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Lower Production Costs and Resilient Food Demand Increased Farm Income in 2020

In spite of the COVID-19 pandemic, income across the various farm systems in Ireland either held, or increased in 2020, the Teagasc annual review of farm incomes has concluded. The results are published in the Teagasc National Farm Survey 2020 and are representative of over 93,000 farms in Ireland.

Production costs were lower as key farm input prices fell in 2020. It had been initially feared that COVID-19 would significantly damage food demand, particularly for beef, due to food service closure and lockdown measures in Ireland and in overseas markets. However, this was effectively off-set by growth in the consumption of food at home.  A Brexit trade deal was eventually agreed, but the protracted negotiations created additional uncertainty, impacting beef prices in particular.

In the Spring of 2020 there was some significant, but ultimately short-term, disruption to the beef supply chain which saw Irish finished cattle prices decline sharply. As a result, supplementary support was provided by the national exchequer under the ‘COVID-19 State Aid Temporary Framework’ to beef farmers who delivered cattle for slaughter between February 1 and June 12 2020.

In spite of these challenges, farm output prices held firm overall in 2020 and a feared fall in farm incomes did not materialise, although some farm systems fared better than others.

Weather conditions in Ireland were generally favourable for grass production in 2020, but difficult planting conditions had a negative impact on Irish cereal crop production, leading to a decline in yields. COVID-19 led to a significant reduction in global economic activity in 2020.

This had a major negative impact on crude oil and other energy prices, with knock on consequences for fertiliser prices. Feed prices were also lower in 2020.  The fall in input prices benefitted farmers through a reduction in their production costs. These cost reductions were sufficient to boost the average income in Irish agriculture in 2020.

Across the key outputs categories, lamb prices performed best, recording a 13% increase in 2020 compared with 2019. Beef and Dairy farmers benefitted from marginally higher cattle and milk prices in 2020. Cereal prices were up significantly in 2020, reflecting market supply and demand conditions.

Lower Dairy system production costs, coupled with a further increase in milk output volume and slightly higher milk prices, resulted in an average dairy farm income of €74,236 in 2020, an increase of 13% on the 2019 level.

The Cattle Rearing system, which comprises farms that are mainly specialised in suckler beef production, benefitted from marginally lower production costs in 2020. However, the value of output and support payments were also down slightly in 2020. Overall, the average Cattle Rearing income of €9,037 in 2020, was unchanged on the 2019 level.

In the ‘Cattle Other’ system, which comprises mainly of beef finishing farms, but also includes farms selling store cattle, production costs also fell in 2020. While support payments were also lower, the value of farm output increased. In combination this resulted in an average income of €14,813 in 2020 for the Cattle Other System, an increase of 8% on the 2019 level.

The Sheep system also benefitted from lower production costs in 2020 and also experienced a strong increase in the value of farm output, which was driven by higher lamb prices. In common with other drystock systems, on average the level of direct payments for Sheep farm was down slightly. The average income on Sheep farms increased by 24% in 2020 relative to the 2019 level to €18,383 in 2020.

The Tillage system experienced poor production conditions in 2020, which led to lower crop yields. In line with other sectors, input prices for tillage farms decreased in 2020.  However, there was also a significant increase in cereal prices in 2020, partially offsetting the impact of the drop in crop yields. The average income on tillage farms fell by 1% in 2020 to €32,525.

Taking account of the income developments across the various farm systems, the average family farm income rose by 9% in Ireland in 2020 to €25,662.

The full Teagasc National Farm Survey showing increased farm income in 2020 is available here.

Source: Teagasc

Tags : Farm Income

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