Fertiliser prices and availability will represent twin concerns for farmers in 2022 and are one factor which could contribute to an average farm income drop of 19%, according to Teagasc.
Teagasc warned that the escalation in natural gas prices, a key ingredient in fertiliser production, is unprecedented and has been caused by a reduction in the supply of gas available on the European market, which is increasingly dependent on imports.
It said fertiliser prices have risen to record levels and that prices in 2022 could be more than double those seen in 2021.
Teagasc made the prediction in its outlook for 2022 Economic Prospects for Agriculture report, which was published at the annual Teagasc outlook conference on Tuesday.
Input cost inflation
Market prospects for all agricultural sectors in 2022 are dominated by cost pressures that have built up over the second half of 2021 and which will impact to a greater extent on incomes in 2022 than they did in 2021, says Teagasc.
A spokesperson said higher cereal harvest prices in 2021 will likely lead to a further increase in feed costs in 2022 and fuel prices will also be substantially higher next year.
Teagasc forecasts that grassland farmers may review their level of fertiliser and meal usage in an attempt to offset some of the rise in production costs.
Incomes to drop
After a year where farm incomes increased by 28%, 45%, 15% and 0% on dairy, tillage, sheep and beef farms respectively in 2021, Teagasc has forecasted significant income decreases across all sectors next year.
A Teagasc spokesperson said: “The average farm income in 2022 is forecast to decline by 19%, but the outlook is extremely uncertain.”
Average 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.
Teagasc warned that the higher cereal yields achieved in 2021 are unlikely to be repeated in 2022, with average tillage incomes forecast to fall by almost 35%.
“Average incomes on sheep farms are forecast to decline by 14%, reflecting somewhat lower sheep prices [down 5%] and higher production costs.
“Average incomes are also forecast to fall on cattle farms in 2022, with a decline of 31% in prospect for cattle rearing farms and a decline of 18% for other cattle farms.”
Teagasc says that while pig prices should be higher in 2022, the benefit for farmers will be cancelled out by increased production costs, with margins to decline further.
A spokesperson explained the end outcome next year for all farm systems will depend on several factors, including the impact the coming winter has on silage stocks, fertiliser market developments in the spring of 2022 and weather conditions.
They said the strategies that farmers adopt in reaction to these external market circumstances will be crucial.