Editorial: plenty on the mind as farmers look to the future

It was fantastic to see the large crowds attending the National Ploughing Championships this week. Once again the event provided an excellent platform for the sector to showcase its importance to the rural economy and the extent to which farming and food production is woven into the fabric of our society. Anna May McHugh and her team can take great pride in a job well done.

Not far from the NPA headquarters at the Ploughing was Tirlán. It is positive to see it responding to the changing landscape for global and Irish milk supplies having this week announced the removal of any volume restrictions and the reopening of the door to new suppliers. It is welcome news for their existing milk suppliers who have invested heavily on farm and potential new entrants.

The Ploughing serves as an excellent opportunity to gauge the mood. To this extent, there is certainly a broad range of issues on the minds of the farming community as they look to the future – the most immediate being the outlook for winter finishing.

Confidence

The higher beef prices over recent months have undoubtedly injected confidence into the sector. But a strong store trade combined with inflated feed costs – in the form of silage and concentrates – is causing serious concern for winter finishers, most of whom are aware that the safety net, in the form of their basic payment, is going to be significantly reduced. With Teagasc data showing that a record beef price of €6/kg will be required next spring for finishers to break even, the appetite for risk will be tested like never before.

Of course, this is not the first Ploughing Championships where we have heard winter finishers threatening to leave sheds empty. But the scale of the investment and the level of financial exposure this year, combined with the downward pressure on basic payments, will undoubtedly force change – most likely in the form of lower numbers being finished rather than a complete exit. It is a move that is likely to see processors become even more reliant on what is now a highly concentrated network of large-scale finishing units.

Looking beyond the autumn, attention turns to spring where the price and availability of fertiliser is front and centre. It would seem that a significant number of dairy farmers have already moved to secure supplies for next year – typically adequate tonnage to meet demand for silage ground and the first grazing rotation. For most suckler and sheep farmers, cashflow simply does not allow them to buy into the market at this stage.

Most farmers see 2023 as a much more challenging year in terms of costs given that a significant proportion of key inputs for 2022 was secured prior to the surge in prices – a scenario that along with rising output prices should see profit margins underpinned for this year.

Price correction

However, as farmers and the processing sector become fully exposed to the headwinds of rising costs, there is a fear that the jump in output prices, alongside a potential recession, could bring a demand and price correction – creating a dangerous environment of soaring costs and easing commodity prices.

Our reader survey this week shows that 40% of farmers are now very concerned around profitability. Thankfully, most farmers appear to be factoring such a scenario into their investment plans and preparing for potentially a more challenging year in 2023.

Longer term, the impact of increased environmental regulations on farm productivity and profitability is top of the agenda. For dairy farmers, the impact of changes to the nitrates derogation is front and centre – some reporting that changes in the banding rates combined with a potential reduction in the organic manure limit to 220kg/ha will require them to reduce cow numbers by 20-25%, or force them into the rental market seeking access to more land.

Production levels

Meanwhile, there is no doubt that farmers have seen through reassurances from Government that emission reduction measures, including reducing cow numbers, will be voluntary. Changes to the nitrates derogation, the allocation of €250m into an organic scheme, the flattening of farm payments and the diversion of 25% of direct income supports into eco-schemes are all seen as clear policy measures to force farmers to reduce production levels.

Perhaps not surprisingly in the face of cuts to their basic payment and the pressure to reduce their farming activity, a proportion of suckler farmers are positively disposed to the introduction of a properly funded scheme that allows them to adjust their farming systems.