SITUATION AND OUTLOOK - For Irish Agriculture July 2020
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SITUATION AND OUTLOOK
For Irish Agriculture
July 2020
Trevor Donnellan, Kevin Hanrahan, Anne Kinsella, John Lennon, Brian
Moran and Fiona Thorne
Agricultural Economics & Farm Surveys Department
Teagasc
Athenry,
Co Galway
Ireland
31st July 2020
Situation and Outlook July 2020
Contents - Situation and Outlook for Irish Agriculture (July 2020)
Introduction 2 Acknowledgement
Global Economy 3 The provision of the National Farm Survey 2019 is a vital stepping stone in
producing a forecast of margin and income developments on farms in 2020.
Macro Economy and Exchange Rates 5
The authors wish to thank all who contributed to the National Farm Survey
Weather Conditions 6
2019, including the farmers who participate voluntarily, the Central Statistics
Farm Inputs 8 Office who select the sample and provide the population weights.
Feed Market 9 Particular acknowledgement is due to the Teagasc research staff involved in
Fertiliser Market 10 the collection and validation of the farm data: J. Colgan, A Curley, L. Deane,
L. Delaney, P. Harnett, P. Healy, P. Madden, J. McConnon, E. McGrath, K.
Energy Market 11 McNamara, M. Nicholson, J. Robinson, J. Teehan and to M. Clarke for the
Dairy 12 administration of the survey.
Beef 15
Sheep 19
Tillage 22
Agricultural Economics and Farm Surveys Department
Teagasc
Athenry
Co Galway
H65 R718
Ireland
Situation and Outlook July 2020
INTRODUCTION
This mid-year update is a supplement to the annual the previous year would be categorised as a negative This approach is designed to highlight the key market
Situation and Outlook published by Teagasc in December situation. developments that have recently taken place and that are
2019. It begins with a summary of current economic However, if milk prices were anticipated to likely to take place in the short term and to highlight, if
conditions, looking at the international macroeconomic rise in the outlook period relative to the same necessary, key uncertainties regarding the short-run
picture and recent exchange rate developments. This is period in the previous year this would be outlook. The associated information is then distilled down
followed by a review of weather condition and inputs described as a positive outlook. to a series of summary tables.
markets. The update then provides a summary of the
developments that have taken place in commodity markets Examples of positive developments would
during the first half of 2020. Finally, there is an assessment include:
of the performance of the main farm systems in that A rise in output prices
Positive COVID-19
period. A fall in inputs prices
The report takes a short-term outlook perspective to the A decrease in international supply
At the time of writing uncertainty remains with
year end, assessing likely future developments and how An increase in international demand
they would influence commodity prices, production costs Favourable weather conditions regard to evolution of the COVID-19 epidemic.
and farm profitability. A weaker domestic exchange rate The virus had been suppressed in Europe but
Across the various farm sectors, access to timely official cases continue to mount globally. It seems for
data on production volumes, output prices, input utilisation Conversely, examples of negative the moment that the worst fears in terms of the
volumes and prices, remains a challenge across the EU. developments would include: short-term impact on agri-food commodity
Official data sources tend to lag behind the actual market
situation by three months and more in some cases. It is A fall in output prices markets have not materialised. However, the
therefore necessary to rely on unofficial data sources, A rise in inputs prices virus will have some negative impact on farm
industry expertise and even anecdotal evidence to form an An increase in international supply prices and farm incomes in 2020.
Negative
up to date assessment of output and input prices, A decrease in international demand
production and input usage. Poor weather conditions BREXIT
A stronger domestic exchange rate
In this publication the situation and outlook is summarised.
For each commodity sector, production, consumption, While the UK has left the EU, it remains in a
Where either the situation or the outlook
output price, input market developments and income are transition phase until the end of 2020.
suggests no change relative to the
assessed and then given either a positive, neutral or a
corresponding period in the previous year, this Negotiations between the EU and UK regarding
negative ranking.
is categorised as neutral. Neutral the future relationship continue, but the risk
This exercise is carried out in respect of the Situation,
representing the first half of 2020, and the Outlook remains that no agreement will be reached and
representing the second half of 2020. The categorisation is Finally, in instances where it is either too early that tariff and non-tariff barriers could come
performed with respect to the farmer’s perspective on the to make an informed judgement or where
into play for EU/UK trade from 2021.
impact of market price, supply and demand developments there is a deficit of the necessary data on
which a judgement should be made, it may not Uncertainty about the future relationship could
on farm profitability.
be possible to determine whether a positive, ? affect market conditions (prices and exchange
The categorisation takes account of the position in the negative or neutral symbol should be used.
previous period. So for example a fall in milk prices in the rates) later in 2020.
Such instances are represented by a question
first half of the year in comparison with the same period in mark.
