“Little sign of relief” as input costs will continue to rise in 2023

Looking at the projected average input prices in 2023 compared to 2022, fuel prices could fall slightly, but feed prices are likely to be higher again.

The development of fertilizer prices is difficult to predict, but hardly any change is to be expected, according to the economists.

Milk prices are likely to fall 15 percent as global milk production growth picks up again and demand eases.

While dairy farm incomes are expected to be lower next year, the projected average dairy farm income of €104,000 would still be one of the highest on record.

Beef prices are expected to increase in 2023 and especially in the first quarter of the year. Stable beef production volumes are expected to limit rising cattle prices in the second half of 2023.

The forecast says that average prices for finished cattle will be 4 percent higher next year and prices for young cattle will increase by 5 percent.

Teagasc expects average incomes on cattle farms to increase, with a projected increase of 11% for cattle ranches to €9,700 and a 2% increase for other cattle ranches to €17,300.

However, beef producers are unlikely to see a change in their gross margin as rising input costs are expected to erode new profits.

Lamb prices are expected to increase by an average of 2 percent. With a projected increase in costs of 4 percent, the average income on sheep farms is expected to fall by 2 percent, leaving the average income at just under €19,500.

Grain prices are expected to be lower next year. The high grain yields achieved in 2022 are unlikely to be repeated.

Overall, average crop income is forecast to fall by 48% to €33,000.

Pork prices are expected to continue to rise. A 22 percent rise is forecast and this would return the sector’s profitability to “more normal levels”, the economist claimed.

Average farm income “superfluous”

In this latest report, Teagasc has stated that the traditional measurement of average farm income as an indicator of typical farm income performance across the agricultural sector has become redundant and therefore no forecast of average farm income for 2023 is presented.

“All of these income calculations are nominal, meaning they do not take into account general inflation and the impact this has on the purchasing power of farm incomes.

“With general inflation at its highest level for many years, a company with a stable nominal income will experience a noticeable decline in real income,” say the economists.

Income 2022

For farm incomes, the 2022 outcome was mixed. Dairy farms, like arable farms, achieved dramatically higher incomes compared to the previous year.

Cattle, sheep and pig farm incomes were estimated to be lower than in 2021.

On dairy farms, the average Irish dairy farm income is likely to increase by 50 per cent.

This increase would bring the average dairy farm income to €148,000. Dairy farmers have benefited from a 44 percent rise in milk prices this year due to a lack of growth in the global milk supply.

In 2022, however, milk production costs were, on average, about 8 cents per liter or 30 percent higher.

Average income on cattle farms is estimated to be 20 percent lower as higher production costs more than offset the benefit of higher cattle prices.

The average income of cattle farms is estimated at €8,700. The average income for other cattle ranches will be reduced by 2 percent to about €16,900.

Sheep farms benefited in 2022 from higher lamb prices, which remain at record levels, and feed support payments, but also had to cope with higher production costs.

Payments received from participation in the Sheep Welfare Scheme increased gross production but were not sufficient to cover input cost increases.

The average income on sheep farms is estimated to be 4 percent lower. This would mean that the average sheep farm income would rise again to around €19,800 in 2022.

For the tillage system, favorable weather resulted in higher yields and favorable moisture levels for most crops. However, winter barley yields were lower due to virus impact.

Tight global grain supplies and uncertainty about export potential from Ukraine caused grain prices to spike at harvest time. Even allowing for the increase in production costs, it is estimated that average farm income has increased by 10 percent to about €64,000.

Pig prices gradually increased throughout 2022 to reduce monthly losses. Despite this increase and significant government support to the sector, the average pig farm will have lost approximately €422,000.