Family farm incomes will rise by 5% in 2016, according to Teagasc’s annual review and outlook. The organisation expects that the final outcome for this year will be a drop of 9%.
For next year it forecasts a good recovery in dairy margins due to higher prices and volumes. It expects more modest rises in margins in tillage, sheep and pigs due to higher prices. However, after a jump in margins this year, suckler and beef farmers are likely to see lower margins in 2016. Teagasc bases these forecasts on a return to more normal weather next year, giving a more normal grazing year and more normal cereal yields.
On the input side, fertiliser and fuel prices will be unchanged while feed prices will rise a little.
Dairy: Output value set to rise
The output value of dairy is set to rise next year due to a price rise of 5% and an increase of 7% in volume of production, according to Teagasc economist Trevor Donnellan.
“Over the last two years the Global Dairy Trade (GDT) auction has been a negative story in price movements, with few exceptions,” said Donnellan. “The market should come back into balance in 2016. But if the price rise doesn’t happen until later in the year, Irish dairy farmers won’t benefit from the improvement.”
Donnellan told the conference that despite evidence of great grass growth in the last two years, feed usage on dairy farms has increased by 8% between 2009 and 2015. A 5% increase in feed expenditure/ha is expected in 2016 due to a 3% increase in feed volume and a rise of 2% in average feed prices compared to 2015.
In 2015 the two major stories in dairy were the abolition of milk quotas and the fall in milk prices. An increase in production and lower costs/litre of production, due to good grass growth and improved solids, cushioned dairy margins and the fall in income due to deteriorating milk prices.
However, there has been a varied story in production around the EU. Between January and August, Irish production has increased by 9.2% while the UK, Netherlands and Poland have also seen strong growth. However, there has been a contraction in supply across southern Europe, particularly in France and Italy. It is expected that 2016 will see an even sharper reduction in New Zealand production than in 2015.
Beef: Margins
to fall
This year – 2015 – has been exceptional for cattle farmers. Prices for beef and young cattle are up and costs are down. Gross margin from single suckling will be up by 37% this year to €464/ha, gross margin from beef will be up 33% to €418/ha. For the first time in years, suckling will make a positive net margin and won’t eat into farmers’ EU Basic Payment.
Net margin from finishing also improved but was still negative.
Margins from both enterprises will fall next year. EU beef supplies are expected to grow on higher dairy cow numbers. Global prices will decline. Input costs will be largely unchanged.
Prices for weanlings and store cattle are forecast to fall by 8%. Gross margin from suckling will fall by 15% to €397/ha.Prices for beef cattle will fall by 4% while gross margin from beef finishing will fall by 11% to an average of €370/ha. Neither system is forecast to make a positive net margin in 2016.
Sheep: Prices to edge up
A small rise in Irish and EU lamb prices is expected. This will arise from tight global supplies of mutton and lamb and rising demand in the EU. Production costs are likely to rise slightly. While feed usage is not forecast to increase, feed prices are expected to rise by 2%. Fertiliser price and use are not expected to change. Average gross margin from midseason lowland lamb is forecast to rise by 4% to €729/ha.
Tillage: 5% rise in prices forecast
Teagasc is forecasting a small – about 5% – increase in grain prices in 2016, based on global output returning to more normal levels after two record years. Irish yields are likewise likely to return to more normal levels, said Fiona Thorne.
Costs of production are not expected to change significantly in 2016. Fertiliser and seed costs will be unchanged. Lower fuel prices are likely to be cancelled out by higher spray and land rental costs. As a result, gross margins will rise slightly.
While there is wide variation in margins between farms, the average farmer will in 2016, as this year, have a negative net margin and will eat into EU direct payment. Average net margin will be -€25/ha.
Pigs: Prices to rise, but not enough
Pig prices are forecast to increase by 6% in 2016, while feed prices will increase by 3%, according to Teagasc economist Michael McKeon.
“This will result in a margin over feed of 43c/kg dwt,” said McKeon. “But pig farmers need 50c/kg dwt to hit requirements. There will be no real change in feed ingredient prices, but one slight problem is the El Niño effect, which will have an impact on South America in Q1 of 2016, compromising soyabean yield in particular.”
The margin over feed per kg of deadweight was 37c in 2015, the lowest since 1999. Two factors may give the pig price a boost, said McKeon. “Increased Chinese pigmeat imports to offset the decline in domestic production and a disease outbreak in Europe.”