Situation and Outlook July 2020 2
COMMODITY SECTOR SUMMARY
Dairy Beef Sheep Tillage
Situation Outlook Situation Outlook Situation Outlook Situation Outlook
Negative Positive Negative Negative Positive Positive Negative Negative
PRODUCTION: Global milk supply growth in PRODUCTION: Irish beef production PRODUCTION: Irish sheep slaughter PRODUCTION: In Ireland, unfavourable
H1 2020 is depressed, but there has still decreased by 3% in H1 2020 due to the at sheep export premises in H1 2020 sowing and growing conditions have
been an overall increase in milk production COVID19 related closure of the European is 6% higher compared to 2019. meant that yields in 2020 are likely to be
in the major exporting regions. Irish milk food service industry. Over the course of However, when measured on a well behind those of 2019. Whilst it is still
production for H1 2020 is up 3.5% compared the full year, assuming no repeat of the tonnage basis (cwe), when Jan-June early days in the harvest season, first
to the same period last year. Spring 2020 COVID-19 shutdown, 2020 compared with corresponding production estimates for 2020 indicate a
production is forecast to end the year 2% period of 2019 sheep slaughterings 20% decrease in total cereal tonnage
PRICES: Irish milk prices fell in Q1 of 2020,
lower. increased by somewhat less, circa 2%. compared to 2019 is likely.
but the reduction has been reversed by the
PRICES: Finished cattle prices are forecast PRICES: The estimates for EU production,
end of Q2. A stronger than expected PRICES: EU and Irish heavy lamb
to be 4% lower in 2020. Both EU demand demand and ending stocks for this
recovery in demand has limited the COVID- prices are to date one fifth higher in
and supply have contracted in response to harvest are creating some upward
19 related price drop. For the year as a 2019 compared to 2020. This reflects
COVID-19 and the pandemic related movement on green wheat prices this
whole, Irish milk prices could yet be close to higher prices in the EU for heavy
recession now affecting the UK and harvest compared to 2019, with prices
the 2019 level. lamb, which are forecast to persist
Eurozone will suppress demand in 2020. quoted for green wheat about 15% up on
COSTS: H1 of 2020 has seen some over the remainder of 2020.
2019 harvest prices. Prices quoted for
unfavourable weather, but the impact on COSTS: Costs of production are set to COSTS: Costs of production on Irish barley are not benefiting to the same
milk production has been negligible. Feed decrease in 2020 due to lower feed, sheep farms are forecast to decline in extent as wheat, with prices up at best 5
use in 2020 is up marginally on the 2019 fertiliser and energy prices and this will 2020. Overall, the large decrease in % compared to 2019.
level as is fertiliser use. Feed and fertiliser mitigate the impact of lower marketed fuel, fertiliser and feed prices are COSTS: Production costs in 2020 are
prices in 2020 are both lower than in 2019. output value on farm incomes. expected to lead to a 5% reduction in likely to be about 10% lower than in
Total production costs for 2020 are forecast total costs of production for 2020.
MARGINS: Output value will be supported 2019.
to fall marginally relative to 2019.
by the announced Pandemic payments MARGINS: The forecast reduction in MARGINS: The decrease in cereal and
MARGINS: Average dairy net margin in 2020 targeted at beef finishers. Despite this costs in 2020 coupled with more straw yields in 2020 will not be offset by
could be on a par with the 2019 figure of 10 support, overall output value is still favourable lamb and sheep prices will slight increases in cereal and straw
cent per litre. An average dairy farm income expected to decline. Despite lower direct impact positively on gross margins. prices. With costs decreasing slightly, it
of about €68,000 in 2020 is possible. costs gross margins per hectare on Cattle For 2020 gross margin per hectare are is estimated that family farm income on
Rearing farms and Cattle Finishers are forecast to grow strongly, increasing specialist tillage farms in 2020 will be
forecast to fall by 1% and 5% respectively. by over 20% to €780/ha. struggle to reach €30,000.
Situation and Outlook July 2020 3
GLOBAL ECONOMY Situation and Outlook July 2020 4
MACRO ECONOMY and EXCHANGE RATES
Progress in these negotiations is said to have been minimal to date.
The short-term macroeconomic outlook will continue to be governed
heavily by the need to contain the COVID-19 pandemic. Growth rates The possibility of a no deal remains at the end of the UK’s transition period. In addition to uncertainty
for 2020 and beyond have been revised down dramatically since the around exchange rate movements, this would pose further challenges for exporters in the form of tariff
outset of 2020. and non-tariff barriers.
As a result of the lockdown measures to contain the virus, economic Figure 1: Euro/Dollar Exchange Rate 2008 -2020
activity globally contracted dramatically in H1 of 2020. Emergency
measures have been required by governments around the world to 1.60
minimise the adverse impact in terms of business bankruptcy and
1.50
unemployment.
Dollars per Euro
The temporary closure of manufacturing, retail and services providers 1.40
indirectly affected food demand, with increased home consumption 1.30
and a collapse in food consumption outside the home.
