Good riddance to year of greater expense, stress and workload!

December 29th, 2018 7:10 AM

By Southern Star Team

Donal Whelton, AIB agri advisor.

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Donal Whelton, AIB agri advisor in West Cork, reviews 2018 and encourages farmers to take action now for the months ahead

WITH only a few days of this year remaining, farmers will be looking to 2019 in hope and anticipation that it bears no resemblance to 2018 – a year, irrespective of farm system or location, which will be remembered for increased expense, stress and workload.

• On dairy farms, milk price has remained relatively strong and is likely to average around 35c per litre (solids adjusted) this year compared to 37c/l in 2017. Output held up well, even during the drought-affected summer months, and to the end of September milk intake by creameries was up by 1.2%. However, the increased input expenditure as a consequence of the weather will put downward pressure on dairy farm incomes this year.

• In the cattle sector, increased costs, reduced thrive and a more challenging marketplace will certainly impact incomes this year. While factory prices were running ahead of last year for the first half of the year, this was followed by a price reduction in July and August and current prices are now on a par with 2017. 

Throughput is up by about 2% to date this year – driven by a large increase in cow throughput, which is up 7%. What is obvious in the sector this year is the price variation in marts between quality and plainer lots. 

Quality, well-fleshed animals and forward stores continue to sell well, but plainer lots are finding it more difficult to find a home.

• A similar story in the sheep sector, where prices in the first half of the year were well above 2017 levels. However prices declined significantly from the end of May onwards, and are now on a par with 2017 levels.  

While throughput is up almost 3% on last year, (mainly driven by an increased throughput of ewes and rams) the throughput of lambs coming to market was later than previous years.

•  It was a year of mixed fortunes too for the tillage sector. There was a big increase in output prices – to over €200/t in the case of barley, up around €60/t on last year. This price increase was driven by a reduction in global stock levels for a second consecutive year. 

This price increase, combined with increased straw prices were negated by a reduction in yields – particularly for spring crops. Margins in the sector are expected to be at similar levels to 2017 – but with significant variation depending on crop mix and location.

• Finally, coming off the back of the highest margin-over-feed levels in over 10 years, the pig sector endured a very difficult 2018, with current prices running 14c/kg below 2017 levels and feed prices on the rise, margin-over-feed is at its lowest level in 30 years.

All in all, reduced output prices, yields, and increased input expenditure have eroded margins and are creating cashflow pressure on some farms. 

If you are experiencing or anticipate cash flow pressure, I encourage you to quantify your requirements for the months ahead and to engage early with your bank. 

The good weather during September and October has helped somewhat, keeping stock at grass; winter crops sown and established (it is estimated that the area under winter cereals is up almost 30,000 hectares on last year), and also providing the opportunity to conserve additional winter forage supplies, meaning winter fodder deficits have reduced somewhat on many farms. 

The latest Teagasc fodder census estimates suggest that, despite the favourable conditions, one in three farmers still have a fodder deficit (average -15%). The advice to those in deficit is to put a plan in place and take action early. 

‘Hoping’ for a late winter/early spring, in itself, isn’t the most convincing strategy to rely on.

Looking to 2019, projecting forward with certainty is by no means an exact science, and will again depend much on prevailing weather conditions, global supplies and trade negotiations. Dairy commodity prices, although weakened somewhat in recent months, should remain relatively stable in the short term, helping limit any reduction in on-farm milk price currently received. 

The outlook for the beef sector will be impacted more than most by the trials and tribulations of the Brexit negotiations, while for cereals, sheep and pigs, their fate will largely depend on global supplies. 

Overall at this stage, 2019 looks set to be another mixed year for the sector.

•  Article includes statistics drawn from sources including AIB, Bord Bia, CSO and Teagasc.

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