Under a no trade deal Brexit outcome, average income on cattle farms in Ireland is expected, in the absence of very significant Brexit specific income support, to fall by about 40% relative to 2020, said the authors of a report, Outlook 2021: Economic Prospects for Agriculture, published by Teagasc this week.
Teagasc is the semi-state authority responsible for research and development, training and advisory services in the Irish agri-food sector.
The UK market has traditionally been Ireland’s second ‘home’ market, and the Irish beef sector has traditionally depended on the UK for a significant share of exports.
“Based on a no trade deal Brexit outcome, our forecast for 2020 is for a significant reduction in Irish cattle prices,” they said.
If tariffs at the rate indicated by the UK government earlier this year are imposed, in the event of no trade deal being agreed with the EU, Irish exports to the UK are likely to collapse dramatically in 2021, said the authors.
The urgent challenge facing the wider Irish beef industry will be to develop new markets for Irish beef, they stressed.
Dairy sector outlook
Looking at the Irish dairy sector, the contributors to the Teagasc report predict that, in the absence of a Brexit trade deal between the EU and UK, dairy farm margins in 2021 will decrease, with a fall of 21% on the 2020 level predicted.
The Irish dairy sector had seen a substantial reduction in production costs in 2019, principally due to lower feed and fertilizer usage. Production costs fell further in 2020, with the reduction driven by lower input prices, noted the Teagasc review.
Despite early fears of a significant reduction in milk price in 2020, COVID-19 has not had a substantial impact on dairy demand or supply, said the authors.
“Milk prices in 2020 were in line with the 2019 level. Overall, there was an improvement in net margin per hectare and per liter of milk produced in 2020. On average, it is estimated that dairy enterprise net margin per hectare increased by 5% in 2020 to €1,302.”
In 2021, the annual average milk price is forecast to fall 7% relative to the 2020 level if there is no Brexit deal.
On the assumption that normal weather is experienced in 2021, input usage should remain relatively unchanged, with a marginal increase in input prices, leading to slightly higher production costs.
Factoring in a 3% increase in milk production in 2021, it is forecast that total production costs will rise by about 1% to 24.6 cent per liter.