1.20
Even though at the time of writing (July 2020), it would appear that
the worst of the economic disruption associated with COVID-19 has 1.10
passed, an overall contraction in economic activity in 2020 is
1.00
inevitable, with growth forecasts for the early years of this decade also
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
now lower than had been anticipated.
The value of the euro against the US dollar weakened slightly in H2 of Source: European Central Bank
2019 and the euro has strengthened slightly over H1 of 2020. Over Figure 2: Euro/Sterling Exchange Rate 2008 -2020
the course of the last year the US dollar/euro exchange rate has
moved over a very narrow range. 1.00
There has been a bit more fluctuation in the exchange rate between 0.95
the sterling and the euro over the course of the past year, with a range
£ Sterling per Euro
0.90
of about 6 pence. Sterling remains at a comparatively low rate against 0.85
the euro, currently close to 90p, which continues to be a source of
0.80
concern for Irish exporters to the UK.
0.75
The continuing Brexit related weakness of sterling is a negative for 0.70
Irish agri-food exports, making them less competitive on the UK
0.65
market. The general weakness of sterling reflects uncertainty about
the future economic growth prospects of the UK beyond the Brexit 0.60
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
negotiations on a future relationship between the EU and UK have
continued into the transition period, which will end at the end of 2020.
Source: European Central Bank
Situation and Outlook July 2020 5
WEATHER CONDITIONS Situation and Outlook July 2020 6
WEATHER CONDITIONS
Weather conditions in 2020 have shown considerable variation
Figure 3: Jan. to July 2020 Mean Temperature Figure 4: Jan. to July 2020 Rainfall Relative to
relative to normal and this has had an impact on both grazing Relative to Normal (1981-2010) Normal (1981-2020)
conditions and grass growth as various points in the first half of 2020.
2.0 300
Extremely heavy rainfall in February was followed by below normal
Index (Normal = 100)
250
temperatures in March, contributing to a slow start to the grazing 1.0
Degree C vs Normal
seasons in some areas. This was then followed by a period of usually 200
low rainfall levels, which lasted until June, leading to drought 0.0
150
conditions in some areas and widespread soil moisture deficits. -1.0
100
Figure 3 provides a summary of deviations in air temperature to date
-2.0 50
this year compared to normal levels for a range of Teagasc locations.
Similarly, Figure 4 illustrates an index of monthly rainfall amounts -3.0 0
relative to normal across a number of Teagasc locations through to Jan Feb Mar Apr May Jun July Jan Feb Mar Apr May Jun Jul
July 2020. Athenry Grange Oak Park
Athenry Grange Oak Park
Weather conditions in June were close to normal, but July has seen Moorepark Johnstown Moorepark Johnstown
cooler temperatures, with less sunshine and considerably more
rainfall than normal, particularly in Athenry. By contrast, rainfall Source: Met Eireann Source: Met Eireann
levels in Moorepark in July were below normal
Figure 5: Irish Grass Growth 2018, 2019 and 2020
The impact of the brief drought conditions is evident in Figure 5,
100
which shows a clear dip in grass growth in June, as measured by
PastureBase Ireland. However, the period of low rainfall did not 90
extend long enough to have a serious impact on production. With the 80
return to more normal weather in June of 2020, grass growth rates 70
quickly reverted to normal in July.
kg DM/ha/day
60
Note: Normal weather is defined as the 30 year average from 1981 to 50
2010.
40
30
20
2020 2019 2018
10
0
Jan-27 Mar-24 May-19 Jul-14 Sep-08 Nov-03
Source: Teagasc Pasture Base Ireland
Situation and Outlook July 2020 7FARM INPUTS Situation and Outlook July 2020 8
FEED MARKET
A feature of 2019 was the sizable reduction in ruminant feed use resulting from the return but have begun to move upwards marginally in H1 of 2020. The decrease in prices at the
to normal weather conditions in the aftermath of the drought of summer 2018. Based on end of 2019, and continued low prices at the start of 2020 reflects the decrease in cereal
DAFM and CSO data, average dairy feed use per head in 2019 is estimated to have been harvest prices in 2019. Significant pressure for further increases in feed price later in
about 1,120 kg per cow in 2019, a decrease of 18% on the previous year. Beef feed usage year are unlikely, given the market indications for virtually ‘no change’ in barley price at
per head in 2019 was down about 18% on the 2018 level, while sheep feed use also harvest 2020. Averaging across the full year it is likely that feed prices in 2020 will be
decreased substantially in 2019. marginally lower than in 2019.
For 2020, similar levels of feed use to those observed in 2019 are anticipated. This Figure 6: Index of Monthly Irish Feed Prices 2018-2020
implies that feed prices changes will largely determine any change in the level of 115
expenditure on feed in 2020.
110
index 2015 = 100
As of July 2020, official data on feed use in the current year are limited, with DAFM sales
data available for Q1 only. These data show that the aggregate volume of dairy feed 105
sales in Q1 2020 was up 4% on the same period in 2019, perhaps reflecting a continuing
100
increase in dairy cow numbers and a slower start to the grazing season in 2020.
