Demand and supply balance presents challenge for Irish beef farmers

The latest analysis from Teagasc has shown that margins fell on most Irish farms this year. 

International supplies of beef – and grain and milk – have been running ahead of demand, subsequently leading to a fall in farm prices.

The increased supply of cow beef, combined with the continuous slow growth in demand, has meant that cattle prices in 2016 are lower than in 2015. “In Ireland the reliance on the UK market means that the fall in sterling contributed to the estimated 5% drop in Irish finished cattle prices,” explained Dr Kevin Hanrahan, economist for Teagasc.

On single suckling farms, payments under the Beef Data Genomics Programme will offset the negative implications of lower prices on margins, which will mean they will largely stay unchanged compared to last year. Meanwhile, on cattle finishing farms, the lower output prices in 2016 are reflected in lower gross and net margins.

In the sheep sector, prices for the year declined slightly compared with 2015, taking into account the lower costs of production in 2016. Margins earned on sheep farms are estimated to have increased by 3%.

The Irish pig market has also seen inconsistent development in 2016. “Pig farmers had a year of two halves, with very low profitability in the first half of the year, offset by a significant improvement in the second half of the year as China increased its pig meat imports,” commented Michael McKeon of the Teagasc Pig Development department.

Despite the fall in margin, it is expected that the overall agricultural income in Ireland for the year will broadly be in line with 2015 levels, as the annual receipts from the Basic Payment Scheme and Green, Low-Carbon, Agri-Environment Scheme should be higher in 2016 than the previous year.

Moving forward, Teagasc believes the beef sector is heading into a difficult year in 2017. Beef supplies across the European Union are expected to increase, although demand in the Union is not particularly strong. Prices are likely to fall by up to 10%.

Considering that the UK market is particularly important for Irish beef exports, the weak sterling is thought to have an adverse impact on beef prices in Ireland, which are forecast to decline by 12%.

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