A new Mid-Year Outlook report from Teagasc economists has outlined that dairy incomes - which fell substantially in 2018 - are set to rebound in 2019 due to savings on feed and strong growth in milk production.
While the dairy cow population has only increased marginally this year, a large increase in milk yields is being observed, which could see the volume of Irish milk production increase by 10% in 2019, economists said.
While a significant portion of the peak milk delivery season remains, if weather conditions stay favourable, the average income on dairy farms could increase by about €12,000 in 2019, taking the average Irish dairy farm income to €74,000, which would represent an increase of 20% on the 2018 level.
While feed use has returned to normal levels, there has been a drop in cattle prices for the year to date, with weanling prices down 8% and finished animal prices down more than 6% relative to the 2018 level.
The additional support from BEAM should help to keep incomes on cattle rearing farms stable in 2019, while incomes on the average cattle finishing farm will increase, largely due to the receipt of BEAM payments, according to Teagasc economists.
“Without this exceptional aid, incomes this year would only recover a little on last year’s very low levels.”
Similarly, in the sheep sector, there has been a reduction in feed expenditure in 2019, but there has also been a fall in lamb prices, forecast to average 9% lower than in 2018.
As the reduction in costs will not be sufficient to offset the forecast decline in gross output, this will have a negative impact on margins and income in the sheep sector in 2019.
Incomes on sheep farms are set to fall by 4% in 2019, while the average income on tillage farms could drop below €35,000 - a decline of over 20%.
In income terms, tillage farms had a better year in 2018 than the weather conditions might have suggested, due to a sharp rise in cereal prices.
By contrast, production conditions for cereal crops in 2019 have been considerably better than in 2018 and yields should show a significant increase on the 2018 level.
However, input price inflation and a forecast reduction in 2019 harvest prices of 30% relative to 2018, will lead to a drop in cereal margins in 2019, in spite of the increase in yields.