95
Aggregate beef feed sales decreased in Q1 of 2020 by 14% relative to the same period
in 2019, with this decrease coinciding with a further decline in cattle numbers, but also 90
perhaps reflecting weaker demand due to pressure on margins associated with lower Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
cattle prices.
2018 2019 2020
For the year as a whole, it is estimated that beef feed use will be lower than in 2019. In Source: Central Statistics Office
2020 sheep feed use should remain at the 2019 level.
Figure 7: Longer Term Index of Monthly Irish Feed Prices 2006-2020
Overall, given the growth in the dairy cow herd, early indications are that aggregate dairy
feed use will increase slightly over the full year, with feed use per head also up marginally 130
relative to 2019. 120
Index 2015 = 10 0
Taking a more global view, it is still too early in the year to be fully confident, but it would 110
appear that the global wheat harvest is forecast to decrease slightly in 2020 by about
100
1%. However, perhaps more importantly, stocks are expected to remain low in the main
export regions, especially the EU and the Black Sea region. Overall, this suggests that 90
there will be a slight increase in cereal prices on the Irish market at harvest 2020 relative 80
to 2019. At present (July 2020), a 15% increase in farm gate wheat prices for the 2020
70
harvest is expected. The price outlook for barley is not as optimistic as wheat, with world
Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
barley production forecast to change very little in 2020 compared to 2019.
Source: Central Statistics Office
Consequently, virtually no change is forecast for barley prices at harvest 2020 compared
to harvest 2019.
As shown in Figure 6 and Figure 7, feed prices have moved downwards in H2 of 2019,
Situation and Outlook July 2020 9FERTILISER MARKET
Energy prices, particularly for oil, decreased in H1 of 2020, having moved upwards Figure 8: Index of Monthly Irish Fertiliser Prices 2017-2020
steadily in the previous couple of years. This unanticipated energy price decrease relates
100
to the COVID-19 crisis and the related knock-on impact on economic activity. Fertiliser
prices are influenced by supply and demand in the market, but also reflect production 2017 2018 2019 2020
95
costs, which are heavily related to energy prices. Figure 8 contains official monthly
fertiliser price data from the CSO. Downward movement in prices observed in 2019
Index 2015 = 1000
90
accelerated in 2020. It is anticipated that prices for the remainder of 2020 will continue
to remain subdued. 85
In terms of fertiliser sales in Ireland, the available official data covers the first six months
80
of the fertiliser year (Oct 2019 – Mar 2020). For this six month period Figure 9 shows an
increase of 8% in nitrogen sales volume over the same period in the previous year. Sales
75
of phosphorous and potassium also increased, up 7% and 5% respectively compared to
the same period in 2018/19. 70
The continuing expansion in milk production is most likely the driver of the observed Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
increase. While it is difficult to be certain, it is assumed these higher fertiliser usage levels
Source: Central Statistics Office
will persist through the rest of the current fertiliser year.
Fertiliser usage associated with cereal production tends to be more predictable from
Figure 9: Irish Fertiliser Sales in first 6 months of fertiliser year 2015-2020
year to year than that experienced on grassland farms. On cereal farms any changes in
fertiliser volume will tend to be associated with a shift in the total crop area sown, i.e. 200,000
shifts in cropping pattern between winter and spring sown crops and nutrient off takes Oct '15 to Mar '16
175,000
from the previous year yields. Hence, for the 2020 harvest, it is expected that fertiliser Oct '16 to Mar '17
volume on cereal farms will be up down due to a slight in cereal area and a decrease in 150,000
Oct '17 to Mar '18
winter sown crops. 125,000 Oct '18 to Mar '19
Tonnes
100,000 Oct '19 to Mar '20
75,000
50,000
25,000
0
Nitrogen Phosphorus Potassium
Source: DAFM
Situation and Outlook July 2020 10ENERGY MARKETS
Figure 11: European Natural Gas Average Import Price 2008 2020
While fuel and electricity are less significant input items than feed and 20
fertiliser in grassland systems, the price of energy has implications that
extend throughout the economy, given the importance of energy as a 15
$ per MMBTU
cost item in the production and distribution of goods.
10
Crude oil prices have dropped dramatically in 2020, reflecting the
subdued demand for aviation and ground transport and the negative
5
outlook for economic growth.
There have been some attempts to limits supplies as crude oil 0
inventories have built up and this has contributed to a slight recovery Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
in prices more recently.
Source: World Bank
The monthly average Brent crude oil price was just under US$65 in
December 2019, as illustrated in Figure 10. However, prices declined Figure 12: Index of monthly fuel and electricity prices 2015-2020
sharply in February and March of 2019, to a little over US$20. Prices 120
have since recovered somewhat and are moving towards €40 per Electricity Motor fuel
barrel. European natural gas prices have also moved down sharply in 110
Index 2015 = 100
recent months, mirroring the reduction in crude oil prices.
