Average family farm income (FFI) in Ireland is forecast to decrease by 19% in 2022, according to a new report published by Teagasc economists.

While uncertainty in the agricultural sector remains, Teagasc has made the forecast on the basis of increasing input costs including those for fertiliser, feed and fuel.

The forecasted decrease in farm income is in contrast and almost cancels out the 20% increase Teagasc says farm systems experienced in 2021 due to rising output prices.

The Teagasc outlook for 2022 Economic Prospects for Agriculture report was published at the annual Teagasc outlook conference on Tuesday.

Describing the flux between farm incomes experienced this year and forecast for next year at the launch of the report, Teagasc director professor Frank O’Mara said: “The cycle never goes away.”

Input cost inflation

Professor O’Mara said “the pity is that the projections for input prices in 2022 are going to claw back” any increased margins made through output price increases.

Launching the report, Teagasc officials drew attention to international events and markets for feed, energy and fertiliser and the impact these will have on Irish farming.

Across all sectors, fertiliser price increased by 10% in 2021, with volumes used also up 5% on the previous year.

The cost of green diesel increased by 29% over the year, with white diesel seeing a 13% cost increase.

Feed prices were up 16% and the volume of feed used increased by 8%. Meanwhile, electricity costs were also up 10%.

Teagasc economist Fiona Thorne warned that there will continue to be “overall upward pressure on [input] prices” into 2022 and that this “hangover” from 2021 will affect farm profitability next year.

On fertiliser in particular, Thorne warned that there will be “unprecedented price increases in 2022 for the full year”.

Impact on incomes

Thorne described a “positive news story for cereals” in 2021, where higher yields and cereal prices saw the tillage sector experience an increase in average farm income of 45%.

However, she said this forecast is to decrease again by 35% in 2022 due to it being “unlikely” such high yields will continue. Increasing fertiliser and fuel costs are also likely to affect tillage margins.

Teagasc research officer Jason Loughrey noted that average incomes are also forecast to fall on cattle farms in 2022, with a decline of 31% estimated for cattle rearing farms and a decline of 18% for other cattle farms.

Looking at 2022, Louhrey described how EU beef production will be down in 2022 and that imports into the EU market will be limited due to ongoing increases in shipping costs.

These factors, which he described as favourable for Irish beef price, will be offset by increasing input costs in feed and fertiliser.

Cancelled out

Teagasc sheep sector economist Anne Kinsella predicted a 14% increase in total input costs on sheep farms in 2021. The 15% increase in farm income seen on such farms in 2021 is likely to be almost cancelled out by a 14% decrease in 2022.

Sheep concentrate costs are forecast to rise 6%, pasture and forage cost will be up 71% and electricity and fuel could be up as much as 14%.

On dairy, Teagasc economist Emer Dillon warned that dairy income is forecast to fall by 16% in 2022, due to sharply higher production costs, with just a 2% increase in milk production forecast and no prospect of increasing milk prices next year.

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Teagasc Outlook: fertiliser prices and availability ‘twin concerns’ in 2022