of demand growth. For the pigmeat sector, the possibility of continued closure of the Russian market is a significant risk to price prospects.

High input costs continue to put significant pressure on farm profitability. In 2015, the expected continued low oil prices should result in a reduction in fuel costs, while feed prices should remain largely unchanged, due to the low grain price at harvest 2014.

Access to credit

Access to credit remains a key issue for the day-to-day running of, and investment in, farm enterprises. In 2015, it is expected that a significant number of farm enterprises, particularly in the dairy sector, will come under increased cashflow pressure. The anticipated superlevy bill will add to this. It is critical that there is full engagement by the banking sector to work with farmers and to provide flexibility on loan products and repayments.

With the continued negative outlook for growth in the euro area and the relatively improved position of the Irish banks, it is not expected that there will be any significant movement in interest rates in 2015, with the possibility of a slight reduction in rates, as the cost of borrowing for the Irish banks should continue to fall.

Of interest to farmers and other small and medium enterprises (SMEs) will be the impact the Government’s Strategic Banking Corporation of Ireland (SBCI) will have on the availability of credit in 2015. The SBCI will offer long-term working capital and capital investment finance through both the retail banks and other non-bank lending institutions. The purpose of the SBCI is to offer more flexible products to SMEs and farm enterprises with longer maturity and capital repayment flexibility than currently offered by the mainstream banks and to offer lower cost funding to financial institutions, which will then be passed on to SMEs. With significant planned investment on farms with the abolition of milk quota and the rollout of TAMS, it is expected that there will be strong demand from the farming sector for matching funding via the banking system over the coming years.

General economic outlook

The outlook for economic growth in 2015 is largely positive. However, some uncertainties remain due to the openness and small size of the Irish economy, as it can be affected significantly by the growth prospects of its main trading partners. On the positive side, the UK and US economies, which account for 40% of Irish exports, continue to report strong growth and are projected to grow by a further 3% in 2014. By contrast, the eurozone (which is the market for a further 40% of Irish goods), continues to flounder, with the most optimistic projections for growth of about 1% next year.

At home, falling unemployment appears to be finally beginning to contribute to an increase in consumer sentiment. Within the domestic economy, the construction, manufacturing and services sectors continue to report an increase in activity. The combination of these factors should lead to continued positive economic growth and a further fall in unemployment in 2015. The outlook for continuing low oil prices into 2015 is a positive for Irish consumers overall (both households and enterprises), and may encourage increased expenditure elsewhere, leading to an increase in domestic demand for goods and services.

It is likely that the euro will continue to weaken against the UK and US currencies, with an expectation of weaker growth prospects in the eurozone (potentially prompting significant action by the ECB, in the form of quantitative easing, to stimulate the real economy). A weaker euro will have a positive impact on the value of Irish exports, including agri-food exports. However, it will also make imports of goods and services from the UK or US more expensive, increasing costs of production.

CAP implementation

The full implementation of the new Common Agricultural Policy (CAP), including the rollout of the Basic Payment System and the implementation of the Rural Development Programme will have a significant impact on farm incomes and payments in 2015.

The continued delay in agreeing clear qualifying measures for greening has created a lot of uncertainty for farmers in the tillage sector. It is critical that the greening criteria are finalised in early 2015 and that there are no delays to the 30% greening payment at the end of the year.

In Rural Development, the approval of Ireland’s Rural Development Plan at EU level must be prioritised in early 2015, thereby allowing the opening of new programmes, which will provide a critical support to farm incomes, in particular GLAS. The farm income figures of the past five years have demonstrated the negative impact on incomes in the drystock sector arising from the closure of schemes such as REPS.

In addition, farmers with Basic Payments above the national average will experience the first of five cuts to their payments, while farmers with payments below 90% of the national average will receive the first of five increases to their direct payments. The young farmer top-up will be allocated for the first time in the 2015 payments. All of these changes will affect the income of individual farmers in 2015.

International trade talks

The main focus of EU trade discussions in 2015 will be on the EU-US negotiations on the Transatlantic Trade and Investment Partnership (TTIP). While there have been seven rounds of negotiations since the discussions were launched in mid-2013, there is little evidence of significant progress having been made. IFA is clear that, with both threats and potential opportunities for the agriculture sector arising from the TTIP discussions, there must be no sacrifice of EU and Irish agriculture in pursuit of an overall deal.

With a newly appointed EU Commission, there have been recent soundings of a renewed focus to progress the discussions, with Trade Commissioner Cecilia Malmstrom saying the EU hopes to have the “bare bones” of an agreement by the end of 2015. It would appear that the US is less focused on achieving a deal, and that its focus remains more firmly on the conclusion of a Trans-Pacific Partnership (TPP). It is more likely therefore that the TTIP discussions will continue into 2016 rather than reaching any significant conclusions by the end of 2015.