The price reduction in energy markets, has affected motor fuel and 100
electricity prices, with motor fuel prices in particular showing a sharp
90
decrease of more than 20 percent since the beginning of the year.
Figure 10: Brent Oil Prices in Euro and US Dollar Terms 2008 -2020 80
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
140
Source: CSO
120
Currency per barrel
100
80
60
40
20
US Dollar Euro
0
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
Source: Adapted from the St Louis Fed
Situation and Outlook July 2020 11DAIRY Situation and Outlook July 2020 12
DAIRY
Global Supply Global Demand Milk Prices Irish Production Input Cost Irish Farm Income
Situation Outlook Situation Outlook Situation Outlook Situation Outlook Situation Outlook Situation Outlook
Neutral Neutral Negative Neutral Negative Neutral Positive Positive Positive Positive Negative Positive
In the key export International dairy product European wholesale dairy Production conditions in Feed prices in H1 of 2020 Average net margin in
regions, milk demand in H1 2020 has prices have dropped in 2020 were affected by have been 5% lower than 2020 is likely to be about
production growth has been adversely affected by 2020, reflecting the COVID heavy early season rain in H1 2020 and little price 10 cent per litre, but will
been stronger in 2020 COVID-19 emergency. followed by an extended movement is anticipated depend on grass growing
than in 2019. Drinking milk and other Butter reached a low of dry period. This led to over the rest of 2020 conditions and input
Falling milk production fresh products were €2,900 per tonne, in May restricted grass growth in Dairy feed sales in Q1 requirement in H2.
in some key milk particularly affected. 2020, but have since begun May and June. 2020 have increased Savings on feed, fertiliser
regions has been more Demand for milk powders to recover. The growth in Irish dairy slightly relative to 2019. and fuel expenditure in
than offset by has also been depressed. cow numbers continues, Overall, feed use in 2020 2020 relative to 2019
SMP prices have managed
production growth with an increase of just will depend on late will help to offset any
Demand for butter and to stay above intervention
elsewhere. over 2% likely in 2020. season weather decline in milk prices.
cheese have not been levels and have
conditions. An increase of The current forecast is
In 2020, milk affected to the same strengthened to €2,100 per Milk yields to date in
2% per head is assumed. that the average Irish
production to the end extent. tonne in recent weeks. 2020 are up slightly on
Energy prices in 2020 dairy farm could see a
of May has fallen in NZ Lower dairy product prices Cheddar prices have moved the 2019 level.
have fallen due to lower net margin per ha in
by -1.5%, in the UK by - in regions where demand over a fairly narrow range. Milk fat and protein oil and gas prices. 2020 on a par with 2019.
0.7% and in Italy by - has been depressed, have Monthly Irish farm milk levels in 2020 have Fertiliser prices are down Early indications are that
2.8%. helped to make exports increased further and are
prices in 2020 have fallen about 9%. average dairy farm
By contrast, EU milk more competitive. in response to COVID-19 likely to be up 2 to 3 basis Fertiliser sales are up income is likely to be in
production has While Chinese import but have recently stabilised points on the 2019 level. slightly in the first half of around €68,000 in 2020,
increased thus far in demand was disrupted in and begun to recover. With normal weather and the fertiliser year. but uncertainties
2020 by 1.8%. US milk the early stages of the no deterioration in milk Total production costs remain.
Short-term milk price
production has also pandemic, exports to China prices over the rest of per litre in 2020 could be EU/UK Brexit
prospects will depend on
increased by a more from the EU were broadly 2020, Irish milk down 1 cent or more on negotiations continue
COVID-19 developments,
modest 1.2% on a par with the 2019 production is likely to be the 2019 level. and any prospect of an
but overall milk prices for
level by the end of May up about 3% to 4% on the adverse outcome could
2020 could be close to the
2020. 2019 level. weigh negatively on
2019 level.
commodity prices.
Situation and Outlook July 2020 13DAIRY
Figure 13: % Change in Milk Production Jan- May 2020 Figure 14: Monthly Irish Farm Milk Prices (actual fat) Figure 15: GDT Auction Index Fortnightly Price
15 Movements in 2019 and 2020
12 50 10
9 8
2019 2020
AUS IE 45
6 NE
PL 6
Cent per litre
EU DE
% change
3 US FR 40
0 4
% change
-3 UK 35 2
NZ
-6 IT 0
30
-9 -2
-12 25
-4
-15
20 -6
Source: Eurostat, USDA, Dairy Australia, DCANZ
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 02-Jan 02-Apr 02-Jul 01-Oct 07-Jan 07-Apr 21-Jun
Source: CSO Source: GDT
Figure 16: Chinese Powder Imports Jan-May 2014-2020 Figure 17: EU27 Wholesale Dairy Product Prices Oct 2017 Figure 18: Dairy Net Margin per hectare 2014 to
to May 2020 2019 and Forecast for 2020
600
SMP WMP 7,000 1,800
500 Butter SMP Cheddar
6,000 1,600
400 5,000 1,400
Euro per hectare
'000 tonnes
euro per tonne
1,200
300 4,000
1,000
3,000
200 800
2,000 600
100 1,000 400
- 200
0
2014 2015 2016 2017 2018 2019 2020 Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- 0
17 18 18 18 18 19 19 19 19 20 20 2014 2015 2016 2017 2018 2019 2020
Source: US Dairy Export Council
Source: DG Agri Source: Teagasc NFS 2014-2019, 2020 Author forecast.
