• Farming

How weather hit farmers’ margins in 2018

Friday, 16th August, 2019 10:15pm
How weather hit farmers’ margins in 2018

Head of the Teagasc Rural Economy Development programme, Dr Kevin Hanrahan.

ALL types of farm enterprises suffered decreases in margins last year due to a series of unprecedented weather extremes.

The details and extent of this have been published by Teagasc in its annual series of farm enterprise factsheets, which outline the output, costs and profit margins for a range of farm systems in Ireland, as well as metrics summarising their technical performance for 2018. The factsheet information is drawn from the Teagasc National Farm Survey, which collects data from 898 farms, representative of almost 93,000 farms nationally.

Head of the Teagasc Rural Economy Development programme, Dr Kevin Hanrahan, said: ‘In broad terms the 2018 factsheets show a reduction in margins for dairy, beef and lamb enterprises, largely related to elevated spending on feed, silage making and the purchase of forage. The difficult weather conditions encountered in 2018 led to lower technical performance on grassland farms.’

For the average dairy farm, total milk production costs increased from 22.9 cent per litre in 2017 to 26.8 cent per litre in 2018, an increase of 17%. As a result, the average net margin per litre on dairy farms fell from over 15 cent in 2017 to just over 9.5 cent in 2018, a decline of 37%.

The labour supplied by the farm household does not form part of the internationally-recognised production costs definition. If a cost is imputed for the farm household labour used and if this were included as part of a milk production cost measure, it would add a further 12 cent per litre on average to the cost of producing milk.

The difficult production conditions meant that there was only a marginal increase in milk production per hectare or per cow in 2018.

Dr Hanrahan said: ‘For the average single suckling enterprise, output prices and production costs moved against each other, leading to a fall in margins in 2018. The main reason for the increase in production costs for single suckling was higher concentrate use associated with the difficult weather conditions in 2018.’

The net margin per cow, which already represented a loss of €39 in 2017, fell by almost a further €100 in 2018 to a loss of €138.

Total production costs for the finishing enterprise increased by over 12% on average. However, in contrast to the single suckling enterprise, output value moved upwards by 5% for the cattle finishing enterprise in 2018.

This increase in output value can be attributable to the decline in prices for purchased cattle. The average net margin per hectare for the cattle finishing enterprise, which already amounted to a loss of €14 in 2017, fell by a further €78 in 2018 to a loss of €92.

The mid-season lowland lamb enterprise, typical of many sheep farms in Ireland, also experienced a large increase in feed expenditure in 2018. Output from the sheep enterprise also fell due to a lower weaning rate and increased lamb mortality. The net margin for the average mid-season lowland enterprise fell from €187 per hectare in 2017 to €116 per hectare in 2018, a decline of 38%.

The cereals enterprise factsheet details the increase in net margin on spring barley and winter wheat farms in 2018, despite a 20% decline in yields in 2018. In addition to decreases in yields, cereal and straw prices were significantly higher in 2018 compared to 2017. Direct and overhead costs also increased slightly for both crops. Teagasc has also published final results for the 2018 National Farm Survey, which generally shows minor revisions to farm incomes for 2018 relative to the previously-published preliminary 2018 estimates.