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Slight fall in farm incomes predicted

February 27th, 2018 8:24 PM

By Con Downing

Pictured at the Teagasc Spring Economic Briefing in Clonakilty were – from left – Pat Murphy, Teagasc; Maeve Buckley, branch manager, AIB, Skibbereen; Cathal Buckley, Teagasc, Dorothy Draper, asst branch manager, AIB, Skibbereen; Donal Whelton, agri advisor, AIB; Mark Gibson, Teagasc, Stephen Rowe

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BREXIT is still ‘the big elephant in the room’ when it comes to making forecasts, Teagasc economist Cathal Buckley told a gathering of West Cork farmers and agri-business representatives at a Spring Economic Briefing in Clonakilty.

While the Irish economy is expected to grow by 4.2% in 2018, he qualified this by saying that ‘everything is premised on the Brexit outcome.’ Unfortunately for farmers, they will not be seeing any such increase in their income this year. While average farm income increased by 35% between 2016 and 2017, driven by a strong milk price recovery, an 8% drop is forecast for dairy farmers this year, but income will still remain higher that it had been in previous years.

In 2017, record levels of food and drink exports, driven by dairy – with butter ‘a hero’ last year in terms of prices – were key components of the country’s 5% GDP growth. This was a result of higher prices rather than increased volume.

The strong milk price recovery (up 30%) led to an estimated net margin of €1,800 per hectare for dairy farmers. However, the price is expected to fall about 10% in 2018 to give a net margin of approximately €1,400 per hectare. Cattle prices were volatile last year, with a marginal overall increase of about 1%. With half our beef exports going to the UK, the value of them has decreased due to weaker sterling. 

Mr Buckley said that beef producers are not making any money – their income coming mainly from direct payments. This is the case also for about 50% of tillage farmers for whom there won’t be much change in 2018 in spite of a forecasted 7% price increase for cereals.

Sheep is considered a niche sector with supply and demand in balance. Largely stable production costs are predicted for 2018, but with a slight contraction in income for sheep farmers.

Describing Brexit as ‘a disaster basically,’ the Athenry-based economist remarked that ‘history won’t judge David Cameron very kindly.’ He said that the agri-food sector is most exposed – beef and dairy especially – and, in the best-case scenario, there will be a decline of 2.8% in our food and drink exports and possibly up to 8.2% in the case of a ‘very hard Brexit.’ 

His conclusion was that ‘the closest to the current situation, the better for us’ in the Brexit negotiations, but whatever way you look at it, ‘there is no upside.’

Cathal Buckley turned his attention to Common Agriculture Policy (CAP) reform and outlined the pressures of recent years to spend the EU budget in other ways, which will put CAP spending under pressure. The next tranche from 2021 to 2027 could suffer a cut of anything from 15% to 30%.

Once the CAP budget amount for the period is agreed later this year, rather than imposing how it will be spent on member-states, there is a school of thought that each country should tailor how supports are given to their own individual needs, hopefully leading to a more equitable distribution of direct payments. 

The other main aims of the next CAP budget will be to encourage technology adoption, assist with generational renewal, promote environmental protection and address income volatility. He said that Ireland is likely to adopt ‘a cautious approach’ on CAP reform.

On sustainability, Mr Buckley said that we must aim to become environmentally, economically and socially sustainable – with each as important as the other two. The gathering was also addressed by Mark Gibson of Connect Ed, who emphasised the importance of continuing further education so that agri-business personnel could stay attuned to the needs of already highly-educated farmers and add value to their services. 

The speakers at the briefing were introduced by Teagasc’s new regional manager for Cork West, John Horgan, who also thanked the attendance and the management and staff of Fernhill House Hotel. 

Derogation hangs on new 

water quality initiative

THE importance of improved water quality is widely accepted, declared Teagasc specialist Pat Murphy, with farmers wanting to protect their nitrates derogation.

Introducing a new water quality initiative to farmers and agri-business personnel at Teagasc’s Spring Economic Briefing at Fernhill House Hotel in Clonakilty, Mr Murphy said that, under the LAWCO (Local Authorities Waters and Communities Office) Catchments Assessment, several different organisations were getting together to tackle a number of river basin areas across the country. 

Among those involved with Teagasc were the EPA, Department of Housing, Planning and Local Government, local authorities, the Department of Agriculture, Food and the Marine and farmer organisations, describing it as an ‘all of government – all of industry’ approach. He said that this pioneering project would be under a lot of scrutiny at EU level and that ‘derogation hangs on this.’

After the LAWCO assessment, to support farmers making improvements, there would be free advice from Teagasc specialists about nutrients use, etc. Also, under a pilot scheme, co-ops will make sustainability advisers available to farmers.

Mr Murphy envisaged that, further down the line, they will be required to do something similar in relation to reducing greenhouse gas emissions.       – Con Downing

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