Situation and Outlook July 2020 14BEEF Situation and Outlook July 2020 15
BEEF
EU Supply EU Demand Beef Prices Irish Production Input Costs Farm Income
Situation Outlook Situation Outlook Situation Outlook Situation Situation Situation Outlook Situation Outlook
Negative Neutral Negative Negative Negative Negative Negative Neutral Positive Positive Negative Negative
EU production in H1 EU consumption of Price forecasts are Irish beef production Direct costs of beef Output value on cattle
2020 decreased by beef declined conditional on our in H1 2020 was over production are finishing farms in 2020
over 5% vs H1 2019. dramatically in Q2 assumption of no future 3% lower than in H1 dominated by will be supported by
Q2 2020 EU cattle 2020. COVID-19 outbreak in 2019. purchased feed and the €50m COVID-19
slaughtering was The effective closure the EU. This fall was due to pasture costs. pandemic aid package.
dramatically lower of much of the EU dramatically reduced A modest decrease in Pandemic payments
Average EU male
COVID-19 affected food service industry factory throughput in overall feed demand is are assumed to equal
finished cattle prices
demand and supply had a dramatic impact April and May due to forecast in 2020 the BEAM payments
were 3% lower in H1
of beef. on demand for beef. the COVID-19 collapse For the year to date, received in 2019.
2020 relative to H1
As the EU economy As the EU and UK in food service both feed and fertiliser Lower finished cattle
2019.
reopens, beef economies reopen, demand for beef in the prices have been prices and disposals
Irish finished prime
production is demand is recovering UK and EU. lower than in 2019. are reflected in lower
cattle prices have
forecast to recover but this will not undo In June and July beef For the year as a output value on cattle
decreased by 3% to 5%
in Q3 and Q4 2020. the losses for the year slaughter has returned whole, feed prices finishing enterprises.
in H1 2020 relative to
EU imports of beef to date due to the to normal levels. should be 5% lower Gross margins on
H1 2019.
have declined pandemic induced For 2020 as a whole, than in 2020 and single suckling and
For 2020, Irish finished
dramatically and are recession. Irish beef production is fertiliser prices 9% cattle finishing farms
cattle prices are forecast
forecast to be 7% Total EU domestic use forecast to decline by lower than in 2019. are forecast to fall by
to fall by about 4%
lower for 2020. of beef is forecast almost 2% compared Total costs of 1% and 5%.
relative to 2019.
EU beef supply is (conditional on there to 2019 on the production on single With lower overhead
In H1 2020, weanling
expected to be being no further assumption of no suckling and cattle costs, FFI on Cattle
prices are up 2% on H1
almost 2% lower in closure of food service further COVID-19 finishing farms are Rearing farms is
2019. Over all of 2020,
2020. outlets) to contract by related demand forecast to decline by forecast to increase by
weanling prices are
more than 2%. shocks. more than 5% in 2020. 7%, while FFI on Cattle
forecast to be 2% higher
Other farms is forecast
relative to 2019.
to fall by 4%.
Store cattle prices are
also forecast to increase
by 2% relative to 2019.
Situation and Outlook July 2020 16BEEF
Figure 19: Monthly EU and Brazilian Steer Prices 2012-2020 Figure 20: Irish and EU27 cow inventories (December) 2007-2019
500 2,500 33,500
400 2,400 33,000
euro/100 kg cwe
300 2,300 32,500
000 head
000 head
200 2,200 32,000
100 2,100 31,500
0 2,000 31,000
IRL (left axis) EU27
Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
1,900 30,500
EU Brazil 2007 2009 2011 2013 2015 2017 2019
Source: DG Agriculture and Rural Development and Consorcio de Exportadores de Carnes Argentinas ABC Source: Eurostat
Figure 21: Monthly EU, UK and Irish Finished Cattle Prices 2013 to 2020 Figure 22: Single Suckling and Cattle Finishing Gross Margin per hectare 2016-2019 and
Forecast for 2020
550 600
2016 2017 2018 2019 2020f
500
500
450
Euro/100 kg cwe
Euro per hectare
400
400
300
350
300 200
EU UK IRL
250 100
200 0
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Single Suckling Cattle Finishing
Source: Teagasc NFS 2015-2018 and Author forecast for 2019.