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Full coverage: Teagasc outlook 2016
Family farm incomes will rise by 5% in 2016, according to Teagasc’s annual review and outlook. The organisation expects that the final outcome for this year will be a drop of 9%.
For next year it forecasts a good recovery in dairy margins due to higher prices and volumes. It expects more modest rises in margins in tillage, sheep and pigs due to higher prices. However, after a jump in margins this year, suckler and beef farmers are likely to see lower margins in 2016. Teagasc bases these forecasts on a return to more normal weather next year, giving a more normal grazing year and more normal cereal yields.
On the input side, fertiliser and fuel prices will be unchanged while feed prices will rise a little.
Dairy: Output value set to rise
The output value of dairy is set to rise next year due to a price rise of 5% and an increase of 7% in volume of production, according to Teagasc economist Trevor Donnellan.
“Over the last two years the Global Dairy Trade (GDT) auction has been a negative story in price movements, with few exceptions,” said Donnellan. “The market should come back into balance in 2016. But if the price rise doesn’t happen until later in the year, Irish dairy farmers won’t benefit from the improvement.”
Donnellan told the conference that despite evidence of great grass growth in the last two years, feed usage on dairy farms has increased by 8% between 2009 and 2015. A 5% increase in feed expenditure/ha is expected in 2016 due to a 3% increase in feed volume and a rise of 2% in average feed prices compared to 2015.
In 2015 the two major stories in dairy were the abolition of milk quotas and the fall in milk prices. An increase in production and lower costs/litre of production, due to good grass growth and improved solids, cushioned dairy margins and the fall in income due to deteriorating milk prices.
However, there has been a varied story in production around the EU. Between January and August, Irish production has increased by 9.2% while the UK, Netherlands and Poland have also seen strong growth. However, there has been a contraction in supply across southern Europe, particularly in France and Italy. It is expected that 2016 will see an even sharper reduction in New Zealand production than in 2015.
Beef: Margins
to fall
This year – 2015 – has been exceptional for cattle farmers. Prices for beef and young cattle are up and costs are down. Gross margin from single suckling will be up by 37% this year to €464/ha, gross margin from beef will be up 33% to €418/ha. For the first time in years, suckling will make a positive net margin and won’t eat into farmers’ EU Basic Payment.
Net margin from finishing also improved but was still negative.
Margins from both enterprises will fall next year. EU beef supplies are expected to grow on higher dairy cow numbers. Global prices will decline. Input costs will be largely unchanged.
Prices for weanlings and store cattle are forecast to fall by 8%. Gross margin from suckling will fall by 15% to €397/ha.Prices for beef cattle will fall by 4% while gross margin from beef finishing will fall by 11% to an average of €370/ha. Neither system is forecast to make a positive net margin in 2016.
Sheep: Prices to edge up
A small rise in Irish and EU lamb prices is expected. This will arise from tight global supplies of mutton and lamb and rising demand in the EU. Production costs are likely to rise slightly. While feed usage is not forecast to increase, feed prices are expected to rise by 2%. Fertiliser price and use are not expected to change. Average gross margin from midseason lowland lamb is forecast to rise by 4% to €729/ha.
Tillage: 5% rise in prices forecast
Teagasc is forecasting a small – about 5% – increase in grain prices in 2016, based on global output returning to more normal levels after two record years. Irish yields are likewise likely to return to more normal levels, said Fiona Thorne.
Costs of production are not expected to change significantly in 2016. Fertiliser and seed costs will be unchanged. Lower fuel prices are likely to be cancelled out by higher spray and land rental costs. As a result, gross margins will rise slightly.
While there is wide variation in margins between farms, the average farmer will in 2016, as this year, have a negative net margin and will eat into EU direct payment. Average net margin will be -€25/ha.
Pigs: Prices to rise, but not enough
Pig prices are forecast to increase by 6% in 2016, while feed prices will increase by 3%, according to Teagasc economist Michael McKeon.
“This will result in a margin over feed of 43c/kg dwt,” said McKeon. “But pig farmers need 50c/kg dwt to hit requirements. There will be no real change in feed ingredient prices, but one slight problem is the El Niño effect, which will have an impact on South America in Q1 of 2016, compromising soyabean yield in particular.”
The margin over feed per kg of deadweight was 37c in 2015, the lowest since 1999. Two factors may give the pig price a boost, said McKeon. “Increased Chinese pigmeat imports to offset the decline in domestic production and a disease outbreak in Europe.”
Read more
Full coverage: Teagasc outlook 2016
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