Source: DG Agriculture and Rural Development
Situation and Outlook July 2020 17BEEF
Figure 23: Cattle Finishing Gross Output, Direct Costs and Gross Margin per hectare Figure 24: Irish Live Cattle Exports January – May 2018, 2019 & 2020
1,400 180
160
1,200
140
1,000 2018 2019 2020
120
euro per ha
800
000 head
100
600 80
400 60
200 40
20
0
2016 2017 2018 2019 2020f 0
0-6w 6w-6m 6-12m 12-18m 18-24m 24-30 30m+
Direct Costs Gross Output Gross Margin
Source: Teagasc NFS Source: DAFM
Figure 25: Long Term trends in Dairy and Suckler Cow Inventories (December)
1,600
1,400
1,200
000 head
1,000
800
600
Dairy Cows Suckler Cows
400
200
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Source: Eurostat
Situation and Outlook July 2020 18SHEEP Situation and Outlook July 2020 19
SHEEP
EU Supply EU Demand Lamb Prices Irish Production Input Costs Farm Income
Situation Outlook Situation Outlook Situation Outlook Situation Outlook Situation Outlook Situation Outlook
Negative Neutral Negative Negative Positive Positive Positive Positive Positive Positive Positive Positive
Over the year as a EU sheep meat Heavy lamb prices in the For the year to date, Direct costs of Margins earned from
whole, EU sheep meat consumption in 2020 is EU for the year to date total sheep slaughter is production on Irish sheep sheep production in
production is forecast forecast to decline by are 18% higher than in 6% higher than in 2019 farms are dominated by 2020 are forecast to
to marginally decline. circa 3%, following a 2019 and for the year as a at sheep export concentrate, pasture and increase compared to
Following reductions rise in consumption in whole are forecast to premises. forage costs. 2019, due mainly to
of flocks and fewer 2019. Taking remain well ahead of Total sheep throughput Owing to good grass higher sheep and lamb
ewes put to the ram consumption back on 2019 prices. in Ireland, for the year growth, use of feed is prices.
in 2019, total EU par with 2017 levels. Irish prices for the year to to date, is just over expected to remain Direct costs of
sheep meat slaughter Seasonal demand in the date are over 5% higher 1.58m. below 2019 levels. production on sheep
is forecast to decline. first half of 2020 is not than in 2019, remaining Increases in spring lamb For the year to date, farms are expected to
Exceptions to this forecast to continue well above the 5 year has accounted for 38% fertiliser, feed and fuel be much lower in 2020.
were in Ireland and over the remainder of average price (2015- of this, up 14% year to prices have been lower In 2020 the net margin
Romania where, 2020. 2019). date at 600,000. than in 2019. from mid-season
owing to expanding EU per capita With the seasonal One major contributing Overall, the large lowland lamb
flocks, more sheep consumption of sheep reduction in lamb prices factor to this has been decrease in fuel prices, production is forecast
were slaughtered. meat in 2020 is underway following the an increase in carcass fertiliser prices and feed to more than double to
EU imports of lamb expected to decline, as Eid festival, lamb prices weight limits and active price coupled with feed circa €230 per hectare.
are expected to be 5% a consequence of lower for 2020 as a whole, are sourcing by export use decline, is expected The average gross
lower in 2020 imports and tight forecast to average plants for factory ready to lead to a 5% reduction margin per hectare is
compared to 2019. supply. approximately 6% higher lambs. in total costs of forecast to increase by
EU lamb imports are Following an almost than in 2020. Good grass growing production for 2020. one quarter to €780/ha.
dominated by NZ & 10% increase in EU conditions has been Incomes on sheep
Australia. Total NZ exports in 2019, a another positive farms are set to be up
export volumes are further small increase is contributing factor. by more than 15% in
forecast to be lower. forecast for 2020. Despite difficult market 2020, due to growth in
Expected decrease in conditions, Irish lamb output value, stable
2020 shipments with has performed well to direct payments and
tight availability. date in 2020. lower total costs of
production.
Situation and Outlook July 2020 20SHEEP
Figure 26: UK and Irish Ewe Inventories (December) 2001-2019 Figure 27: Weekly Irish Lamb Prices 2020, 2019, 2018 and average 2015-2019
4,500 17,000 650
4,000 16,500
600
3,500 16,000
550
euro/100 kg cwe
3,000 15,500
000 head
000 head
2,500 15,000 500
2,000 14,500 450
1,500 14,000
400
1,000 13,500 2015-2019 2018 2019 2020
IRL (Left axis) UK
500 13,000 350
- 12,500 300
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 wk1 wk5 wk9 wk13 wk17 wk21 wk25 wk29 wk33 wk37 wk41 wk45 wk49
Source: Eurostat Source: DG Agriculture and Rural Development
Figure 28: EU Sheep & Goat meat imports* (January – May) 2019 and 2020 Figure 29: Mid-Season Lowland Lamb Gross Margin per hectare 2017-2019 & Forecast
2020
90 900
New Zealand Australia
80 800
United Kingdom Others
70 700
euro per hectare
'000 tonnes cwe
60 600
50 500
40 400
30 300
20 200
10 100
0 0
2019 2020 2017 2018 2019 2020f
Source: Teagasc NFS 2017-2019 and Author forecast for 2020
Source: DG Agriculture and Rural Development
*EU imports shown with UK included
.
Situation and Outlook July 2020 21TILLAGE Situation and Outlook July 2020 22
TILLAGE
Wheat Market Barley Market Prices Irish Production Input Costs Farm Income
MarketWheatr
Situation Outlook Situation Outlook Situation Outlook Situation Outlook Situation Outlook Situation Outlook
Positive
? Unchanged
? Positive
? Negative
? Positive Positive Negative
?
EU wheat production in Aggregate EU barley Wheat: signals at present Provisional data from In 2020, there has been With only slightly higher
2020/2021 is expected production is set to indicate a slight increase DAFM show that all a slight decrease in output prices for wheat
to be about 137.6Mt, increase by about 3% in harvest price in 2020 Irish winter cereal crops total direct costs, on a and straw, coupled with
with a 17.1 Mt year-on- compared to 2019. relative to 2019. decreased in area, with per hectare basis. more significant
year harvest reduction. World barley supply is Barley: signals at present increases in spring area Fertiliser prices are decreases in yields for
World wheat forecast at 155.6 Mt, indicate very little change recorded in 2020. estimated to have the main cereal crops,
production in 2020/21 which is more or less in harvest price for barley Total cereal area decreased by about 9%, Irish cereal output value
is expected to be 731.1 unchanged since this year compared to last decreased by just over seed prices down by 7% is forecast to be down
Mt, down 1.5 Mt on 2019/20. year. 1% in 2020. and fuel down over 10% in 2020.
2019/20. World demand is July MATIFF futures It is too early to for the year to date. Overall costs in 2020
World demand for expected to be slightly indicate a slight increase accurately forecast Irish The decrease in the are forecast to
human and industrial higher this year, with in 2020 harvest prices for yields for 2020, but area of winter crops is decrease.
purposes is expected to this year’s demand wheat, with on account early indications are expected to contribute Average income on
increase slightly by 2.8 estimated at 153.2 Mt. green harvest prices in that cereal crop yields to a further decrease in tillage farms in 2020 is
Mt, whilst feed demand World ending stocks are the Irish market quoted will be lower than in total farm direct costs. expected to struggle to
is expected to decline forecast to be approx. 15% higher than 2019. 2019. Spring barley The downward reach €30,000.
by 7.4 MT year on year. 27.8 Mt in 2020/21, up Virtually no change is yield in particular is movement in energy However, much
World ending stocks are from 25.3 Mt in forecast for barley prices. expected to show prices should mean uncertainty still
expected to be up by 2019/20. Demand for straw significant yield decline reductions on some surrounds the full yield
13.3 Mt in 2020/21 The stock to use ratio of appears to be sluggish relative to 2019, due to overhead cost items. potential of all crops at
compared to 2020/19. world barley is compared to 2019, drought conditions in Anecdotal evidence this stage of the
However, stocks are projected to be 18.1%, despite lower overall many parts of the suggests that land harvest.
expected to remain low in 2020/21, which is up straw availability. country during crop rental prices have Much uncertainty
in the main export from 16.8% in 2019/20. Despite sluggish demand, establishment and the remained static. surrounds regional yield
regions, especially the The EU balance sheet some increase in straw key growing period. Overall, it is estimated variation associated
EU and the Black Sea also shows an increase prices compared to 2019 First estimates of total that total costs on the with sowing dates and
region. in the stock to use ratio is likely but this will not Irish cereal tonnage in average tillage farm in weather impacts.
for the marketing year be enough to 2020 are down by over 2020 will be about 10%
compared to last. compensate for reduced 20% on 2019 levels. lower than in 2019.
straw volume.
Situation and Outlook July 2020 23TILLAGE
Figure 30: World Wheat Balance Sheet (Mt) Figure 31: Nearby Futures Prices – July 2018 – July 2020 (€ per tonne)
800 2019/20 2020/21 200
€ per tonne (nearby futures)
600 175
Million tonnes
400 150
200
125
0
Carry-In stocks Production Trade Demand Carry Out 100
Stocks 3/7/19 3/9/19 3/11/19 3/1/20 3/3/20 3/5/20 3/7/20
Source: Strategie Grains
Source: AHDB (MATIFF nearby futures)
Figure 32: World Barley Balance Sheet (Mt) Figure 33: Average Irish Tillage Farm Income (2010-2020e)
180
19/20 20/21 45,000
160
40,000
140
35,000
120
Million tonnes
30,000
Euro per farm
100
25,000
80 20,000
60 15,000
40 10,000
20 5,000
0 0
Carry-In stocks Production Trade Demand Carry Out 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020e
Stocks
Source: Teagasc, National Farm Survey 2010-2019 and Author estimate 2020.
Source: Strategie Grains
Situation and Outlook July 2020 24Trevor Donnellan
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